Local Firms Need to Prepare for Weak Yen
By Yoon Ja-young
Staff Reporter
Exporters should not rely on the price competitiveness they are now enjoying thanks to the weak Korean won and the strong Japanese yen, as it will be short-lived, a leading economic think tank warned Tuesday.
The Samsung Economic Research Institute (SERI) said that Japanese exporters' current trouble following the strong yen would last through the first half of this year. This has eaten into Japanese exports as they have lost price competitiveness. They will, however, soon learn how to adapt to the strong yen, it added.
``The yen-dollar rate dropped to 80 yen per greenback in April 1995, but Japanese firms overcame the strong yen crisis by cutting costs,'' the institute said. Moreover, Japanese companies improved corporate fundamentals through massive restructuring.
It said the yen wouldn't remain strong given the fundamentals of the Japanese economy.
``When the problem of the strong yen disappears, many Japanese businesses will turn to surpluses,'' it added.
SERI said Korean exporters should prepare for the strong won instead of depending on the price competitiveness they are enjoying now. It warned Korean firms to refrain from pulling down prices to benefit from the weak won, which could act like a boomerang, eating into profitability, when the currency turns strong in the future. Instead, they should build up competitiveness through quality control and keeping delivery dates, the institute said.
There has been growing concern over Korean companies' dependence on the weak won without going through the massive restructuring that other global competitors are implementing. LG Electronics CEO Nam Yong, for example, recently said at a shareholders' meeting that the weak won could be a poison instead of a blessing, though analysts pick LG Electronics as one of the biggest beneficiaries of the weak currency.