Precision machine industry predicted to be hit hard by Japan’s trade restrictions

Japan’s export curbs against South Korea are expected to hit the precision machine industry the hardest, while automobile, chemicals, and steel industries have a higher chance of surviving the trade restrictions with enhanced competitiveness over time, industry watchers said.

According to data collected by securities firms on Monday, the machine industry is set to suffer difficulties in procuring parts designated as strategic items due to strengthened regulations on exports. “South Korea experienced the huge trade imbalance in the machine industry last year, exporting machinery worth 7.76 billion dollars to Japan and importing 22.27 billion dollars from the country,” an official at KB Securities pointed out. “A possible ban on the export of computer numerical control (CNC) of machine tools will even make it impossible to produce machine tools.”

Yet, experts expected that automobile, chemicals, and steel industries will be able to endure Tokyo’s export restrictions and in the end, will deal a blow to the Japanese economy. “These industries currently have a high dependency on Japan, but will be able to catch up since technological barriers are not that high,” an official at SK Securities assessed, saying that the demand for parts made in Japan will drop in the long term. Still, some expressed concern that eco-friendly and autonomous vehicles may take a hit from the ongoing feud.

Meanwhile, it remains to be seen how the trade dispute will affect South Korean banks and financial businesses. Though less than two percent of funds are invested from Japan, even a small issue triggered by the export restrictions can greatly affect the market. “It’s too early to be relieved as foreign investors can start to sell stocks and bonds, degrading the country’s foreign currency liquidity,” an analyst at Kiwoom Securities said.

Securities firms expected that the aviation and tourism industries will suffer a heavy blow immediately due to the shrunken demand for trips to Japan.


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