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Yen’s weakness threatens Korean economy, says report

Publication Date : 10-01-2014

 

The Korean government has designated the Japanese yen’s depreciation as one of the biggest threats to the country’s recovery efforts.

In a monthly report, or the “Green Book”, released by the Ministry of Strategy and Finance on Thursday, it said that signs “strongly” showed that Asia’s fourth largest economy is recovering.

However, the rapid depreciation of the yen poses a risk to the Korean economy, along with monetary stimulus cuts in the US.

“Even though Korea is showing stronger signs of an economic recovery, private investment and consumption are still weak,” the report said.

“The weakness of the Japanese yen and the US monetary cuts remain as risks.”

The Korean won has been rapidly gaining against the yen since Asia’s second-largest economy implemented fiscal and monetary stimulus early last year to overcome its two-decade-long slump, the report added.

The won-100 yen exchange has slid by more than 20 per cent to arrive near 1,000 won at the end of last year, prompting the Korean government to increase its vigilance over the foreign exchange market.

Also, the US Federal Open Market Committee released the minutes from its meeting last month showing that it was confident that the unemployment rate was lowering as the world’s largest economy recovers.

It said the US central bank would need to “cautiously” reduce its monthly bond purchases in measured steps. Many analysts predict that it may eventually withdraw its accommodative monetary policy by the end of this year.

 

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