Korea’s economy has recently seen external conditions deteriorating quickly with domestic indicators showing little improvement.

Japan’s central bank announced a further monetary easing Friday, two days after the U.S. Federal Reserve decided to stop its monthly asset purchases from next month. Following the Bank of Japan’s move, the Korean won appreciated sharply against the Japanese yen, closing at a nearly six-year high of 957.39 won to 100 yen.

The prospect of the yen weakening further overshadowed government data released Saturday showing that Korea’s exports increased by 2.5 percent from a year earlier to $51.76 billion in October. A weaker yen is set to undercut the price competitiveness of the country’s products in overseas markets as more than half of its top 100 export items overlap with those of Japan.

If the won-yen exchange rate stands at an annual average of 950 won to 100 yen this year, Korea’s shipments abroad are forecast to drop by 9.1 percent from last year, according to a study by a local economic research institute. Major global financial institutions predict the rate will slide further to the 800-won range in the latter half of next year.

Financial officials here were caught off guard by the BOJ’s action as they were concentrating on containing a potential fallout from the Fed’s decision to end its quantitative easing. A statement issued by the Finance Ministry on Thursday said the termination of the U.S. asset-purchasing program would have a “limited” impact on local financial markets as the measure was in line with market expectations.

The Fed said its benchmark interest rate would be kept near zero “for a considerable time.” But data showing the robust recovery of the world’s largest economy raises the speculation that the Fed may advance a rate hike. Expectations of the first U.S. interest rate increase since 2006 could trigger massive outflows of money from emerging markets, including Korea.

The rapid rise of the Korean won against the U.S. dollar prompted by the differentiated monetary policies of the U.S. and Japan last week suggested how vulnerable local financial markets could become. The Korean currency rose by 21 won in two days to 1,068.5 won to the greenback.

An economic slowdown in China and eurozone countries is also deepening external downward risks to Asia’s fourth-largest economy.

These deteriorating external conditions, coupled with a widening revenue shortfall and increasing national and household debts, appear to be pushing policymakers here to be more cautious about taking additional stimulus measures. The economic team led by Finance Minister Choi Kyung-hwan, who took office in July, has proposed a 376 trillion won ($361 billion) budget bill for next year, up 5.7 percent from this year, and drawn up a separate plan for injecting 46 trillion won into the sluggish economy.

The government is taking the right path by shifting the focus of its policy to accelerating structural reforms to enhance economic competitiveness and expand growth potential. Efforts should be strengthened to overhaul financial, labor, education and public sectors, in particular, under the three-year economic renovation plan outlined by President Park Geun-hye in February. Long-term measures toward structural reforms should be carried out beyond a short-term stimulus package.

Down the road, economic policymakers here should also be more proactive in responding to the impact from the weakening of the yen, which is expected to continue for years to come. With regard to this, the Bank of Korea will be assigned the thorny task of deciding on whether and when to further cut the base rate, which it has lowered to a record low of 2 percent. Proper judgment is needed in order to offset Japan’s monetary easing and prevent the prospect of a U.S. rate hike from sparking an outflow of foreign capital.