Yen and Won Diverge After Tokyo Talks Between South Korean and Japanese FX Officials
Nashnova编辑部
South Korean and Japanese finance officials held their first bilateral meeting since the July 31 coordinated intervention, but the two currencies have since split — the yen slid back toward 160 while the won hit an 11-month high, exposing a three-way divergence in rate differentials, fiscal confidence, and capital flows.
What did the Tokyo meeting cover?
South Korea's Vice Finance Minister Mun Ji-seong met Japan's Vice Finance Minister Mimura Atsushi in Tokyo, exchanging views on global economic and financial-market developments and pledging close communication at working and senior levels.
This was the first high-level bilateral contact since the July 31 joint FX intervention by the U.S. and Japan.
The two sides also discussed agendas for ASEAN+3 and G20 forums, along with preparations for the 11th Korea-Japan Finance Ministers' Meeting, to be hosted by Seoul.
What actually happened on July 31?
Japan and the U.S. jointly entered the market to buy yen. Mun said at the time that U.S., Korean, and Japanese FX authorities were in close contact.
Media reports, citing an unnamed market source, said Korean authorities also sold dollars that day, but Mun declined to confirm.
This means → all three countries appeared to coordinate a same-day dollar-weakening move, yet Seoul has never formally acknowledged its role — leaving deliberate policy ambiguity.
Why is the yen weaker now than before the intervention?
The yen has given back part of its intervention-driven gains and was trading at 158.6 per dollar at the time of reporting, creeping back toward the critical 160 level.
The persistent U.S.–Japan rate differential and lingering concerns about Japan's fiscal outlook are both pressing down on the yen.
In plain terms = intervention fixed a short-term supply-demand imbalance, but the two structural headwinds — rate gap and fiscal doubt — never went away, so the yen rallied and then faded.
Why is the won strengthening against the trend?
The won broke through 1,400 per dollar for the first time in over 10 months this week, trading at 1,385.15 — its strongest in 11 months.
SK Hynix announced a buyback and cancellation programme worth ₩40 trillion (≈$28.6 billion) and pledged to return more than 50% of free cash flow to shareholders from 2025 to 2027.
Samsung Electronics' board approved a 2026 shareholder-return plan estimated at ₩90–110 trillion.
This means → the two memory giants' record buyback programmes are emerging as a new structural driver of won strength.
Are these mega-buybacks actually good or bad for the won?
Citigroup estimates that roughly half the returned capital could be converted back into dollars as foreign shareholders repatriate funds — a bearish force.
But Citi Korea chief economist Kim Jin-wook argues the net effect is still won-positive: the companies will need to convert more export revenue into won to fund the programmes.
In plain terms = some buyback cash will flow out as foreign holders swap back to dollars, but the companies must first swap their dollar earnings into won to pay for the buybacks — more comes in than goes out, so the won benefits on net.
What comes next?
The Bank of Japan's September rate decision is the nearest key test for whether the yen can find a floor — overnight index swap pricing implies an approximately 80% probability of a hike.
If continued yen weakness and rising inflation push the BOJ to act sooner, the yen could receive stronger support.
Whether Korea-Japan FX policy coordination can become a more durable institutional framework hinges on the 11th Korea-Japan Finance Ministers' Meeting in Seoul.
Content is for reference only, not financial advice.