South Korean Won per 100 Japanese Yen

KRWJPY is the raw bilateral nominal exchange rate recorded without transformation, namely the number of Korean won that exchanges for one hundred Japanese yen as observed in the spot market. The won-per-hundred-yen quotation expresses one hundred units of the smaller-denomination currency per unit of the won so that the recorded level is of comparable magnitude across the two currencies.

A bilateral nominal rate of this kind is the elementary price at which two currencies trade. That the nominal rate is anchored to the ratio of the two countries' price levels is the content of purchasing-power-parity theory (Cassel 1918), followed by the distinction between its absolute and relative formulations (Officer 1976) and the doctrinal measurement choices it entails (Frenkel 1978). The same rate is what the law of one price equates good by good in common-currency terms (Isard 1977). It is also the nominal counterpart of the consumer-price-deflated real rate used as the benchmark for reading currency movements (Rogoff 1996; Dornbusch 1987).

As an elementary bilateral series, this observed rate is the starting point from which trade-weighted effective indices are aggregated, and the indices in that lineage all begin from observed bilateral rates of exactly this form (Hirsch and Higgins 1970; Rhomberg 1976; Black 1976; Pauls 1987; Loretan 2005).

KRED applies no transformation to KRWJPY, neither rescaling, deflation, smoothing, nor annualization, and adds no seasonal adjustment or index renormalization, storing the bilateral nominal rate as recorded. The measurement basis is the market exchange ratio itself, a price of one hundred yen expressed in won, which exists prior to any aggregation and serves as the raw input to the effective-rate construction methodology.

That construction lineage clarifies by contrast what the raw datum is. Its starting points are the first averaging of bilateral rates into a multilateral indicator (Hirsch and Higgins 1970), the analysis showing how the weighting scheme and the base period determine the resulting index (Rhomberg 1976), and the derivation of the weights from a general-equilibrium model of traded goods (Black 1976).

The measurement choices that separate a constructed index from the underlying bilateral quote are matters of base-period selection, the weighting procedure, and the deflator (Maciejewski 1983). Their details comprise the third-market weighting and the geometric-versus-arithmetic averaging conventions (Turner and Van 't dack 1993), the trade-weight derivation (Zanello and Desruelle 1997), the geometric-mean time-varying-weight scheme (Loretan 2005), the re-weighting from updated trade shares (Bayoumi, Lee, and Jayanthi 2006), and the broad-coverage geometric aggregation (Klau and Fung 2006). The trade elasticities behind those weights are supplied by the demand-elasticity framework (Armington 1969), and the trade-weighted currency-index construction is the archetype of its named author (Pauls 1987).

None of these is applied here. The absolute-versus-relative measurement distinction (Officer 1976) and the law-of-one-price reading (Isard 1977) only fix what the untransformed bilateral level means.

As a relative price of two currencies, the won-yen rate is read against the purchasing-power-parity benchmark. Under that benchmark the nominal rate should track the ratio of the two countries' price levels, and the absolute and relative versions of the norm have been formalized (Cassel 1918; Officer 1976; Frenkel 1978).

Persistent deviations from parity and their slow mean reversion are the substance of the purchasing-power-parity puzzle built on the consumer-price-deflated real rate (Rogoff 1996). The structural Balassa-Samuelson wedge between traded and non-traded productivity explains this deviation as a standing gap rather than a misalignment (Dornbusch 1987).

Because the two economies are close trading partners and competitors, the bilateral rate carries price-competitiveness content. The effective-rate literature aggregates that content across partners (Hirsch and Higgins 1970; Rhomberg 1976) and refines it into real competitiveness indices (Maciejewski 1983; Turner and Van 't dack 1993).

The law of one price sets the arbitrage discipline on traded-goods prices (Isard 1977), the demand-elasticity framework governs how relative-price changes shift trade quantities (Armington 1969), and the world-model weighting connects the bilateral rate to general-equilibrium trade outcomes (Black 1976). Movements in the level therefore inform competitiveness, terms of trade, and the relative monetary stance of the two economies.

In markets, the won-yen rate is the conversion factor for cross-border positions and the basis for carry, hedging, and relative-value trades between the two currencies. The foreign-exchange value of a currency is built from bilateral quotes of exactly this form (Pauls 1987; Loretan 2005).

Long-horizon valuation anchors on the purchasing-power-parity benchmark and its absolute-versus-relative distinction (Cassel 1918; Officer 1976; Frenkel 1978). The half-life of parity deviations sets the timescale over which a bilateral mispricing is expected to correct (Rogoff 1996), while the Balassa-Samuelson wedge cautions against treating the full deviation as tradable (Dornbusch 1987). The law of one price underpins triangular-arbitrage consistency across the bilateral and vehicle-currency legs (Isard 1977).

For portfolio and risk aggregation across many currencies, the index-construction methodology translates the bilateral rate into the effective-rate exposures that desks actually hedge. That methodology comprises the re-weighting procedures (Bayoumi, Lee, and Jayanthi 2006; Klau and Fung 2006), the competitiveness weighting (Turner and Van 't dack 1993), and the index documentation (Zanello and Desruelle 1997; Hirsch and Higgins 1970).

On the 9,833 daily observations spanning 1990-01-03 to 2026-06-26, fit with a constant and trend, the unit-root battery agrees that the won-per-hundred-yen exchange rate is integrated of order one. The augmented Dickey-Fuller test of Dickey and Fuller (1979), in the ARMA-consistent lag-augmented form of Said and Dickey (1984) and with lag length set as in Ng and Perron (2001), does not reject a unit root with p = 0.1207, the nonparametric Phillips and Perron (1988) test concurs with p = 0.2232, and the Kwiatkowski et al. (1992) stationarity test rejects its trend-stationary null at p < 0.01, so the verdict is an unambiguous I(1). The GLS-detrended power escalation of Elliott, Rothenberg, and Stock (1996) is reserved for ambiguous outcomes under the house protocol and is not required on this clean reading.

Because the level is integrated, the mean-shift and serial-correlation diagnostics are run on the first difference, the stationary object those procedures require, since a break search or a portmanteau on an integrated level would spuriously segment and read near-unit autocorrelations (Bai and Perron 1998; Perron 1989). The multiple-break procedure of Bai and Perron (1998), computed by the dynamic-programming algorithm of Bai and Perron (2003), finds no break in the mean of the differenced series, consistent with the parameter-instability inference of Andrews (1993). The Ljung and Box (1978) portmanteau statistic, refining the original Box and Pierce (1970) form, is computed on the first difference and rejects the white-noise null at lags 10 and 20, with Q = 580.36 and Q = 619.85 and p = 0.000 and p = 0.000, and the automatic portmanteau test of Escanciano and Lobato (2009) does not detect further dependence with a statistic of 3.03 at p = 0.082.

The series is daily and has no low-integer seasonal period, so the seasonal-unit-root machinery of Hylleberg et al. (1990) and the Canova and Hansen (1995) seasonal-stationarity test are inapplicable and are deliberately not run, the degeneracy of the seasonal auxiliary regression at a daily period being the standard ground (Beaulieu and Miron 1992; Ghysels and Osborn 2001).