SEOUL: Korea’s exports to Japan have been declining sharply, making the island country only the fifth-largest export destination for the first time since the two countries resumed diplomatic relations 50 years ago.
The Chosun Ilbo on Tuesday analyzed data from the Ministry of Trade, Industry and Energy and Korea International Trade Association and found that exports to Japan totaled just US$11.1 billion in the first five months of this year, down a whopping 18.4 percent from a year ago.
Over the same period, exports to the U.S. rose five percent and shipments to China fell 2.7 percent. Now Hong Kong is Korea’s third-largest export market followed by Vietnam in fourth place and Japan in fifth.
The main reasons for the sharp decline in exports to Japan are the weak yen, which has made Korean products more expensive, decline in petroleum products due to low international oil prices, and anti-Korean sentiment.
A look at the export performance of Korea’s top 50 products in Japan shows 35 of them dwindling compared to last year.
Samsung, the world’s largest TV maker, packed up and left Japan in 2007 after years of lagging sales there. LG Electronics, the world’s No. 2, ranks fifth in Japan after Sharp and Sony. Samsung smartphones also rank fifth in Japan after Sony and Sharp, although first worldwide.
E-Land, which generates W2 trillion (US$1=W1,119) in sales in China every year, closed down its Japanese branch this year, while Hankook Tire’s Japanese subsidiary has run out of money. Nongshim ramen and Orion’s Choco Pie, which are global bestsellers, are faring poorly in Japan too.
Lee Ji-pyung at the LG Economic Research Institute said, “Korea and Japan have many overlapping products and it’s more difficult for Korean companies to succeed in Japan.”
The weak yen is the main culprit behind lagging exports to Japan. A hundred yen, which was worth W1,430 in October of 2012, is now worth W900. That means Korean products have become 37 percent more expensive in Japan over the last three years.
Chilled relations between Seoul and Tokyo have increased anti-Korean sentiment in Japan and hurt demand for Korean products. Export figures since Japanese Prime Minister Shinzo Abe came into office in late 2012 support this.
The export growth rate of Korean mobile phones to Japan peaked at 18.2 percent in 2012 but had since fallen 54.1 percent by April this year. Exports of cosmetics to Japan rose 27 percent in 2012 but have declined since 2013.
Experts say an FTA between Korea and Japan or trilateral FTA involving China could help solve the problem since it would boost the cost competitiveness of Korean products.
Shin Seung-kwan at KITA said, “An FTA would provide valuable momentum for Korean businesses in tapping into the Japanese market.”
Others say the government must take the lead in instigating such changes. Byun Yang-gyu at the Korea Development Institute said, “We need to take steps to ease anti-Korean sentiment in Japan to capitalize on that huge consumer market.”
