Japan, South Korea pose threat to Taiwan exporters

TAIPEI - Taiwan faces pressing challenges from Japan and South Korea according to economists, who point out that the Japanese yen has depreciated against the US dollar by much more than the Taiwan dollar, and that South Korea is gearing up to sign free trade agreements with its major trading partners to win preferential tariff status.

The Taiwan Government has repeatedly cut its 2013 economic growth forecast, citing slower exports as a main reason. In late November, the estimate fell to 1.74% from 2.31%. In the first 11 months of 2013, Taiwan's exports increased by just 0.9% from the previous year to US$277.63 billion.

Gordon Sun, Director of the Macroeconomic Forecasting Centre at the Taiwan Institute of Economic Research, said sharp depreciation of the yen (by 21.5% against the US dollar) had made local industries victims, in particular machine tool manufacturers. Over the same period, the Taiwan dollar depreciated by only 2.7% against the greenback.

Sun said Seoul's strategy is to ink as many free trade agreements as possible to lower tariff barriers and accelerate outbound sales, in sharp contrast to policy during the 2008 financial crisis when South Korea sought to depreciate its currency to secure export markets (ATI).