The South Korean won has been going up lately. According to this KT article the won may end up at 1,050 to a dollar sometime this year.
(Graph from the KT)
The fact that the won is rising, and will continue to rise, has Japanese companies excited that they will recover some of the marketshare they lost from Korean firms in 2009.
According to the Financial Times:
Japanese and South Korean companies compete fiercely for exports in products from televisions to microchips and cars.
Now companies including Sony hope that the stronger won will help them to seize back market share lost to South Korean rivals such as Samsung Electronics and LG Electronics in recent years….
Those in line to benefit [from the rising won] include Samsung’s competitors such as Sony and Sharp; Japanese exporters to South Korea such as semiconductor production equipment makers Disco and Advantest; and companies with operations in South Korea, such as the convenience store FamilyMart.
FamilyMart is Japanese? Isn’t there one on every freakin’ Korean street corner (including a few in North Korea)?
{ 32 comments… read them below or add one }
FamilyMart is Japanese. So is 7-Eleven.
Loath as I am to proscribe too much emphasis on exchange rates to explain the economic success of countries like Korea, this article is a useful reminder that for all the talk of Korea, Inc. kicking Japan’s ass in industry after industry, it’s hard to dismiss the effects of a won that trades at 1100 to the dollar and a yen that trades at 90.
If Hyundai and Samsung had banner years in 2009, these exchange rates undoubtedly played a very big role indeed.
DLB
Yes indeed, and although the press might be proud in their proclamations that Korea, Inc. has slayed Japan, I can tell you that management of Korea, Inc. is very much aware of what a 1400won/USD rate did for them last year.
The only problem I have here are that the Japanese companies are acting a bit giddy like they have found Korea’s kryptonite or something… however, Korea’s march to match Japan in many industries has been going on for decades and recovering all that marketshare will be harder then they imagined it will be… higher won be damned.
For example, the Japanese never recovered their lead in shipbuilding regardless of where the won ended up relative to the yen for the past five or seven years…
In other words, Japan, Inc.’s problems are greater than an overvalued currency and an undervalued won. Hopefully Japan’s execs will realize/understand this.
Yet more evidence that makes me suspect Wangkon’s claim to korean-ness.
So the theory is that nominal exchange rate should tend towards PPP exchange rate, right? These things always give me such a friggin headache…
JW,
Sounds like someone took a college course not too long ago (and got a C or B-)…
I haven’t heard PPP in relation to nominal exchange rate since Professor Cauley’s International Finance class (in addition to him talking every other day about his Irish heritage, his Persian wife and how he was the faculty advisor for UCLA’s Korean student association)!
http://www.anderson.ucla.edu/x4929.xml
Korean brands are still cheaper than Japanese, “Made in China” Japanese brands won’t get too far as most consumers wanting Japanese brands wants “Made in Japan” quality not “Made in China” quality. What Japanese companies are doing is exactly this, they going to outsource to China to fight off Korean brands.
Japanese aren’t think smart, they should have moved on to different market such as military, computer software, service & banking sectors not consumer electronics and cars. Koreans are leaping ahead of Japan in arms and infrastructure sale, which is more profitable than consumer goods and cars.
Due to peacetime Consitution, the Japanese can’t export military hardware.
Koreansentry,
Let’s not get too ahead of ourseleves here…
The ultimate scorecard:
- Japanese GDP per capita: $38,457
- Korean GDP per capita: $19,136
However, PPP (purchase power parity) difference is much less pronounced with Japan at $34k and Korea at only $27k.
JW, the best way to understand PPP is to think of it in terms of the Economists’ “Big Mac” Index.
http://en.wikipedia.org/wiki/Big_Mac_Index
… an no. PPP does not always cleave to nominal rates because the basket of prices is not always equal with different countries. It’s very similar with U.S. rates because I’m suspecting that the basket of goods are from a U.S. standard! I’m guessing that Norway’s basket of goods is vastly different given the very big gap between PPP and nominal GDP per capita.
I have only been to Japan a couple of times, but just walking around a little bit makes it really obvious — Japan is a lot richer than Korea, and has been that way for a long time.
^ You hardly make a living with $38,457 in Japan, basically Japanese economy didn’t really grow since decade ago due to their short slightness and lack of openness. They can blamed their aging population but frankly speaking Japan didn’t achieved much since last decade because of old & corrupted government and old fashioned attitude.
KS,
That’s why the difference between Korea and Japan’s PPP is much lower. Nominal judges how much total wealth a nation is generating and PPP is how much are equal goods going for.
For example, the per capita nominal in Manhattan is probably a lot more than the per capita nominal in St. Louis, Missouri… but rents are A LOT cheaper in St. Louis for comparable square footage living quarters than in Manhattan… so there would be a lower gap in PPP… but come on, who wants to live in St. Louis, Missouri regardless how low the rents are, huh?
Are you trying to get a rise out of me or something? St. Louis, Missouri is a great place to live. West Coast turkey…
Goodness, I need to really visit the United States one of these days…
“Toyota Halts Sales of Eight Models After Recall”
And the opportunity widens for Hyundai!
I and all my family members only buy Korean brand goods and cars. Not one single Japanese product or car in my family at all. I also urge all Koreans and Korean-Americans to do the same. We Koreans really need to strengthen up our economy. We also need to brand Korean food as well and make it first class and popular all over the world. Then companies such as Lotte, Ottogi, Nong shim, Hite, Cass, OB, Makeolli, etc. can be world wide brands. The food industry is big business and it can also add a huge boost to Korea’s economy. We can’t just count on Samsung, LG, Hyundai, Kia, Daewoo, Pantech, Hyundai IT, Hynix, Kumho, Hangook Tires to build Korea’s economy. We need to make Korean cosmetics such as Laniege (Amore) to be in department stores such as Macy’s as well. We need to brand everything. But the main thing is to brand Korean cuisine.
Also, did you guys hear the news about Toyota? ANOTHER recall!!! Ha Ha Ha. A couple months ago, there was a recall for 4 million cars. Now, the second recall is 2.4 million cars and now they are stopping production. Screw Toyota/Lexus, Nissan/Infinit, etc.. Go Hyundai!!
Demand for Japanese goods is decreasing. Taiwan is also developing at a rapid rate. Their computer hardware industry is very developed. Who cares about japan anymore… Let’s just work on making Korea well known as a “cool” and super clean country.
Korean rice cookers are awesome as well. There is Cuckoo, Cuchen, and Livart. I think Livarti is from LG.
Please support Korea brands. They are high in quality as well.
Also please recycle all your garbage and appliances. Please keep the world clean.
@ # 16,
That’s why it will take more than a cheaper yen… if they don’t realize it then they have already lost.
@ # 17,
Not my dad. I gave him three grand and he bought a Sony Bravia LED, Sony blu-ray and a Onkyo sound system. He also has a Toyota Prius… but he does have Hankook tires on it…
Koreans love and buy Japanese products. Japanese hold their noses and pinch their fingers at Korean products. In Japan, there are no Hyundai nor any Samsung. But at least there are a few Korean kimchi’s. They can give away Korean products for free, but no-one would want them because Japanese consumers are thoroughly brainwashed that Korean products are no good.
“The ultimate scorecard:
- Japanese GDP per capita: $38,457
- Korean GDP per capita: $19,136″
Wangkon, those are last year’s numbers. If the predictions of Korean won strengthening and Japanese Yen weakening, comes true, suddenly the numbers will look different with the big difference evaporating. If Korea (like Greece did, massaging their numbers to inflate the GDP), also figure in the huge underground economy that is calculated to be as much as 35 percent of the total GDP, then all of a sudden the nominal GDP per person for Korea becomes a lot higher.
I don’t trust any of the GDP per person numbers for showing the wealth of the country. They depend too much on the exchange rate of the day. Nor do I really trust the PPP either. There really should be another method developed to measure the wealth of a country.
“Hite, Cass, OB” can be world wide brands?
you are either high, or you’ve never tasted them.
Just another example of why things are not always as competitive as it seems and Korea, Inc. still needs/depends on Japan, Inc.
http://www.reuters.com/article/idUSTOE60Q08E20100127?type=marketsNews
Hi WongKon this is the old day4night (that accnt doesn’t work anymore was mysteriously double-banned some time after Pawi accused my of being a child molester or something…). Maybe you remember on the eve of the financial crisis, as it was beginning, I called the won to fall to 1450 vs the greenback. And then recently noted (as Robin Hedge) that the Bank of Korea would probably try to avoid raising rates and try to use unconventional means to deal with credit while avoiding actions that would increase the won’s value. And that happened as we saw (Brazil was the first to take similar measures). Since then the won actually lost some ground (during the USD rally) and then has gained again. Now it’s pretty much back to where it was when the (quite moderate and reasonable) currency controls were announced.
I agree the general trend is for a stronger won, and a trend is clearly in place. That said, with currencies you should almost always be ready for a surprise. The Bank of Korea may have a target, and I’d guess they’d like to see 1100 or thereabouts stick. But 1300 or 1250 again wouldn’t surprise me.
A crucial point here is the Chinese yuan’s dollar peg. Korea I imagine will resist the won strengthening against both yuan and dollar at the same time. In fact the Chinese yuan peg makes it hard for the US dollar to lose much value really, as much as a weaker dollar might be in US interests.
Greece and Spain are suffering because they can’t devalue their way out of trouble now.
Meanwhile, about the Chosun won up North, this from the DailyNK:
‘As predicted by experts on North Korea’s economy, since the authorities have yet to officially release state prices, the North Korean people are now surviving by bartering.
A defector, who spoke with his family in North Hamkyung Province on Tuesday, reported the news to the Daily NK, “I called my family to send some money to them as I had heard they were in trouble, and they told me that the current situation is unspeakably terrible. They live only by bartering with others.”’
Robin,
What took you so long to tell me?
I mentioned it in another post (you mean me being day4night, right?) but of course those things fly off the boards and I usually post late anyway… But yes, ’tis me.
Omg last night I went on Second Life (might have some work with that company) and was wandering around, no problem anywhere until the Korean area (“Pusan”) where I (or my avatar) was promptly booted for being a foreigner. Wow. I explained I knew some Korean, nothing doing. Didn’t matter. Koreans only thank you.
so Koreans love Japanese cars and products and open up Japanese restaurants and dress up in Japanese attire at these restaurants. why is this? will Korea ever achieve the level with the Japanese?
If Koreans can’t brand their own food and country, can they compete with the Japanese?
I don’t know why Koreans aren’t proud and confident in their own cars and products. I also don’t know why Koreans love to open Japanese restaurants when they emigrate.
Do we have a buddying wjk here (UT version)?
‘double-banned some time after Pawi accused my of being a child molester or something…)’
EXCUSE ME? calling somebody a child molester isn’t my style. please don’t make shit up and blame me for your banning. robert’s his own person and i’m sure you yourself provided him with the reasons for your ban.
I believe some guy named Mkaplan was banned for accusing someone of being a child molestor.
OKokokokokokokok….
Pawi it’s up on the old comments somewhere. It wasn’t child molester, but something else. Anyway I wasn’t upset and mostly thought it was funny, and Brendon Carr came to my defense. It seemed you’d confused me with someone else, and I think you admitted as much later. Robert didn’t ban me he said, and was surprised I’d been banned. And it’s possible something else happened and I’d never been banned. Maybe it was a problem with my account, not sure. Every time and from any ISP I couldn’t log in. Then Robert fixed the problem, and then it happened all over again. At least this is what I understand. Anyway, I suddenly had a lot of trading to do and also moved twice, no four times actually wow so I didn’t have time to play Marmot. But I like to play Marmot and also like that it creates this kind of big Korea through Western Eyes (props to Neff) wiki or at least searchable mess. And I’m extremely happy Robert didn’t close the comments and almost always prefer if people are not banned, although incentivizing productive discourse seems a good goal. So far the Whuffie (voting) system on the comments seems to work although I was getting negative Whuffie for a bit which I admit discouraged me from commenting here and there. But the Hole wasn’t missing much once you consider my propensity to rrrramble…..
btw Whuffie was the reputation currency in Cory Doctorow’s post-scarcity novel Down and Out in the Magic Kingdom. Fun book.
ok, but it’s not my style to say things like that.
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