TOKYO — Japan's top trade negotiator Friday criticized South Korea's efforts to depress the value of the won, saying the currency's relative weakness against the yen posed a "serious challenge" to Japanese industries and that it was inappropriate for Seoul to intervene in the currency market except in extraordinary circumstances.
But Hideichi Okada, vice minister for international affairs at the Ministry of Economy, Trade and Industry, also praised progress by South Korea in crafting free-trade agreements and stressed the need for Japan to strike similar deals with its major trading partners.
Mr. Okada emphasized the need for countries to continue to open up global trade, and played down the risk of a rise in protectionism that some analysts have warned may emerge if the global economy takes a turn for the worse.
"Countries still remember that protectionist measures taken after the Great Depression spiraled the global economy into a worldwide depression, so the risk of a similar trade war repeating itself is very small," Mr. Okada told Dow Jones Newswires in an interview. "But this does not mean we can drop our guard. We have to fight against any signs of trade and currency wars with strong resolve."
At the same time, the senior official expressed frustration with moves by the Bank of Korea to curb the won. The BOK has intervened frequently in the foreign-exchange market to restrain the currency, which—like others in Asia—has been put under strong upward pressure by the U.S. Federal Reserve's dollar-weakening easy- money policy.
Korea has had much more success with the won than Japan has had with the yen, which has set post-World War II highs against the dollar despite interventions by the Japanese authorities. The won's relative weakness against the yen has given Korean exporters an edge over their Japanese rivals in export markets like the U.S. and Europe, where Japanese and Korean automakers and electronics companies compete fiercely.
"The Korean won has gotten very cheap in relation to the Japanese yen. This has posed a serious challenge to Japanese industries competing against their Korean rivals," Mr. Okada said. "It is undesirable (for Korea) to continue interventions in the absence of any unavoidable emergency situation."
"A country should not intentionally depreciate its currency," he added. "The value of a currency should be decided in the market."
A won that's weak against the yen does have some drawbacks for Korea, Mr. Okada noting that some Korean companies purchase key components for their cars and electronics products from Japan.
Similarly, the strong yen—with the dollar at ¥77.78 in late Friday trading, well below the ¥80 level that many Japanese companies have been counting on—isn't all bad for Japan.
"It is necessary to think of the strong yen as a plus for the country," Mr. Okada said. For instance, he said, the strong yen could allow Japan to acquire key resources, such as coal and natural gas, helping the nation prepare for an expected decline in the supply of nuclear-generated power in the future, following the disaster at the Fukushima nuclear plant in March. Mr. Okada said he didn't think the yen would return to much lower levels any time soon., though he said a strong appreciation would need to be dealt with. Currency policy is the province of the Ministry of Finance rather than his own METI.
Mr. Okada said he expects Prime Minister Yoshihiko Noda to reiterate Japan's intent to pursue free-trade agreements with its major trading partners when he makes a policy speech in an extraordinary parliamentary session set to begin Tuesday. That suggests Mr. Noda may renew a commitment to join negotiations for a trans-Pacific free trade area involving the U.S. in the near future.
This autumn, the leaders of Japan and the European Union are expected to launch formal negotiations for free trade, he said. Also, Japan is proceeding at pace with the aim of launching talks with Korea and China next year aimed at creating a trilateral FTA, he said.
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