Neighbors in Contrast: Yen's Surge Suggests Much for Korean Firms, Government

yonhap - No country is free from the worldwide financial turbulence, but the hardship comes in directly opposite appearances for some adjacent nations.

Japan's financial authorities seemed to clandestinely intervene in its currency
market Tuesday, reports said. Tokyo's first market intervention in almost five
years, however, was to ``pull down" its monetary unit instead of propping it up
as is the case in most other countries, including Korea.
The nearly peerless strength of the Japanese currency is ascribable to global
investors' confidence in the world's second largest economy as a haven in
uncertain times as well as to their rush to repay low-cost yen-denominated loans.
Hit hardest were Japanese manufacturers, who are finding their export goods
rapidly lose price competitiveness in global markets against major rivals.
Japan's export slump is little comfort for its competitors, however, as the
resultant business setback in one of the three pillars bolstering the global
economy and would ripple around the rest of the world.
The yen's surge should come as a sobering reminder for the Korean government and
businesses of the wide gap between the two neighbors in both overall economic
scale and strength. Seoul has long disparaged Japan's ``lost decade," while
praising itself as having successfully gotten out of the Asian financial crisis
11 years ago. Now, this country has come to once again worry about even the
possibility of state default. On the other hand, Japan's financial firms are on a
shopping spree on Wall Street, while its people are hoarding the greenback as
well as the Korean won as if in a fire sale for future use.
Seoul even has little to gain in the trade front, either, as global export
markets have already sharply shriveled while its imports from Japan soared, in
value terms if not in volume, as its industry heavily relies on Japanese
suppliers for core parts and technology. Korea's chronic trade deficit with Japan
is expected to expand further this year, adversely affecting Seoul's overall
payment of balance situation, too.
It is all the more regrettable against this backdrop that large export firms here
are demanding their smaller parts suppliers to lower their prices, demonstrating
a ``live-and-let-die" selfishness as they have always done in economically
difficult times. The government ought to step in to stop this shift of cost
burden to industrial weaklings.
The Bank of Korea's recent rescue of smaller businesses suffering from huge
foreign exchange losses in their failed currency hedging game against commercial
banks was a move in the right direction, but the central bank has to do more to
salvage small firms in liquidity crunch, as they account for up to 80 percent of
the employment market.
In total, Japan's reemergence from its lost decade owes to the successful rebirth
of its industry and policymakers by tightening their belts and enhancing
efficiency. The Japanese banks, for example, saved expenses and expanded their
scales through merger and acquisition, while their Korean counterparts thrived on
easy business practices of borrowing cheap, short-term money from abroad and
extending long-term, housing loans at home, repeating the mistakes of merchant
bankers a decade ago, undeterred by loose governmental regulators.
Crisis comes to all countries, but some learn from it to emerge stronger, while
others forget lessons once the danger has passed to repeat same mistakes later.
(END)