South Korea offers measures to shield exporters from falling yen

[SEOUL] South Korea announced several measures to aid local exporters hit by a falling yen, as it expressed concern that prolonged weakness of the Japanese currency could do long-term damage to the Korean economy.

The government will work to cut the costs of insurance on exchange-rate volatility for the roughly 4,000 small-to-medium sized companies directly affected by fluctuations in the yen , the Ministry of Strategy and Finance said in a statement on Wednesday.

It said the government will provide affected companies one-on-one consulting on business difficulties stemming from the weakened yen and provide concessional loans.

Roughly 1 trillion won (US$937.7 million) will be allocated for such loans and financial aid for firms, but no details were given on the terms for extending them.

In recent years, South Korean exports have fared well, with the country maintaining a 3.1 per cent share in the global export market from 2011 through the first quarter of 2014, according to government data.

But the situation could change if the yen keeps steadily weakening and Japanese exporters change their sales tactics. "The extended weakness of the Japanese yen could lead to Japanese exporters lowering prices, which could in turn negatively affect our exporters," said the ministry.

It added that although sentiment has recovered in some sectors, the economic recovery in Asia's fourth-largest economy is progressing "at a very slow pace with momentum weak".

The yen has fallen more than 20 per cent against the won since the end of 2012 when "Abenomics" resulted in a fall in the value of the Japanese currency.

The measures, which are neither massive or new, were announced a week before the Bank of Korea next reviews its monetary policy. They are expected to add to pressure on the central bank to lower rates again on Oct 15.

In August, the central bank cut its monetary policy rate by 25 basis points to 2.25 per cent in a move widely seen as influenced by the government. Finance Minister Choi Kyung-hwan has repeatedly stressed the importance of harmony in policy between the government and central bank. - Reuters