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Should Korea Worry about a Permanently Weak Yen?
Author:
Mr. Jack J Ree
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Mr. Gee Hee Hong null

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Seoeun Choi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 158
Language:
English
Publication Date:
16 Jul 2015
DOI:
https://doi.org/10.5089/9781513510835.001
ISBN:
9781513510835
ISSN:
1018-5941
Pages:
38
Keywords:
WP; export; price; exchange rate; Japan; export volume; Abenomics; Qualitative and quatitative easing; currency war; spillover; price pass-through; pass-through effect; import price effect; price competitiveness; pass-through relationship; investment decision; market share; exchange rate shock; cost saving; Exports; Export prices; Exchange rates; Depreciation; Real effective exchange rates; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Three years have passed since the Bank of Japan’s asset purchase program was introduced in 2011, causing a sharp decline in the value of the Japanese Yen. What would be the implications for Japan and Korea’s exporters if the weak Yen is here to stay? We explore this question by examining exporters’ pricing behaviors and volume responses to exchange rate shocks. We find that if the weak Yen persists, it would strengthen Japan’s price competitiveness over time as export prices respond with a lag. We also find that while direct boosts to export demand will be rather limited, a persistently weaker Yen would expand the Japanese exporters’ profits lastingly, which could reinvigorate the ability, particularly of flagship exporting firms, to compete and grow in the global market over time. These findings suggest that the muted price and volume response so far to the sustained weakness of the Yen may mask a more fundamental shift in the relative competitiveness of Japanese and Korean exporters.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund