Are concerns over yen depreciation overblown? An analysis has been published suggesting that prices of South Korea's key exports are more sensitive to global economic conditions than to the yen exchange rate, limiting the impact of yen depreciation.
According to a report published on the 28th by the Korea International Trade Association's Institute for International Trade and Commerce, a 10% rise in the yen-dollar exchange rate would lower South Korea's dollar-denominated export unit prices by 1.43%, but the increase in export volumes would offset this decline, leaving the decrease in total export value at just 0.07%, the analysis said.
The report concluded that prices for semiconductors, petroleum products, automobiles and auto parts are driven by global business conditions, and that industry-specific supply and demand contribute more to export unit prices than the yen exchange rate. DRAM prices, global semiconductor market conditions, petroleum product prices and the outlook for the US economy were identified as key variables.
The decline in export competition between Japan and South Korea was cited as a factor that softened the yen depreciation shock, with competition declining in major markets, including across all industries and in semiconductors. Competition in the US, Chinese and ASEAN markets has also declined compared with 2015.
The growth gap has also widened. From 2015 to 2025, the average annual growth rate of total exports was 6.1% for South Korea and 3.3% for Japan, with South Korea recording the stronger growth. The difference was particularly large in semiconductors, machinery, automobiles, auto parts and petroleum products.