South Korea Escalates Concern With Japan Policies as Yen Slides

South Korea’s newly-appointed finance minister, Hyun Oh Seok, revived his nation’s concerns over weakness in the yen and said that the Group of 20 nations should revisit the issue.
“Japan’s expansionary policies are having various ripple effects on many countries,” Hyun, 62, told reporters on March 23 in Bundang, on his second day as finance chief. “The yen is depreciating while the won is gaining and this is flashing a red light for Korea’s exports.”

Japan central bank Governor Haruhiko Kuroda is poised to boost monetary easing, expanding a campaign to defeat deflation that triggered an 11 percent decline in the yen against the dollar in the past three months. South Korea expressed concerns about the currency’s slide before and after last month’s meeting of the G-20 in Moscow, where that organization refrained from criticizing Japanese policies.
“The South Korean government is well aware that the negative influence on the economy from the yen’s depreciation is not small,” said Lee Sang Jae, a Seoul-based economist at Hyundai Securities Co. The nations are in “a competing relationship, not a complementary one,” said Lee.
South Korean officials are concerned at the yen’s slide because the nation depends on exports for economic growth and competes in overseas markets with Japanese manufacturers of cars and electronics. At the Moscow meeting, G-20 nations pledged not “to target our exchange rates for competitive purposes,” without any censure of Japan for the yen’s decline.

Japanese View

Japan’s government says it is not targeting the yen, with declines in the currency a side-effect of efforts to spur a sustained recovery in the world’s third-biggest economy.
“While we will do what we can, we need international cooperation to deal with the weak-yen problem,” Hyun told reporters. “This should be discussed at the G-20.”
Hyun’s comments came as he toured markets in Seoul and Bundang, checking on prices of goods after the new government under President Park Geun Hye pledged efforts to aid low income earners. Appointed by Park on March 22, Hyun said in his inaugural speech he would use “all possible measures to speed the economic recovery,” and indicated that government support would come as early as this month.

Two Pillars

“We need to factor in the yen problem as we think about policy measures, as exports and domestic demand are two big pillars of our economy,” Hyun said on March 23. Stabilizing foreign-exchange markets should always be an important part of government policy, since currency moves can be a source of shocks, he said.
Yoon Sang Jick, minister of trade, industry and energy, also underscored the importance of stability in the foreign- exchange market, in e-mailed comments yesterday.
South Korea’s Kospi Index fell 0.1 percent on March 22 as Cyprus struggled to avoid a financial collapse. The won declined 0.7 percent in the past week to 1,119.28 per dollar in Seoul, according to data compiled by Bloomberg.
Hyun’s appointment last week in the face of objections from opposition lawmakers may bring forward measures that Park hopes will spur the economy after growth last year was the weakest since the global financial crisis. Challenges include a stagnant property market, an aging population, and weakness in the yen.
Hyun was president of the state research center Korea Development Institute, which was founded by Park’s father, former dictator Park Chung Hee. He has a Ph.D. in economics from the University of Pennsylvania and previously worked at the World Bank, as well as South Korea’s finance ministry.
The government may announce a supplementary budget of 10 trillion won ($8.9 billion) on March 26, Yonhap News reported last week, without saying where it got the information. Choi Sang Mok, a director general at the finance ministry, said no decision had been made.
To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Score : http://www.bloomberg.com/news/2013-03-24/south-korea-escalates-concern-with-japan-policies-as-yen-slides.html