Both the South Korean won and the Japanese yen have experienced significant depreciation against the U.S. dollar in recent years, but the underlying causes and implications differ fundamentally between the two currencies [1]. For South Korea, the won's weakness is closely tied to a structural decline in demand, as major exporters in the semiconductor and automobile industries are increasingly retaining their foreign earnings overseas rather than repatriating them. This trend has reduced the demand for the won and contributed to its depreciation [1].
In contrast, the yen's depreciation is primarily attributed to Japan's monetary and fiscal policies. The Bank of Japan's continued ultra-loose monetary policy and yield curve control have kept domestic interest rates low, even as the U.S. Federal Reserve raised rates to combat inflation. This policy divergence has led to capital outflows from Japan, exerting further downward pressure on the yen [1].
Market analysts emphasize that the solutions for each currency's weakness are not interchangeable. South Korea may need to implement incentives or policy measures to encourage companies to repatriate more overseas profits. For Japan, a reversal of monetary policy—such as tightening or raising interest rates—could support the yen, but such actions risk destabilizing financial markets or undermining Japan's fragile economic recovery [1].
Technical analysis indicates that both the won and the yen are trading near their lowest levels against the dollar in decades. The won's support is seen at 1,400 per dollar, with resistance at 1,300, while the yen is trading above 145 per dollar, with technical support at 150 and resistance at 140 [1]. Short-term trading sentiment remains cautious for both currencies, with investors closely monitoring signals from the Bank of Japan regarding potential policy shifts and watching for signs of capital repatriation or changes in export patterns in South Korea [1].
CONCLUSION
The depreciation of the won and yen stems from distinct structural and policy factors unique to each country. Market participants remain cautious, awaiting policy signals from central banks and shifts in corporate capital flows, as both currencies hover near multi-decade lows against the dollar.