Alternating Depreciation of the Japanese Yen and South Korean Won: How Global Exchange Rate Shocks Reshape French Economic Competitiveness

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As the U.S.-dominated global currency tides once again lap against the shores of various nations, France—as Europe's second-largest economy—faces a delicate and complex exchange rate landscape. With the yen plunging to a 40-year low and the Korean won breaching the psychological threshold of 1,500, the competitive depreciation of major Asian currencies poses a question for the French economy: does it represent an export opportunity or a competitive threat? Against the backdrop of the euro's sustained appreciation relative to these currencies, the international competitiveness of French companies is undergoing a silent test.

Background: The Collective Stalling of Asian Currencies

In June 2026, the yen fell to 161.60 against the U.S. dollar, near its lowest level since 1986. Despite emergency talks between Japan's Finance Minister and the U.S. Treasury Secretary, the market remained skeptical of joint intervention. On the same day, the won hovered around 1,500, with South Korea's Finance Minister describing the depreciation as "excessive," triggering a circuit breaker as the KOSPI index plunged 6%. The weakness of these two major Asian economies' currencies is not isolated—it reflects the systemic pressure of global capital flowing back into U.S. dollar assets under the Federal Reserve's high-interest-rate cycle.

Deeper Logic: Interest Rate Divergence and Failed Intervention

The Bank of Japan's modest rate hikes and the Ministry of Finance's market interventions failed to halt the yen's decline, fundamentally due to the still-wide U.S.-Japan interest rate differential and market participants' expectations of an extremely slow pace of Japanese monetary policy normalization. South Korea faces a similar situation, with its current account surplus narrowing and high sensitivity to U.S. interest rate expectations causing its exchange rate anchor to loosen. The weakness of these two currencies is essentially not a collapse of economic fundamentals, but an inevitable outcome of global dollar liquidity tightening and carry trades.

Impact on the French Economy: The Two Sides of the Competitiveness Scale

For Exports: Euro Appreciation Erodes Price Advantages of French Goods

French exports to Japan and South Korea are mainly concentrated in luxury goods (accessories, cosmetics, wine), aerospace, and high-end machinery. Denominated in yen, French products become more expensive: a Peugeot car in Tokyo might cost 5%-8% more than competitors from South Korea or Germany due to exchange rates. Although French brand loyalty is high, price elasticity in the affordable luxury segment cannot be ignored. Similarly, French exports of capital goods such as nuclear reactor components and aircraft engines to South Korea face competitive pressure from local alternatives or lower-cost imports.

For Imports: Lower Costs for Energy and Intermediate Goods

France is a net importer of crude oil. Brent crude fell to $77.56 per barrel due to the U.S. easing sanctions on Iran, which is a direct benefit for French refineries and chemical companies. Additionally, the yen's depreciation means lower prices for electronic components and industrial robots imported from Japan, helping to reduce costs for French manufacturing. This positive effect partially offsets losses on the export side.

For Tourism: Is Europe Set for a Wave of Asian Tourists?

The depreciation of the yen and won may stimulate luxury goods consumption in France: Japanese and South Korean tourists purchasing LV handbags or champagne in Paris effectively enjoy an extra discount. Asian tourists accounted for about 12% of French tourism revenue in 2025, and this share is expected to rise by 1.5 to 2 percentage points in the second half of 2026 due to exchange rate factors.## Europe and Global Impact: France's Position on the Tightrope

Within the EU, France and Germany have significantly different export structures. Germany's exports rely more on automobiles and machinery, overlapping heavily with Japanese products; while France's competitiveness in sectors like aviation and nuclear energy is more marginally affected by exchange rate fluctuations. The recent sharp decline in the yen may expose German automakers (such as Volkswagen and BMW) to fiercer price competition from Toyota and Honda in third-country markets, indirectly dragging down the French supply chain. The eurozone's preliminary PMI is about to be released, and the market has already priced in manufacturing weakness. Currency factors may exacerbate the imbalance between domestic and external demand within the eurozone.

Long-Term Trends: What Monetary Policy Flexibility Does France Need?

• Over the next 3 to 10 years, the start of the Federal Reserve's rate-cutting cycle will ease pressure on Asian currencies, but the European Central Bank's "neither hasty nor slow" pace of rate cuts may keep the euro relatively strong in the medium to long term. French companies should anticipate the following changes:
• A prolonged weak yen may accelerate the export expansion of Japan's high-end manufacturing (such as semiconductor materials, precision instruments), and France needs to enhance local substitution capabilities.
• South Korea may further leverage its exchange rate advantage to expand its market share in Europe for charging batteries and electric vehicles, directly challenging France's domestic battery production capacity (e.g., ACC and Verkor projects) under investment.
• The French government may promote innovations in export credit insurance and currency hedging tools to help small and medium-sized enterprises cope with exchange rate fluctuations.

In short, this round of Asian currency depreciation is not a systemic crisis for the French economy, but a signal of a structural redistribution of competitive pressure. If France can seize the opportunity to lower energy costs and accelerate digital transformation, it stands to consolidate its position as Europe's industrial hub amid the reshuffling caused by exchange rate fluctuations.