S. Korea needs to lure Japanese firms struggling with strong yen

SEOUL (Yonhap) - South Korea should take active steps to attract Japanese companies struggling with the record strong yen by upgrading its business investment environment, a state-run trade promotion agency said Tuesday.
The Korea Trade-Investment Promotion Agency (KOTRA) said Japanese manufactures of automobiles, electronic goods and machinery have become more open to buying foreign parts, with some weighing the feasibility of transferring their production facilities abroad.
"These companies that usually export their products have been hurt the most by the strong yen that has undermined their price competitiveness in the global market," KOTRA claimed based on interviews with Japanese entrepreneurs.
"Even component manufacturers that are less affected by unfavorable foreign exchange rates are starting to consider importing more parts to lower costs."
Growing global economic uncertainties and the eurozone debt crisis have sparked speculative demand for the yen, sending the currency soaring to 75.95 yen to the U.S. dollar.
KOTRA stressed that South Korea's geographical proximity, high quality of its workforce and recent popularity of Korean cultural contents such as songs and TV dramas in Japan, places it in an advantageous position compared to other countries that want to receive Japanese investment.
"To effectively attract business investment Seoul needs to benchmark how foreign governments assist companies wanting to set up operations in their countries," it said.
KOTRA, meanwhile, said that because many South Korean companies use Japanese components to make their products, the higher yen will raise import prices, which is bad for business.
It said to overcome this dependence, steady investments should be made in industrial research and development so local companies can produce components within the country.