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Hyundai Motor’s cars are loaded into a cargo ship for exports at a port near its Ulsan plant in South Korea South Korean exporters such as Hyundai Motor Co. and Kia Corp. grew concerned as the country’s won currency hit the strongest level versus the Japanese yen in more than three years, hurting their competitiveness in overseas markets against their rivals in the neighboring nation.The won on Tuesday gained 0.7% to 9.9 against the yen at the close of South Korea’s currency market, its firmest point to the Japanese unit since Dec. 5, 2018. The won has gained 4.3% versus the yen so far this year.That is expected to boost the price competitiveness of Japanese products in exports markets, especially against South Korean items such as automobiles, experts said.“US customers’ top priority is the price when they compare Hyundai and Toyota,” said Kim Pil-soo, an automotive engineering professor at Daelim University. “Korean automakers are likely to lose margins.”Companies in other industries are expected to suffer from weaker price competitiveness.“Key export products including cars, petrochemicals and steel compete with Japanese,” said Lee Jae-soo, head of regional cooperation at the Federation of Korean Industries (FKI), a business lobby group. “Profits at companies in the sectors are likely to fall in the short term.”NO LONGER A SAFE HAVEN?The yen has been regarded as a safe haven along with the dollar and gold, given Japan’s ample foreign currency assets and strong economic fundamentals. The country holds the world’s second-largest foreign exchange reserves of $1.39 trillion as of the end-January after China.Japanese households and companies that utilized the country’s consistently low-interest rates to buy high-yield assets in other nations often unwound the overseas investments whenever a crisis hit home. That was one of the main factors to support the yen when the world was in trouble. Japanese yen banknotes at South Korea’s KEB Hana Bank headquarters in Seoul But the major currency lost ground despite the war in Ukraine, falling to the lowest since August 2015 on Monday.That came as Japan’s central bank stuck to its ultra-loose policy, while its global peers such as the US Federal Reserve raised interest rates to curb inflation. The Bank of Korea is expected to raise interest rates further after restoring the policy rate to a pre-pandemic level of 1.25% in January with three hikes since August last year.On the other hand, the Bank of Japan offered to buy unlimited amounts of 10-year government bonds to keep its bond yields from rising too much further. Earlier this month, it maintained its short-term rate target at -0.1% set earlier this month.The world’s second-largest economy is also losing steam. Japan’s economic recovery from COVID-19 was predicted to be the slowest among the Group of Seven, according to the International Monetary Fund. The country’s gross domestic product this year was forecast to be similar to a level in 2019 before the pandemic hit the world. The US economy was expected to grow 6.2% in 2022 from three years ago, while Canada and Germany were predicted to expand 3.2% and 1.7%, respectively.Japan’s current account balance has also been weakening. It reported a deficit in February and March each as the war in Ukraine ramped up commodity prices.By Ik-Hwan Kim and Hyung-Kyu Kimlovepen@hankyung.comJongwoo Cheon edited this article.
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