South Korea Demands "International Action" Against "Negative Impact" Of Abenomics

Tyler Durden's picture


Over three months ago in "South Korea Starts Currency War Rumblings; Has Japan In Its Sights" we showed that the one nation with the biggest sensitivity to Japan's currency-destructive and export-promoting Abenomics policy is its close neighbor, South Korea. With nearly 60% of SK's entire GDP deriving from net exports, every percent drop in its trade balance result in a more than 0.5% hit to GDP: more than any nation in the world. And since South Korea and Japan compete for the same export end markets, there would be no bigger loser in a zero trade sum world than Seoul.

We said as much back then: "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."

The immediate result were three months of relative silence as South Korea bit its tongue and suffered export pain, while following the broader G-7/8/20/IMF script, which ignored the actual impact of Abenomics on global trade, and was perfectly happy to "let it be" as long as the global liquidity tsunami out of Kuroda resulted in a surge in global stock markets (after all, must preserve confidence in the global Ponzi at all costs, as has happened) and as local banks scrambled to engage in an unprecedented bond carry trade also pushing European peripheral yields to record lows in some cases (in the process masking Europe's insurmountable problems even more).

However now that Abenomics is in its sixth month, and South Korea's max export pain threshold has been reached, the country no longer will stay silent. As the FT reports, "South Korea has warned that G8 leaders need to do more to tackle the “unintended consequences” of Japan’s monetary easing when they gather for a summit later this month amid mounting concerns about the knock-on effects of a weaker yen. In an interview, Hyun Oh-seok, the South Korean finance minister and deputy prime minister, said that international co-ordinated action was needed to mitigate the impact of so-called “Abenomics” on currency markets."

The weaker yen had begun to hurt South Korean exports, Mr Hyun said, and is having unforeseen spill over effects on the global economy.


“The point is that these monetary policies are having quite a negative impact,” Mr Hyun told the Financial Times.

What is ironic is that it was international coordinated action that allowed Abenomics to develop in the first place, and by doing so it alienated and explicitly damaged South Korea's trade status quo. What is more ironic is that it is finally dawning on South Korea that the "international community" has de facto sacrificed SK's long-term economic prospects to the immediate benefit of rising global stock and bond markets, which are the direct result of Kuroda's $75 billion in month liquidity injections.

In other words, Mr. Hyun has realized he is all alone, and that the international community will do nothing to change a new path, one in which Japan's economy now has no way but to see it through its sad ending, because should Abenomic fail now, this will be it for any future reflation (read reserve injection) attempts by a Goldman Sachs think-tanked BOJ. It will be up to South Korea to act accordingly, which in a world where every nation is now engaged in currency wars means only one thing: destroying the Korean Won.

Of course, diplomacy must fail first:

The G8, he said, needed to come up with ways to address the issue at its summit later this month in Northern Ireland.


“We need some kind of co-ordinated efforts to prevent these kinds of unintended side effects from [Japan’s new] monetary policy,” he said. “Whether it is intended or not, the result [of the depreciation of the Japanese yen] is quite quick.”


The impact on South Korea has been particularly acute because most of its top 10 exports compete directly with Japan. But he said similar concerns were shared by Germany.

He is looking at an uphill climb: the G-8 already made it very clear that as long as Abenomics results in rising stock markets, it won't lift a finger.

G8 leaders and finance ministers have so far stopped short of publicly criticising the moves, believing that the resumption of faster economic growth in Japan would be a greater good for the global economy and overshadow any concerns over the impact of currency swings on the country’s trading rivals.


Keen to defuse fears over the revival of what have in the past been called “the currency wars”, the G8 and G20 have both issued statements this year saying countries should target domestic growth rather than exchange rates with monetary policy. Japan insists it is doing exactly that.

Implicitly, the G-8/20 also thinks everyone else in the world is an idiot. But all this will be irrelevant if one more major export powerhouse joins alongside South Korea in formally lodging complaints. Someone like Germany. Because if Merkel also says that the 200 or so boost to the S&P is more than enough to offset marginal losses in German exports, then Abenomics may very well be on its way out.

What this means for USDJPY, already a tiny 40 pips from plummeting once the 100.000 stops are taken out, and which may well happen tonight once Mrs Watanabe wakes up and sees the carnage from Friday's closing US print, will be made very clear shortly. It also means that anyone long the Korean Won should probably be getting quite nervous right about now.

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Sun, 06/02/2013 - 11:40 | 3618164 Everyman
Everyman's picture

It's is always great fun, until someone gets a stick in their eye.  Then we get stick laws, and eye bailouts.  SSDD.

Sun, 06/02/2013 - 11:48 | 3618180 maxmad
maxmad's picture

hmmm..... who could have thought global money printing could lead to such a mess.... The Keynsian school taught me its all sunshine and unicorns...

Sun, 06/02/2013 - 11:54 | 3618193 i-dog
i-dog's picture


“unintended consequences”

Riiiiiight ... LOL !

Sun, 06/02/2013 - 12:05 | 3618208 TheFourthStooge-ing
TheFourthStooge-ing's picture

When you throw someone under the wheels of a moving bus, the consequences are both known and intended.

Sun, 06/02/2013 - 12:15 | 3618223 AldousHuxley
AldousHuxley's picture

Beggar Thy Neighbor


"Our wage slaves must be cheaper than your wage slaves"


But why does abenomics even matter in this age where people prefer Samsung over Sony?



Sun, 06/02/2013 - 12:48 | 3618278 Buckaroo Banzai
Buckaroo Banzai's picture

Because when you've got someone on the ground, and you're kicking the shit out of them, you want them to STAY DOWN.

Sun, 06/02/2013 - 12:58 | 3618308 Oh regional Indian
Oh regional Indian's picture

But Japan has no account of the carry trade unwind bomb that is clearly yet to go off and the reason abenomics is so liquid, wetting the fuse.

Anothe rpoint to note is that Japan has massively moved their manufacturing into their key export zones.

Japan is the other side of the  US PRINT PONZI>


Sun, 06/02/2013 - 12:55 | 3618295 Hayabusa
Hayabusa's picture

South Korea's school system is rated #1 in the world in mathematics.  You'd think they'd have started complaining sooner

about Japan's QE and the associated negative financial import/export impact associated with it. 

Sun, 06/02/2013 - 11:41 | 3618165 Temporalist
Temporalist's picture

Koreans the next group to learn to love gold.

Sun, 06/02/2013 - 12:16 | 3618224 disabledvet
disabledvet's picture

they already have been. according to the TD's "that meant the end is near for the dollar." Instead "as with Venezuela they might have to learn to love hyperinflation as well." if steel goes the way of oil "the great debt reset is well underway."

Sun, 06/02/2013 - 11:43 | 3618172 jonjon831983
jonjon831983's picture

Yep: "Struggling Korean builders tell employees to show loyalty: buy apartments"

Sun, 06/02/2013 - 11:46 | 3618175 Temporalist
Temporalist's picture

Good article.  Here is a quote from it:

"...outstanding household debt has climbed to almost $1 trillion.


South Korea's household debt has doubled over a decade to levels where debt-to-income ratios are in excess of those in the United States before the sub-prime crash in 2008."

Sun, 06/02/2013 - 11:51 | 3618187 jonjon831983
jonjon831983's picture

Here`s another one: "Singapore fund requests repayment of investment in Yongsan"


"Lessons from the Bankrupt Yongsan Development Project"

Sun, 06/02/2013 - 17:45 | 3618799 Aurora Ex Machina
Aurora Ex Machina's picture

Thankyou for the infomation.

I'd give +10 for linking people into S.Korean stuff, I don't know enough about it, although I was aware that the "buy-in to pay for development" was a common Korean model. *cough* Songdo *cough*

Sun, 06/02/2013 - 11:50 | 3618185 They trynna cat...
They trynna catch me ridin dirty's picture

Korea is perpetually on the lookout for more reasons to hold a grudge against Japan since their "comfort women" fairy tale apparently hasn't gained Spielberg's attention like they hoped it would.  I guess stealing Japan's technology for 30 years wasn't enough for them either.

Koreans need to stick to what they're good at: pressing "F5" all day every day to give "Gangnam Style" billions of YouTube views.

Sun, 06/02/2013 - 11:53 | 3618192 Bay of Pigs
Bay of Pigs's picture

And womens golf.

Sun, 06/02/2013 - 12:22 | 3618233 AldousHuxley
AldousHuxley's picture

Korea is next Japan....protectorate of US military allowed to commercialize US military technology as Goldman invests in Samsung and Korean banks. Then when Korea gets too powerful, US will stroke their ego and give them housing bubble which will crash so bad that Korea will have 30 year deflation just like Japan while Korean elites all invest in US SP500 to keep the ponzi going.


That's when US will allow hand over of Sony --> Samsung --> Foxconn.


There are more countries lined up for next 200 years.. vietname, thailand, indonesia, etc.


Sun, 06/02/2013 - 12:50 | 3618283 Buckaroo Banzai
Buckaroo Banzai's picture

And plastic surgery.

Sun, 06/02/2013 - 12:12 | 3618220 TheFourthStooge-ing
TheFourthStooge-ing's picture

Actually, Korea needs to stop being the "comfort woman" of the US government, grow a spine and a set of testicles, throw out all foreign troops, and sign an armistice with North Korea.

Sun, 06/02/2013 - 12:50 | 3618271 They trynna cat...
They trynna catch me ridin dirty's picture

Korea will never be anything without latching on to other countries.  They are the Israel of Asia. 

The entire mass media and organized crime racket in Japan is run by Koreans pretending to be Japanese--sound familiar?  Count the squares on their flag: 666, same as that 'star' on the other flag.  Coincidence?  I think not.

The only thing stopping them from doing it in Europe and America is the fact that they can't pretend to be Caucasian.


Like a Korean female who I used to work with once told me: "America is everyone's country but Korea is for Koreans."

Sun, 06/02/2013 - 12:53 | 3618291 Buckaroo Banzai
Buckaroo Banzai's picture

Japan has used Korea as a punching bag for the last millennium, yet you seem to have a problem now that the roles are finally reversed. Why do you care one way or the other?

Sun, 06/02/2013 - 13:07 | 3618323 They trynna cat...
They trynna catch me ridin dirty's picture

Because they are liars and shysters.

Everybody has been a punching bag for everyone over the years: Ireland from Britain, Britain from the Romans, Lithuania from Russia, China from the Mongols and Britain.  GET OVER IT.  Not to mention, Korea, like the others, are masters of the great 'Oy, vey, we are just so POY-SE-KEW-TED' schtick.

As for the "roles being reversed," if Japan remilitarized, Korea wouldn't last a week against them.  They are just another Israel--quick to act tough as long as it's not a fair fight.

Sun, 06/02/2013 - 14:25 | 3618466 Troll Magnet
Troll Magnet's picture

Hmm...I had no idea Korea was constantly pushing their neighbors out of their own countries and building illegal settlements throughout Asia. And if what you're saying is true, I hope we start racially profiling Koreans because sooner or later they are gonna fly planes into our buildings and frame it on that Buddhist extremist Richard Gere!

Sun, 06/02/2013 - 16:36 | 3618690 They trynna cat...
They trynna catch me ridin dirty's picture

Obviously they are not as bad as the others because they are not 'global,' but the damage they do in Japan is hard to exaggerate.  Drugs, media degeneracy and lies, left wing propaganda, human sex trafficking to name just a few.  Like I said, the only reason they aren't able to pull off the same in the West is because they can't pretend to be White as can "those of whom we must not speak."  They will both travel 10 miles out of their way just to patronize a store owned by their fellow Korean/Jew, but are more than happy to rip off those of different ethnicities (see the ubiquitous Korean liquor stores in poor black areas).

Korea is like Israel's retarded little Asian brother.  A runt with a Napoleon complex perpetually playing the victim card.

Sun, 06/02/2013 - 18:42 | 3618908 Troll Magnet
Troll Magnet's picture

OK, dude. I really can't see how a country that glorifies rape and beastiality through fucking cartoons no less can be "degenerated" anymore than it already is but whatever you say.

Sun, 06/02/2013 - 21:33 | 3619241 123dobryden
123dobryden's picture

good country bad country, listen, its not countries that have identities, its every individual citizen, there are lots of shitbags in every country, but in almost every country is the ruling political class looking ahead to next election, this country that that country this makes no sense.

Sun, 06/02/2013 - 23:24 | 3619484 They trynna cat...
They trynna catch me ridin dirty's picture

Most people here are ignorant of what goes on in Asia, what can I say.  Try learning the language(s) and living over there.  Live in Japan and live in Korea and really get to know the people.  You will be singing a different tune afterward, I promise you.

Sun, 06/02/2013 - 13:26 | 3618362 Non Passaran
Non Passaran's picture

Disgruntled tourist, I presume?

Sun, 06/02/2013 - 13:46 | 3618397 They trynna cat...
They trynna catch me ridin dirty's picture

Nope, I am just more knowledgeable about East Asia than 99% of posters here.  In particular I know Koreans and I know their character, as well as how they view themselves vis a vis the rest of the world.

If there are two countries in the world that need more 'diversity,' they are Israel and Korea.  I think every Israeli and Korean woman should have a strapping black boyfriend or husband.

Sun, 06/02/2013 - 11:56 | 3618194 machineh
machineh's picture

Oh-seok better change his name to Oh-shit.

Sun, 06/02/2013 - 12:01 | 3618202 disabledvet
disabledvet's picture

hmmm. "so what's Wall Street eyeing this time":

Sun, 06/02/2013 - 12:10 | 3618218 GMadScientist
GMadScientist's picture

???? "Japanese Invasion of the Imjin Year"...water dragon, very dangerous, you go first.

Sun, 06/02/2013 - 17:51 | 3618809 Aurora Ex Machina
Aurora Ex Machina's picture

This is the year of the Snake, unless I've missed something.

Sun, 06/02/2013 - 12:40 | 3618263 eddiebe
eddiebe's picture

This is easy to fix, South Korea: Ramp up the presses!

Sun, 06/02/2013 - 20:03 | 3619064 StychoKiller
StychoKiller's picture

Slathering on the ink right now, Cap'n

Sun, 06/02/2013 - 12:42 | 3618265 Seasmoke
Seasmoke's picture

$5,000 Toyotas VS. $50,000 KIAs

Sun, 06/02/2013 - 12:45 | 3618273 Kirk2NCC1701
Kirk2NCC1701's picture

Serious people who understand Currency Wars need to come clean and admit who the REAL target of the Fed's 'Synchronised Debasement' are: China, Russia.

Paging Dr. Rickards. Dr. Rickards, red courtesy phone.

Sun, 06/02/2013 - 12:52 | 3618288 williambanzai7
williambanzai7's picture

How much do they pay us for our military protection?

Sun, 06/02/2013 - 12:55 | 3618296 eddiebe
eddiebe's picture

They pay us by trading in $'s.

Sun, 06/02/2013 - 13:29 | 3618357 Pure Evil
Pure Evil's picture

Actually, they don't need to pay us for their protection.

The US Empire needs its bases in S. Korea and would be averse to remove its footprint from the Korean peninsula.

Plus the added feature of thumbing our noses at our supposed ally the Chinese is a plus.

We have bases all over the world and so far we've only pulled out of the Philippines, (although we did pull back from a couple of 'Stan bases during the Iraq/Afghan war), much to their regret now that China is becoming a naval power and attempting to claim Philippine islands in the South Pacific. Which is the same problem the Japs are having over the Senkaku islands.

Sun, 06/02/2013 - 15:28 | 3618578 supermaxedout
supermaxedout's picture

China is the most important trading partner of the Philippines. There are very strong economic and cultural ties between these two countries.

Regarding the oil in the Philippine waters or Chinese waters depending on the point of view:  With the Chinese the Philippines could make a deal as follows:

Share the oil wealth 50/50. China gets paid its costs for the extraction in oil and the remaining oil is shared 50/50. That would work great and it would help the Philippines a lot while it would be also acceptable to China for sure, because 50% from something is better than 100% from nothing.

While the way the US likes it looks as follows:

1) Philippines is paid for the oil in licence fee from US oil companies in US Dollar - which is fixed now and stays till the wells are exhausted. Most of this money goes into the coffers of some corrupt Philipinos. Licence fees are also cheated on. Nobody has an interest to report the real quantity of oil extracted. Some extra money has to flow to corrupt Philipinos. Then all is fine.

2) As a result the Philippines have to continue to import oil exclusively from the US corporations on prices which are fixed by these corporations. The oil has to be paid in US Dollars, thus the link from the US economy and the Philippines is not broken.

Guess what would be better for the Philines economy and its people. 

Nobody in the Philippines is trusting the US. Its only that they have no chance to get ridd of the economical occupation plus the military occupation in the South Philippines - Sulu Sea. There is still a lot of oil, gold  and other stuff there but its not meant for the Philippines, that is sole property of the US corporations.


Sun, 06/02/2013 - 12:58 | 3618307 Buckaroo Banzai
Buckaroo Banzai's picture

Same as everyone else.

Sun, 06/02/2013 - 13:19 | 3618348 shovelhead
shovelhead's picture

Korea is just a franchise outlet for our subsidized military jobs program.

Keep em over there instead of on welfare over here.

Maybe Korea gives em free kimchee in the chow line, who knows?


America has to hold the record as the worst colonial power to turn a profit from anywhere they go unless they are burning gunpowder.

Sun, 06/02/2013 - 13:23 | 3618349 Non Passaran
Non Passaran's picture

"I don't know. It's a lot".

But wait, that statement meant the US is paying for S. Korea!

Some must be wondering if China could commoditize that market and offer a lower price.

Sun, 06/02/2013 - 12:56 | 3618301 americanspirit
americanspirit's picture

Let's see now. A suitably-equipped South Korean ship sneaks up next to the North Korean coast and let's fly a nuke-tipped missile ( of course the South Koreans  have them - ready at the turn of a key - bet on it) toward Tokyo and then the Japanese retaliate against the perceived source of the attack - NK - with a few nukes of their own ( of course the Japanese also have turn-key nukes) and a whole lot of problems get solved at one time. Japan's economy destroyed and the Yen is a goner. NK eliminated as a threat to SK - really the only nation that NK actually threatens. SK's Chaebol's now have the markets all to themselves and the national pride goes ballistic over the payback for WWII. China secretly snickers; US overtly blusters; everybody else in the region (especially Taiwan) shits their pants.

Hey - just a thought.

Sun, 06/02/2013 - 13:36 | 3618377 Pure Evil
Pure Evil's picture

Won't work if the Nips have their AEGIS BMD turned on.

Which, by the way, with NK as your neighbor, is always.

You see, Japan's AEGIS BMD, which was practically given to them, is the USA's early, early warning system against Vlad's and Mao's ballistic land based missiles.

Luckily, the Communists also have submarines which can launch off the Communist (Cali) west coast, so the point is nearly mute.

Sun, 06/02/2013 - 13:35 | 3618385 Non Passaran
Non Passaran's picture

If I ever heard a totally absurd plan, that is one!
You forgot the part where the South Koreans steal Japan's advanced designs for radiation-resistant robots and modify them so that they can work in radioactive North Korean fields and factories.

Sun, 06/02/2013 - 14:23 | 3618471 americanspirit
americanspirit's picture

And the Koreans retaliate by sending robotic comfort women into Japan with plutonium in their steel vaginas.

Totally absurd was precisely the point. Isn't that the state of the world?

Sun, 06/02/2013 - 13:14 | 3618336 fonzannoon
fonzannoon's picture

Longer term would I rather own the Korean Won or the Yen?

This seems like an easy one.


Sun, 06/02/2013 - 13:30 | 3618370 Peter Pan
Peter Pan's picture

Like I am fond of saying, currency wars are a zero sum game that eventually lead to a sum of zeroes.

What the world needs to understand is that over indebtedness at all levels and in all countries is leading to earnings being increasingly ear marked for debt servicing rather than consumption. This, along with unemployment, is like a punch between the eyes.

As consumption shrinks everyone tries to steal everyone elses customers to survive.

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