"First in 40 Years" Dr. Cho Hyun-seung Analyzes the Impact of Japan's Weak Yen on Korea

Dr. Cho Hyun-seung analyzed that the competition between Korea's leading industries and Japan is not as intense as thought. He explained that in the semiconductor industry, in particular, the weak yen could actually be advantageous due to the many materials and components imported from Japan. This is because it can lower the cost of importing key Japanese components and materials, thereby reducing the burden on Korean companies.

Dr. Cho Hyun-seung pointed out that while the Japanese economy doesn't look bad on the surface, there's an optical illusion that makes its stock market feel more stagnant compared to Korea or Taiwan. However, he explained that Japanese stock prices have actually hit an all-time high, and this discrepancy arises from not directly benefiting from economic gains like Korea or Taiwan due to a lack of final product manufacturing capability. He added that psychological factors, where the overall economy feels difficult due to exchange rate fluctuations, also play a significant role.

Dr. Cho Hyun-seung identified expansionary fiscal policy as the most fundamental reason for the persistent weak yen, despite interest rate hikes and government intervention. He explained that the Japanese government is emphasizing responsible and proactive fiscal measures, planning to invest over 370 trillion yen in the semiconductor and AI sectors by 2040, and maintaining various expansionary fiscal policies, such as a consumption tax exemption for food and beverages.

Dr. Cho Hyun-seung predicted that the weak yen phenomenon will intensify again by the end of the year unless Japan's fundamentals change. Major financial institutions like Bank of America and Japanese securities firms also anticipate that the weak yen trend will continue without a change in fundamentals. Dr. Cho warned of the risks associated with investing in yen-based assets, as this weak yen trend is not expected to end in the short term.

Dr. Cho Hyun-seung emphasized that Japan maintains high competitiveness in the materials, parts, and equipment (MPE) sector across most industries, not just specific ones. He explained that in key material areas like films for wafers or photoresists, Japanese companies often hold over 90% of the global market share. This indicates a shift in Japan's status from primarily consumer electronics and goods to a focus on fundamental industrial competitiveness. Japan's MPE competitiveness continues to significantly influence the global industrial ecosystem, including Korea.

Dr. Cho Hyun-seung analyzed that for the semiconductor industry, the weak yen could actually be advantageous because many materials and components are imported from Japan. He added that while the weak yen certainly has a negative impact on Korea's exports, the effect is relatively limited because not all items compete with Japan.

Dr. Cho Hyun-seung explained that the country whose industries overlap most with Korea is China, and the relationship with Japan varies by sector. He mentioned that in the semiconductor sector, a complementary relationship has formed where Korea imports MPE from Japan to manufacture and sell products. However, in areas such as automobiles and various industrial robots, competition still exists, indicating that the Korea-Japan industrial relationship has complex characteristics.

Dr. Cho Hyun-seung cited corporate vitality as the most fundamental factor for boosting the Korean economy. He particularly emphasized the need for boldly abolishing entry barriers and business regulations that hinder corporate vitality. He explained that venture finance plays a crucial role for startup growth, and the smooth flow of funds through the financial system played a key role in America's innovation success, more so than its weaker social security system compared to Europe.

While acknowledging the importance of personal information protection, Dr. Cho Hyun-seung questioned whether the current level of data utilization regulation in Korea is appropriate. He pointed out that excessive protection levels are preventing the emergence of new industries and exacerbating conflicts with existing businesses. Citing examples like Uber, where innovative services face restrictions domestically unlike overseas, he emphasized that Korea's strength as an early adopter is being hampered by regulations.

Dr. Cho Hyun-seung asserted that future growth industries are ultimately areas that companies must discover and develop. He warned that if the government directly tries to find industries, the nation could fail, emphasizing that the government's role is to create an environment that does not hinder companies from finding their own way. He criticized the attitude of unconditionally rejecting change without alternatives as irresponsible, stating that it will ultimately lead to stagnation.