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ITO Kenichi, Chairman, CEAC
WATANABE Mayu, President, CEAC
"CEAC Commentary"
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"CEAC Commentary" presents views of members and/or friends of CEAC on an East Asian Community and other related international affairs. The view expressed herein is the author's own and should not be attributed to CEAC.
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No.116
"Younger Generation of Financially Insecure Korea Flee to Japan"
By TAMURA Hideo
Journalist
The Sankei News reported on January 15 that Korean university graduates are storming the job interview venues of Japanese companies. Given that the unemployment rate of the youth (age 25-29) was lower in Japan, 4.1%, while in Korea it was 9.5% in 2017, yet the impact of the US-China trade strife would further widen the gap of the unemployment rate between Japan and Korea. While Japan and Korea are both exporting economies, Korea is much depended on export to China. Whole exports consist 18% of Gross Domestic Product (GDP) for the case of Japan, and only 3.5% towards China. Korea's exports consist 40% of its GDP, and as the export towards China has increased from 10% in 2000 to 27% in 2018, it is only but deepening its dependency on China. If Korea's export to China decreases 10%, Korea loses 1% of its GDP.
Chinese economy has been in decline since before last summer, in prior to the beginning of the US-China trade war. The Korean stock price has been in decline by the pressure of the declining force of Shanghai stock price, based on the prospect that the recent sanctioning tariff on China by Trump administration has started to show the effect, and accelerating the economic decline. The Composite Stock Price Index of Shanghai was 24% decrease in December 2018 from that of the previous year, and Korea's was 17% decrease. The higher Korea's export rate with China becomes, the lower its stock price gets. The stock market suggests as if Korean economy should move away from China. It is no wonder the youngsters of financially insecure Korea want to be hired in Japan, where 'Abenomics' brought the human resource shortage domestically.
Korea is supposed to be internationally highly competitive with Samsung and others' smartphone or processor business, but they have a structural weakness: high dependency on export, particularly to China as mentioned above, as well as on foreign investment/loan. Its foreign debt is nearly 30% of the GDP, and it increased more than 9% in the end of September last year. The stock price will fall sharply and the foreign investment will retreat from Korea if the US-China trade war escalates. It would be the return of Asian currency crisis nightmare after two decades.
Given such financial vulnerability, it would be reasonable for the Moon Jae-in administration to maintain a good diplomatic relations with Japan, and propose to restart the Japan-Korea currency swap agreement to prepare for the possible financial crisis, though they are taking the completely opposite direction. Korea has been intentionally worsening the relationship with Japan by, for example, its navy vessel allegedly directing the fire-control radar at Japan's maritime patrol aircraft, or Korean government ordering Japanese companies to be responsible for forced-labor issues during World War II, while ignoring its own compensational duty in light of the international law.
If financial crisis breaks out now, Korea has no option but to 'kowtow' to China, in which the bilateral currency swap agreement is effective, but China is already busy to save itself with increasing the foreign loans for the foreign currency reserve to cover the loss from withdrawn investments. At the end of the day, it would be obvious that Korea will have no one but Japan to ask for help.
(This is the English translation of an article which originally appeared on the e-Forum "Hyakka-Somei (Hundred Ducks in Full Voice)" of CEAC on April 2, 2019, and was posted on "CEAC Commentary" on April 23, 2019.)
For more views and opinions in the backnumber of "CEAC Commentary," the latest of which are as follows, please refer to:
http://www.ceac.jp/e/commentary.htm
No.115 Miscalculation on the Job Creation Effect from the TPP11
by KURANISHI Masako, Political Scientist
(February 22, 2019)
No.114 Japan Should Be Ready for Head-on Diplomatic Strife
by OKAMOTO Hiroaki, A overseas business owner
(December 21, 2018)
No.113 Pyongyang Joint Declaration Colored with Sophism and Uncertainty
by SAITO Naoki, Professor, Yamanashi Prefectural University
(October 23, 2018)
No.112 The Northern Territories Issue and the Japan-Russia Relations
by SUZUKI Keisuke, Member of the House of Representatives (LDP)
(August 23, 2018)
No.111 The Risk of the Abuse of the Abduction Issue by North Korea
by KURANISHI Masako, Political Scientist
(June 26, 2018)
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