Koichi Hamada, an economic adviser to Japanese Prime Minister Shinzo Abe, told South Korea to adjust its own monetary policies if officials are concerned at the effects of a yen weakened by unprecedented easing.
“Each country can take care of itself through its own monetary policy,” Hamada, 77, said in an interview in Tokyo yesterday. South Korean officials “shouldn’t blame the Japanese central bank, they should demand the Korean central bank have a proper monetary policy,” he said.
South Korean exporters such as Hyundai Motor Co. stand to lose ground to Japanese rivals because of the yen’s 20% slide against the dollar in the past six months. The currency’s decline is adding to the risk of deteriorating relations between the nations, after South Korean Finance Minister Hyun Oh Seok said last month that the weak yen is a bigger economic risk than North Korean threats.
“South Korea is the country most concerned by the actions taken by Japan, and that’s because their exports are seen as relatively close substitutes,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “South Korea could also attempt the same measures” to weaken their currency, he said.
The yen traded at 102.09 per dollar as of 7:08 p.m. in Tokyo yesterday. The won has strengthened about 20% against the Japanese currency in the past six months.
Minutes released yesterday from a Bank of Korea meeting on May 9, showed policy makers’ concerns that the yen’s depreciation will hinder the nation’s economic recovery. One board member said the economy was likely to underperform for a considerable period because of weakness in the yen and the global economy and geopolitical risk. At that meeting, the central bank cut the benchmark rate to 2.5% from 2.75%.
“The Korean central bank can undo some of the negative effects from Japan’s monetary expansion,” Hamada said.
The Bank of Japan in April pledged to double bond buying in an attempt to secure 2% inflation and drag the world’s third-biggest economy out of a 15-year deflationary malaise. Board member Ryuzo Miyao said yesterday that the central bank has taken all necessary steps for now.
Governor Haruhiko Kuroda “should continue to trust in his judgment and ease further” if needed, said Hamada, 77, who was tapped by Abe last year to advise on monetary policy. A stock slump in Japan was “a natural correction” and so-called Abenomics is working “as well or better than expected,” Hamada said.