The impact of a weakening Japanese yen on South Korean exporters may worsen down the road, a report showed Wednesday, highlighting the need for measures to minimize potential losses.

"Growth in exports of South Korean electronics, chemical and machineries firms has slowed significantly and there is a possibility that the impact may worsen following the rapid weakening of the yen since late September," according to the report compiled by Lee Ji-pyung of LG Economic Research Institute.

The report showed that South Korean exporters are especially vulnerable to competition with Japanese rivals in the European market, citing the "export similarity index" (ESI) which measures the extent to which two countries export the same products. The higher the figure, the more the countries are likely to be rivals in the market. 

The ESI between Germany and Japan came in at 0.52, compared to 0.49 between Korea and Japan. The figure for Taiwan and Japan reached 0.37, and China and Japan 0.32.

However, as German products are most preferred in the regional market, South Korean exporters tend to compete most with Japanese firms, according to the report.

The report said that the impact of the weakening yen may grow as Japanese companies are focusing more on establishing overseas manufacturing units rather than exporting products made in the country.

The report comes as a weakening yen is feared to hurt exports that account for over half of Asia's fourth-largest economy.

Officials have also raised concerns over the trend. Bank of Korea Governor Lee Ju-yeol said while market concerns over external conditions may be "excessive," the impact of the weakening yen may grow if Japanese firms start leveraging their increased profit. (Yonhap)