Korea's Export Boom Is Hurting And Helping Japan

Long dependent on Japan for investment and technological knowhow, South Korea is now besting its benefactor in global markets--thanks to a soaring yen, reports economist Ellen T. Rodgers of Morgan Guaranty Trust Co. With the yen up 13% against the South Korean won in 1993 (and another 13% so far this year), Seoul was able to boost exports by 7.3%, helping to cut its overall trade deficit last year by nearly 70%, to $1.5 billion.

The upshot has been a surge in capital investment this year and a hefty pickup in the export of such high-tech goods as petrochemicals, electronics, machinery, and steel, which are also marketed by Japan. South Korean exports of semiconductors were up 43% in the first quarter over the same period last year, while autos and appliances posted 20% and 18% gains, respectively.

The irony is that Korea is heavily dependent on Japan for capital goods and components of its exports. Thus, Korea's export boom, while hurting Japan in other markets, is sucking in high-priced Japanese imports. And Japan's trade surplus with Korea--$4.7 billion through May--is widening.

Meanwhile, Japan is investing less in Korea and more in less developed nations. "The threat to Korea's exports," says Rodgers, "is that Japan's new foreign ventures may eventually churn out goods similar to those produced currently in Korea, but at much lower prices."

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