While Korean tourists are flocking to Japan to take advantage of a record-low yen, concerns are deepening among businesses over capital outflow and export slump in the coming months.

The Korean currency closed in the 910 won ($0.70) range against 100 Japanese yen on Friday.

The won-yen exchange rate had stayed above the 1,000-won range between 2019 and 2022, but the figure continued to fall this year to an eight-year low of 897.49 won last week.

The cheaper yen comes as the Bank of Japan sticks to negative rates at minus 0.1 percent unchanged to spur the local economy, a stark contrast to aggressive monetary tightening among advanced countries.

Many Korean people are reacting to the yen’s weakness positively.

An increasing number of tourists are planning a trip to Japan, while individual investors are turning to Japanese stocks on foreign exchange gains.

According to the Bank of Korea, the total deposits owned in Japanese yen here jumped to $6.25 billion in May, up $930 million on-year, the biggest monthly increase since October 2017.

Separate data from the Korea Securities Depository also showed that Korean investors purchased Japanese stocks worth 862 million won last month, the highest figure over the past two years, especially snapping up on tech shares and exchange-traded funds.

“Despite risks concerning the volatility in the Japanese stock market, the shares are worth investing in for the mid- to long-term,” Kim Chae-yoon, analyst at NH Investment & Securities, said.

In recent months of the falling yen, however, Korea’s trade balance, which refers to the discrepancy between expenditures associated with incoming and outbound tourism, has worsened, with more Koreans visiting Japan. According to the Japanese National Tourism Organization, 515,700 Koreans visited Japan in May alone, taking up 27 percent of foreign visitors to the country.

The nation’s travel balance deficit already hit the highest of $3.24 billion in the first quarter of this year, which compared to the $3.28 billion deficit recorded in the third quarter of 2019, data from the Bank of Korea showed.

Adding to that, the nation’s export-dependent businesses are also feeling the pinch from the weaker yen as they are fast losing price competitiveness against their Japanese rivals who are competing in many industrial sectors such as petrochemicals, electronic parts and gadgets and cars.

A recent report by the Korea Economic Research Institute under the nation’s major business lobby group Federation of Korean Industries also warned against the impact of the yen’s weakness, saying a weakening yen could bring down the prices and volume of Korea’s key export items.

In the meantime, some critics predicted a limited impact on Korea’s exports as the industrial structures of Korea and Japan have differentiated over the past years.

“Even though the yen has been weakening since the second quarter of 2022, there has been no drastic increase in Japan’s exports over the past months,” said Cho Eui-yoon, a researcher at the Korea International Trade Association. “The export structures of Korea and Japan have developed in different directions more recently.”

“What’s more important is how long the eased monetary policy of Japan will continue, which will affect Korean exporters,” the researcher added, saying “The BOJ is likely to increase the rates by the end of this year, pressured by the widening rate discrepancies with the US Federal Reserve.”