Korea’s Export Engine Slips into Reverse

Won Rises against Euro, Yen Saps Competitiveness

South Korea’s much-vaunted export machine is losing steam as the won rises against the euro and the yen, undercutting sales in global markets.

That’s in sharp contrast to Japan, where currency depreciation is giving a leg up to large manufacturers that ship their wares abroad. 

While domestic demand and consumer sentiment in Korea have shown signs of a pick-up following three interest-rate cuts since August, exports have dropped for four straight months this year. The weakness extends to cars and ships - two mainstays of the nation’s manufacturing base. 

Shipments from Japan by volume are at the highest level in three years, with the government citing strength in automobiles, electronic parts and metal-working machinery.

The won rose to the highest level in more than seven years against the yen this month and in April jumped to a nine-year high versus the euro.

Korean Finance Minister Choi Kyung Hwan has noted the pain caused by the currency and said this month that the government would find ways to support overseas shipments. Bank of Korea Governor Lee Ju Yeol said last week that exports were a concern, but that the BOK would not adjust rates just for exports.