More than half of large biz groups fear Japan fallout

More than half of Korea’s top companies said Tokyo’s export restrictions on key industrial products to Seoul will hurt their businesses, a survey showed Monday.

According to the poll by the Korea Economic Research Institute (KERI), 51.6 percent of 153 domestic firms said their business will suffer as a result of Japan’s export restrictions. The survey was conducted from July 29 to Aug. 2 of Korea’s top 1,000 companies by sales, and of that group 153 of them responded.

The survey came amid the rising trade tension between Korea and Japan after Tokyo imposed tougher export control on three semiconductor materials heading for Seoul on July 4 and excluded Korea from its “whitelist” of countries receiving preferential trade status on Aug. 2. The second restriction is anticipated to affect the trade of up to 1,200 industrial items.

On average, the respondents expected Japan’s restrictions would incur a 2.8 percent decline in their sales and a 1.9 percent drop in their operating profit.

Among industries, the machinery industry was expected to suffer the most — a 13.6 percent decline — followed by petroleum products with 7 percent and semiconductors with 6.6 percent.

The three industries were also anticipated to show the most decline in their operating profits, with the machinery industry suffering a 7.9 percent drop followed by petroleum with 5.4 percent and semiconductors with 5.1 percent. “If companies’ operating profit decline by the average 1.9 percent as predicted by those surveyed, it is feared some companies will turn a loss, given the average operating margin of the top 1,000 companies in Korea stood at 5.3 percent last year,” said Yoo Hwan-ik, head of Innovative Growth at KERI.

Of the respondents, 53.7 percent picked securing alternatives for restricted items as the most effective short-term countermeasure for companies. To the question for long-term measures, 28.8 percent also said securing alternatives was their preferred option, followed by 25 percent saying localization of affected items will be effective.

To the question on the fundamental solution for the trade conflict between Korea and Japan, 40.5 percent picked diplomatic negotiations between the two governments, way higher than the 21.9 percent saying international arbitration by the WTO and other organizations.