Korea Beats Japan in Product Account Surplus for 1st Time

Korea surpassed Japan for the first time in product account surplus in the first half of this year, the Strategy and Finance Ministry said yesterday.

Korea had a trade deficit of 12.4 billion U.S. dollars with Japan in the first half, showing that Korea had an enormous surplus in trade with other nations.

The effects of the weak Korean won and the strong Japanese yen are considered the main factors behind Korea outperforming Japan in product account surplus, but this could change depending on changes in exchange rates.

The ministry and the Organization for Economic Cooperation and Development said the product account surplus in the year`s first half was 26.61 billion dollars, second only to Germany (71.95 billion dollars) among 30 OECD members.

Norway was third with 24.81 billion dollars and Ireland fourth with 22.98 billion dollars, while Japan ranked sixth with 9.12 billion dollars.

A ministry official said, "Though both Korea and Japan showed a subdued surplus in which exports and imports simultaneously shrank due to the impact of the economic recession, Japan’s fall in exports was much larger than Korea`s. Korea’s product account surplus grew thanks to the weak won and diversification of export items and markets."

This trend is unlikely to continue, however. Jeong Seong-chun, head of Japan research at the Korea Institute for International Economic Policy, said, “The effects of the exchange rate are disappearing due to the rapid rise in the won`s value."

"Demand for highly functional Japanese products is increasing with global economic recovery. Over the long run, Japan’s product account surplus will rapidly increase."

lovesong@donga.com