The South Korean won's strength against the Japanese yen has driven the weak won-yen exchange rate, as locals seek to capitalize on the yen's decline. One office worker exchanged 2 million yen in July when the rate dropped from 971 won per 100 yen to 917 won in a month. The worker added 100,000 yen each time the yen fell, accumulating 3 million yen, but is now facing a loss of about 750,000 won (2.8%).
The yen has been weakening since the start of the year, breaking below the 900 won level in July. It briefly rose to 883 won after the Bank of Japan raised its policy rate from 1% to 1.25% last month, but has since fallen back to around 850 won. Experts expect the weak-yen trend to continue despite the rate hike.
The won-yen rate is a cross rate calculated by dividing the dollar-won rate by the dollar-yen rate, as the won has recently strengthened. The yen per $1 remains roughly unchanged, from 156 yen at the start of the year to about 158 yen now. In contrast, the won per $1 fell from around 1,450 won to the 1,330 won range, indicating the won's strength rather than yen weakness.
Song Min-gi, a research fellow at the Korea Capital Market Institute, noted Japan's lack of significant export growth as a factor in the lower won-yen rate. Korea's dollar inflows from rising semiconductor exports by Samsung Electronics(005930) and SK hynix(000660) contrast with Japan's modest export growth. Japan's active fiscal policy and reduced likelihood of additional rate hikes are also cited as factors weakening the yen.
As the won-yen rate declined, demand for yen exchanges and deposits increased. Yen deposits at the five major commercial banks stood at 1.1545 trillion yen (about 9.81 trillion won), up about 610 billion won from the end of August (1.0827 trillion yen).