Is South Korea The New Japan?

Reuters reports that Japanese manufacturers are running scared from Hyundai-Kia. A combination of a rising Yen and South Korea sealing more and more free trade agreements with other countries has helped Hyundai-Kia immensely. Of course, copying Toyota’s business model of building reliable cars at affordable prices has helped greatly, too. All this momentum from South Korea is getting Japanese car executives a little bit nervous. “I think there’s a sense of crisis in the whole (Japanese) industry,” Toshiyuki Shiga, chief operating officer at Nissan Motor. “Whether you take the Free Trade Agreements or foreign exchange policy, I get the impression that South Korea is tackling things well.”

South Korea has signed over 40 free trade agreements, almost three times as many as Japan with other Asian countries. This is probably the reason why Toyota has far more foreign factories than Hyundai-Kia. South Korea has more than 40 free trade agreements with other nations. Japan has less than a third of that number, and most of those are with other Asian countries.Whilst Japanese executives have publicly poured anger on the strong yen, the government have done nothing to intervene. At the time of writing this article, the Japanese Yen is 90 to the US dollar. A long cry from January 2008 when it was nearly 110 yen to the US dollar.

Because of the burgeoning trade South Korea is enjoying, it will almost certainly have an appreciating effect on the South Korean Won, but as Reuters puts it “Analysts say the won could gain further as South Korea’s economy stages a faster recovery, but add that foreign exchange authorities in that country are unlikely to condone an unchecked rise.”. Currency manipulations? In Asia? Who are these analysts? Detroit executives?