SEOUL China and South Korea's anxiety over the rapidly falling yen came to the fore on Monday as senior officials said their exporters could be hurt by Japan's attempts to pull its moribund economy out of a two-decade slump.
Beijing and Seoul understand the need for Tokyo to revive its $5 trillion economy and escape persistent deflation.
But they are worried that the massive monetary and fiscal stimulus championed by Japanese Prime Minister Shinzo Abe has sharply weakened the yen and put their exporters at a disadvantage in global markets.
So far, Chinese and South Korean officials have refrained from direct action to maintain competitiveness, such as intervening by buying dollars in currency markets, but there is a risk of a response if their export sectors are severely hampered.
"(Japan) will look to keep the economy growing by boosting exports through the yen's depreciation," Xu Shaoshi, chairman of China's National Development and Reform Commission, said at a meeting with the South Korean finance minister in Seoul.
"This is a policy that will affect South Korea and China, and therefore needs to be monitored closely," Xu said.
The remarks failed to move the holiday-thinned foreign exchange markets in the region, with an analyst in Seoul saying the overall direction of the currencies would not be turned around if the speed could be slowed.
The yen fell to a five-year low against the dollar on Monday, and has plunged 26 percent over the past 15 months.
With the Chinese yuan and Korean won both gaining against the dollar this year, the impact has been even more pronounced on the exchange rates between three of the world's top seven exporting nations.
On Monday, 100 yen hit a 15-year low of 5.7490 yuan and the Japanese currency touched a 5-year low of 9.9983 won. Over the past 15 months, it has weakened by nearly 30 percent against both currencies, Thomson Reuters data shows.
South Korean Deputy Finance Minister Eun Sung-soo told Reuters that Seoul was concerned by the yen's fall at a time when the won was strengthening.
Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul, said she expects the trend of yen weakening against the won "may not be changed even though the authorities will be able to slow the pace."
South Korean authorities have in the past been spotted buying dollars when they wanted to keep the won moving in step with the yen vis-a-vis the dollar because trading of the yen/won pair was almost non-existent.
One prong of Abe's policies, known as "Abenomics", has been to stoke demand to generate inflation. As part of that, the Bank of Japan is increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen to 70 trillion yen ($570 billion to $665 billion).
COMPETITION AMONG POWERHOUSES
In the three north Asian powerhouses, manufacturers of products ranging from cars to electronics goods and ships are in fierce competition for export markets. Big names in the competition - and ones whose sales are sensitive to exchange rates - include Samsung Electronics (005930.KS), Toyota Motor (7203.T), Hyundai Motor (005380.KS), and Huawei Technologies HWT.UL.
China was the world's largest exporter, Japan the fourth and South Korea the seventh during the first nine months of this year, World Trade Organization (WTO) data shows.
Apart from the increased money supply pushing down the exchange rate, Japan's very low interest rates means investors can borrow funds in yen cheaply and then convert them and invest in other countries - helping further depress the yen.
The U.S. Federal Reserve's asset-buying stimulus also saw the dollar weaken as some funds released by the central bank were invested in emerging economies.
($1 = 104.9750 Japanese yen)
(Additional reporting by Jongwoo Cheon; Writing by Choonsik Yoo; Editing by John Mair and Richard Borsuk)