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According to an article from The Korea Times, South Korea’s currency, the Korean won, dropped down by nearly 6% against the US dollar in 2026, shown to be at its lowest point since the global financial crisis in 2009. However, simultaneously, in June of 2026, South Korea’s exports surged by roughly 71% compared to last year. Similarly, the Japanese Yen depreciated against the US dollar, dropping by 11-12% this past year. Yet within that same time frame, Japanese exports increased by 17%. It doesn’t seem to add up. Normally, a falling currency should show signs that a country is facing severe inflation and economic trouble; money will lose its value, and people will get poorer. In Korea, while the global demand for AI-related semiconductors was the primary factor which increased its exports drastically, through these numbers, a currency losing value lined up with the country’s best export numbers in history.
The mechanism behind this process is quite simple. When a national currency weakens, foreign countries have more power with their own money to purchase goods from that country. This makes exports much more inexpensive and price-competitive. This causes more demand from other countries as exported goods can be imported to them at a lower cost using their own currency. For example, in August of 2021, the value of the Korean won was at roughly ₩1173 for one U.S. dollar, meaning that if a product costs ₩1160 in Korea, it would be worth 1 USD in a country that uses U.S. dollars as their currency. As the Korean Won depreciated over time, in 2026 of the same month, that 1 USD becomes equivalent to roughly ₩1,400. Therefore, the foreign country will be able to purchase the same product from Korea for less than a dollar since the price will remain the same at ₩1170 in Korea. Due to this lower price, Korea draws more demand for foreign countries for their goods. This instance is beneficial for both the foreign importers and also the exporter. While foreign importers benefit from purchasing goods at a lower cost, more exports directly result in a higher revenue gain for exporters.
However, Korean companies have another opportunity to benefit from a depreciating currency and higher export numbers. They can keep the foreign price for their products and receive more won when their revenue is converted to their own currency. Exporters will also profit from this method since the currency that is earned overseas can be converted into even more of the local currency. Therefore, a weakening currency can be more advantageous in both ways for the exporters. On the other hand, importers will not gain particular benefits when Korean companies maintain the same foreign price as they will be purchasing Korean goods at an equivalent cost.
However, a depreciating currency does not always open ways for countries to benefit financially. Korean importers are significantly suffering from a weaker won as they are spending much more of their local currency in order to bring in foreign goods into the country. This will create a domino effect where these additional prices will directly be added towards the final price of each product that the Korean consumers purchase. Ultimately the cost of imported products will be much more expensive, which drives up the cost of living for the Korean people. Thus, although a depreciating currency does allow Korean exporters to gain significant profit, it affects the nation by increasing the general cost of foreign goods for importers and ordinary consumers, essentially creating a zero-sum effect within a national economy.
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