South Korea Starts Currency War Rumblings; Has Japan In Its Sights

Tyler Durden's picture

While the rest of the developed (read trade deficit) world's foray into the currency wars was completely predictable and expected, there was one country that had so far kept very silent on the topic of Japan's attempts to crush its currency: its main export competitor, South Korea. Recall that for this Asian nation exports are everything, and as Yonhap reminds us, "exports of goods and services amounted to 538.5 trillion won (US$506 billion) in the January-September period, or 57.3 percent of the nation's gross domestic product (GDP), according to the data by the Bank of Korea. The reading was higher than 56.2 percent tallied for all of 2011 and the highest since the central bank began compiling related data in 1970, and South Korea's exports accounted for 13.2 percent of its GDP." The reason for South Korea's relative silence is that, as we showed yesterday, in the global race to debase launched with the end of the Bretton Woods, it was the undisputed leader, outdoing even the US.

Moments ago South Korea may have just had enough and broke the seal on its code of silence. As Reuters reports, "South Korea said that while the Group of 20 nations at their meeting last weekend did not single out Japan for monetary and fiscal measures that have weakened the yen, the group did not exactly endorse Japan's quantitative easing policy, which in fact stirred controversy."

"The message from Moscow should not be understood as that the leaders endorsed Japan's quantitative easing," Choi Hee Nam, a finance ministry director general, told a briefing in South Korea. "The G-20 also didn't officially oppose Japan's policies, but the topic was very controversial."


The yen has fallen more than 20 percent against the Korean won over the last six months, a big boost for Japanese exporters competing against South Korean manufacturers.

Why this departure? Because in the modern world, where all gains are marginal and all historic benefits due to weak or strong currencies are long forgotten, and thus irrelevant, the fact that the Yen has fallen over 20% against the Korean Won in the past 6 months means a direct loss to Korean exporters, most of whom compete directly with the neighboring island nation. Furthermore, since trade is zero sum, all Japanese gains mean Korean losses, and accenuated and direct hits to Korea's GDP.

Which means that all eyes now turn to Seoul in anticipation when this final bastion of monetary stability will cave to the global onslaught and its central bank proceeds to engage Japan directly in the most acute case of global currency warfare since the Great Depression. However, as C-grade financial tabloids have explained, the currency wars, and trade wars that result, will be a win-win for everyone.... Just please to ignore the last time they resulted in war-war.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TruthInSunshine's picture

G20 pledge: "No currency war"


By Mark Thompson, CNN

Amid concerns of a global currency war, the world's biggest economies pledged on Saturday they would not devalue their money to lift their own fortunes at the expense of the global recovery.


Finance ministers and central bankers from the G20, which brings together the 19 richest nations and the European Union, ended a two-day meeting in Moscow.


In a joint statement, the countries committed to focus monetary policy on boosting economic growth and refrain from actions that could trigger a beggar-thy-neighbor round of currency devaluations.


"We will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open," the G20's statement said.


In a currency war, nations manipulate policy levers to drive down the value of their money compared to others, thus boosting their own exports but hurting their trading partners.


Currency markets have gyrated in recent months due to widening gaps between the policies of the world's major central banks as they seek to revive growth and, in some cases, begin to consider how to withdraw emergency funding that has kept banks and economies afloat since the financial crisis of 2008.


Before the G20 meeting, Japan was singled out for criticism by some policymakers for apparently targeting a lower exchange rate as part of a range of fiscal and monetary measures aimed at ending years of deflation and stagnation. The yen has fallen rapidly against the dollar since last fall.


The euro has also rallied to multi-month highs, threatening to undo some of the recent painful advances in competitiveness that are vital if the eurozone is to recover.

DoChenRollingBearing's picture

If Japan and China are doing currency wars vs. each other, it is DEFINITELY in MY interest for South Korea to depreciate their currency too!  

(Talking my book here...)

Cheaper bearingz, bitchez!

Quinvarius's picture

I am pretty sure the only thing they agreed on was the feel good move of putting another trading bottom in gold.

Sudden Debt's picture

Actually, CURRENCY WARS...

It's a great idea for a board game!!

DoChenRollingBearing's picture

US is Boardwalk.  South Korea might be Marvin Gardens.

Who is Park Place?

[From our US game of "Monopoly", SD!  Actually, a monopoly would do me some good! :)  ]

Irelevant's picture

Forward! Japan is allowed to devalue as long as they will buy 500 bln. USTs over the next year, making it possible for Bernanke to print by proxy, and also give german exporters the finger as retribution for the german gold request. Its a very smart scheme.

ParkAveFlasher's picture

And then Germany will bend that finger backward by printing Volkswagens (aaaagain) and landing them on the East Coast (aaaagain).

I'm surprised they haven't engineered an actual Volkswagen cannon for just such an assault. 

I know, I know, strong Euro = harder time flooding export markets but, who knows what their parts and service supply contracts are priced at and when they were signed and sealed and how far out they may stretch.  Perhaps Germany has their own TBTF industries. 

That article out there that a "German auto company" was stockpiling silver bullion in Switzerland got me to thinking that maybe the German industrialists know WTF they are doing and have built up munitions for a trade war in the event that acts of currency collusion would be unfavorable towards them.


Shizzmoney's picture

I think North Korea threatens South Korea with destruction more often than I eat vegetables.

CheapBastard's picture

SK is a beautiful country....clean, safe, Fuki-free and nice people. But for Americans it is fairly expensive. If they devalue I'd visit again.

DoChenRollingBearing's picture

+ 1  Nice comment.  I found the same.

Good food too!

suteibu's picture

I propose a Hunger Games on the Senkaku Islands.  Put all of the G20 governments and bankers along with their economists and media surrogates there for a fight to the end.  Aside from solving most of the world's problems, it would be "must see TV."

narnia's picture

Trade is not zero sum. That's about the dumbest thing ever posted on this website.

hero HNL's picture

ZeroHedge rarely writes about korea....I don't know the reason.


The country is totally broke after 2009....All its multinational companies (such as samsung, lg, financial, insurance, etc) went bust & no longer korean. More than 50% of the stocks of these companies are held by foreignors....mainly US financial firms.


Also, the more korea exports, the bigger the trade deficit with Japan increases. Most of the rare material, machineries & technology (patent fees) come from Japan. Is used to have the highest suicide rate & inflation is out of control (though it did subside recently). Pure stagflation & the standard of living went down the toilet....


Check me if I am wrong.



suteibu's picture

But they have that sweet FTA with the US now, right?  So...problem solved.

hero HNL's picture

NO....By signing the FTA, the US took over the country and made Korea its colony. In other words, korea lost its sovereignty. The US media is quiet about this because of its sensitive nature.




hero HNL's picture English is poor &  I'm typing fast.




DoChenRollingBearing's picture

Germany's INA now owns Korean bearing manufacturer KBC.

hero HNL's picture

Yes, korea is not a manufacturer but rather just an assembler of parts. (although samsung does have quite a number of electronic patents......but a lot of them originally came from Japan such as toshiba & hitachi).




hero HNL's picture

More about korean bankruptcy, see this link (see thread #26):

Use auto-translator if you can't read Japanese.





hero HNL's picture

Among OECD nations, korea has the worst type of keynsian economy. Unfortunately, it is never mentioned in western media.


Correct me if I am wrong.



Vlad Tepid's picture

That andthe fact that they conned all their old ladies into turning in their gold during the currency crisis, "for the country."  What a bunch of sheep...but at least they had gold.  Japan has to be THE worst at recognizing the value of gold...personally or nationally.

css1971's picture

Korea devalue the Won to make Samsung, LG et al products competitive? No, you can't be serious!!!!


Jones79's picture

Kospi having a major trend day right now.  At least stock markets are having a race to the top.  sarc.

LMLP's picture

North Korea is aggressive now they tested their nukes.....Notably its reported that China and Russia taken a side “As the saying goes, a newborn puppy knows no fear of a tiger. South Korea’s erratic behavior would only herald its final destruction,” Mr. Jon said at the conference.