Japanese Shipyards Demand Action on Cheap Won

Two Japanese shipbuilders have called for urgent government action to tackle what they say is the unfair advantage enjoyed by South Korean rivals from an artificially cheap currency.

In an interview with the Financial Times, Shinjiro Mishima, president of Universal Shipbuilding, one of Japan’s biggest shipbuilders, said the Japanese government should counter the “extremely determined” efforts by Seoul to control the level of the won.

Japanese Yen
Photo by: Jesse Braun
Japanese Yen

“[The government] should of course act ... we want intervention,” said Mr Mishima.

The rare public complaints underscore manufacturers’ fears that the yen’s rise has left them vulnerable to South Korean rivals that increasingly offer products of comparable, and sometimes superior, quality.

The yen has risen from more than Y110 to the dollar in 2008 to Y82 in recent trade. Since September 2009, it has increased 40 per cent against the won .

Seoul denies trying to influence the exchange rate, saying its market intervention is aimed at reducing volatility. But many traders and opposition South Korean politicians believe it is trying to help exporters.

In a separate interview, Hisashi Hara, head of Mitsubishi Heavy Industries’ shipbuilding business, said it was “impossible to compete on an equal basis”. “On cost, rather than price, we are roughly equal. But when we convert to dollars, we become about 20 per cent more expensive [than Korean yards],” Mr Hara said. “Something urgently needs to be done.”

The U.S. Treasury last week noted that South Korea’s recovering economy and rebounding current account surplus meant there was “room for a greater degree of exchange rate flexibility and less intervention”.

The shipbuilders’ comments come amid international debate on currencies centered on U.S. claims that China is holding down the renminbi. Japan itself staged a rare intervention last September after the yen hit a 15-year nominal high against the dollar, but it has subsequently allowed the yen to rise to even higher levels.

Some Japanese officials are equally concerned about the level of the won. Naoto Kan, the prime minister, last year called on South Korea and China to "act responsibly" on exchange rates ahead the G20 summit. But Japan has generally refrained from making currencies a major issue with South Korea, a former colony with which it has close but testy relations.

Mr Mishima and Mr Hara both separately said that failure to put more pressure on Seoul could have disastrous implications for the Japanese shipbuilding industry.

"If the yen stays at current high levels, the competitiveness of domestic manufacturing will be lost and production will flow overseas," said Mr Mishima.