<h2>Export Outlook, More Weak</h2>
In the first half of this year, Japan and South Korea were forced to intervene in the exchange rate against the backdrop of a strong dollar. In the second quarter of this year, Japan and South Korea's foreign exchange reserves decreased by 5.5% and 1.8%, respectively.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/376c7c3e-a5dc-45b2-ae34-850d3d10002a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/376c7c3e-a5dc-45b2-ae34-850d3d10002a.png"/>
Now, their intervention in the exchange rate may intensify.
In addition to guarding the &#34;key points&#34; of the exchange rate, a more important reason is that the export outlook has changed.
Both Japan and South Korea are export-oriented countries, especially South Korea.
As of 2023, the share of goods and services exports in South Korea and Japan's GDP is 44% and 21.8%, respectively, making exports crucial to their overall economic volume.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a987e7a3-5026-4cc5-b3b3-aced3234034e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a987e7a3-5026-4cc5-b3b3-aced3234034e.png"/>
In terms of export products, South Korea and Japan have significant similarities—both primarily export machinery, equipment, automobiles, and parts.
Image: South Korea's export basket in 2022: mainly includes semiconductors, refined gasoline, automobiles and parts, machinery, etc.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1d9ae2c0-6af9-4ba1-81db-8ac507e82d55.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1d9ae2c0-6af9-4ba1-81db-8ac507e82d55.png"/>
Image: Japan's export basket in 2022: mainly includes automobiles and parts, machinery, electrical equipment, etc.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/88bae271-e3be-450f-97a8-a1235fa3deaa.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/88bae271-e3be-450f-97a8-a1235fa3deaa.png"/>
In terms of export destinations, both South Korea and Japan primarily export to the Asia-Pacific region and the United States, with the U.S. accounting for 15.9% and 18.8% of their respective export shares.
Image: South Korea's export country and regional shares in 2022
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/16a09051-531c-477e-a3c9-2de290afc74b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/16a09051-531c-477e-a3c9-2de290afc74b.png"/>
Image: Japan's export country and regional shares in 2022
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/85f2eef5-8b15-4cb8-8d69-524963906f63.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/85f2eef5-8b15-4cb8-8d69-524963906f63.png"/>
Historically, the export prosperity of both countries has been closely related to U.S. business confidence and consumer confidence in durable goods.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4c6cea3f-5f1e-451f-a1ec-dbeeee6dc13b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4c6cea3f-5f1e-451f-a1ec-dbeeee6dc13b.png"/>
In addition, based on the important position of exports in the economies of Japan and South Korea, the domestic industrial production and equipment investment cycles of both countries also align with the export cycle. When exports decline, the impact on the entire economy is naturally amplified.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/cadd632d-b056-48ca-8da5-f5aceddb6096.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/cadd632d-b056-48ca-8da5-f5aceddb6096.png"/>
Currently, Japan and South Korea are stabilizing their exchange rates in advance for two main reasons.
On one hand, the overall demand for industrial bulk commodities globally is weaker than in the first half of the year, leading to a decline in the overall prices of exported goods from Japan and South Korea, and weakening the ability to generate foreign exchange from unit exports;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5cbd218f-99f4-4bb1-ba82-a1712e115084.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5cbd218f-99f4-4bb1-ba82-a1712e115084.png"/>
On the other hand, the arrival of Trump may bring more uncertainty to the tariff outlook for both countries.
To balance the demand for buying and selling dollars in the foreign exchange market, the authorities in Japan and South Korea have to stabilize the exchange rate in advance.
<h2>This time, how to save?</h2>

Japan and South Korea intervened in the exchange rate again against the backdrop of a strong US dollar, due to weak export prospects. In the first half of 2023, foreign exchange reserves in Japan and South Korea decreased by 5.5% and 1.8%, respectively. Both countries have export-oriented economies, with exports accounting for a significant proportion of GDP, primarily exporting machinery and automobiles. Currently, the weakening demand for global industrial goods has led to a decline in the prices of export goods and a decrease in the ability to generate foreign exchange from exports. In addition, since Trump's administration, the uncertainty regarding tariff prospects has prompted Japan and South Korea to stabilize the exchange rate in advance

- Japan and South Korea are facing a weakened export outlook, prompting potential increases in currency intervention.  
- Both countries, heavily reliant on exports—44% of South Korea's GDP and 21.8% of Japan's GDP—are experiencing declines in foreign exchange reserves, with Japan down 5.5% and South Korea down 1.8% in Q2 2023.  
- The decline in global demand for industrial commodities and uncertainties regarding tariffs under the Trump administration are key factors influencing their decision to stabilize exchange rates.

Japan and South Korea have once again launched a currency defense battle