"The world is on alert for a 'weak yen.' The value of the yen dropped to 122.09 JPY to the U.S. dollar this day, the lowest in 4 years and 9 months. In Seoul's foreign-exchange market, the value of the yen dropped to 769 KRW to 100 JPY, falling by 0.9 KRW compared with the previous day, the lowest in 9 years and 4 months since October 1997." (Feb. 2007)

"In addition, the weak yen has significantly tarnished the competitiveness of South Korean businesses competing with Japanese products in the U.S. The tables have been turned for major export items, such as Samsung Electronics' HDTV and Hyundai Motor Company's Accent, which are now more expensive than their Japanese competition.

As for other items, the gap in prices with Japanese products has greatly narrowed, a cause of concern for export businesses. The value of the yen is expected to continue its decline next year, so more sighs are expected from businesses."(Dec. 2006)

These newspaper articles relay the concerns of our government and the business sector concerning the economy in 2007, when the value of the yen was extremely low with an annual average of 117.7 JPY to the dollar.

It is similar to recent concerns about an "age of 100 JPY to the dollar," which most view as a psychological threshold, ever since the drop of the yen accelerated after the Abe cabinet took office in September 2012.

If the Japanese yen falls below 100 JPY to the dollar, it will pose a serious challenge to the Korean economy. At a time when economic recovery remains feeble, if the yen continues to drop, the Korean economy, highly dependent on exports, can further contract.

According to the statistics released by the Bank of Korea on May 12, exports grew by 14.1% compared with the previous year to US$371 billion in 2007, when the value of the yen fell to its lowest in the past ten years.

Although 2006 experienced its share of adverse conditions, export growth was actually higher. The Japanese yen averaged 116.3 JPY to the dollar, a 5.2% drop from the previous year, yet exports grew by 14.4% to US$325 billion.

The Korean economy overcame a weaker yen than the present and persistently continued its growth. In addition, at that time, the Korean economy faced double challenges, as the value of the dollar also dropped. While the value of the yen dropped, giving Japanese products a competitive edge in prices, the value of the Korean won increased, weakening the price competitiveness of Korean exports.

An official from the Bank of Korea said, "We have to see the current situation as a normalizing of the Japanese yen, whose value excessively climbed after the 2008 Asian financial crisis when people preferred the yen as a safe asset. Unlike 2006~2007, when the value of the yen was extremely low, the value of the dollar is currently on the rise, helping maintain the price competitiveness of our products."

Companies have secured overseas production bases, which are also a driving force in overcoming the weak yen. In 2002, Hyundai Motor established a production base in China, the fastest growing market in the world, and in 2005 opened a manufacturing plant in Alabama, U.S.A., home of the automobile. Then it constructed a series of plants in the Czech Republic (2008), Russia (2010), and Brazil (2012).

Overseas production of Hyundai and Kia cars has long surpassed domestic production. Hyundai sold 1,171,804 cars internationally in the first quarter of this year. This is a 9.2% increase compared with the first quarter last year. Samsung Electronics also commenced on the construction of a second plant in Vietnam this March, after completing its first cell phone manufacturing plant in 2009.

Overseas expansion by businesses is not only a strategy aggressively targeting overseas markets, but also a way to avoid the risks of exchange rate fluctuation. This is because they directly sell the products manufactured locally. In 2007, the operating profits of Hyundai Motors soared by 58.1% compared with the previous year.

Many point out that businesses should take this opportunity to improve their properties based on the competitiveness they have secured when the yen was strong, rather than be too sensitive about the exchange rate variable.

Since a weak yen is not a "key variable," which can determine the survival of the Korean economy, Korean businesses should be confident of their ability to overcome the challenge by securing competitive technology. Toyota is a prime example. In an age of a strong yen which began in 2008, Toyota overcame the challenge by expanding its overseas production base and with its new technology, hybrid cars.

Jeong Dae-yeong, director of the Songhyeon Economic Research Institute said, "The profits export companies enjoyed due to the exchange rate are actually a relocated increase in costs for importing raw materials and gas. It is time to strengthen the competitiveness of our businesses, which have relatively fallen due to their dependence on a strong yen."

We also need to improve our economic structure, which is too dependent on foreign markets. An export-oriented model of economic growth is bound to be sensitive to the global economy as well as the exchange rate. The alternative may be to develop the service industry and increase the domestic market.

Hugh Patrick, a U.S. economist and Japan expert at Columbia University recently pointed out South Korea's limited view, which believes that the country only has exports. He claimed that South Korea should realize it can survive only when the country increases its domestic demand.