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 [10], "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 [11], in the global race to debase launched with the end of the Bretton Woods, it was the undisputed leader, outdoing even the US.
[12]
Moments ago South Korea may have just had enough and broke the seal on its code of silence. As Reuters [13]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.