But it was premature to say whether this break in the clouds would last long enough to shield Korea from its severe recession, they said.

Efforts to fix weak points in the economy's structure are still in the early stages. Skittish foreign investors have yet to come back to Asia, especially with concerns growing about a global downturn. And local consumers are battening down the hatches, fearing the worse may have yet to come.

But South Korean media welcomed the yen's upsurge as opening an era of "triple lows" -- low global interest rates, low prices for raw materials and a low dollar/yen exchange rate.

"If sustained, it's a very positive factor for our exports and it's like timely rain amid severe drought," said president of the LG Economic Research Institute Lee Youn-ho. Korean exporters competefiercely with Japan on more than 60 per cent of Korea's overall export sales, and a stronger yen makes Japan's products less competitive by comparison.

Dwindling exports have been a major drag on South Korea's efforts to build up foreign currency reserves and energise an industrial sector that is beginning to crumble.

For the first nine months of this year, exports fell 1.4 per cent from a year earlier, with automobile exports down 11.4 per cent and foreign ship orders down 21.9 per cent.

Companies had been drastically cutting back investment in response to the slump. Investment plunged by 49.2 per cent in August from a year ago following a 47.7 per cent drop in July.

But with local interest rates hitting an historical low last week, the credit climate is suddenly turning buoyant and firms can begin thinking about resuming investment in facilities.

"Once they think things will improve rather than worsen, companies will begin investing again and low interest rates will also help," said Ohn Ki-UN, asenior economist at the Korea Institute for Industrial Economics and Trade.

The benchmark three-year corporate bond yield hit a record low of 10.30 per cent on Friday, compared with over 31 per cent late last year, and analysts said it was poised to slide further. But recovery efforts must also be supported by a continued restructuring of the financial system.

"The government has changed its stance to lowering interest rates and normalising the financial system rather than restructuring the financial system," said Lee Jeong-ja, head of research at HSBC Securities.

South Korea has closed down ailing banks, brokerage houses, investment trust firms and regional savings cooperatives in a restructuring drive, the core of a $58.35 billion bail-out arranged by the International Monetary Fund last year.

The government has said basic restructuring work was to have concluded by the end of September and future policies would aim for reviving the financial system's activity.

Amid the restructuring, financialinstitutions have refused to extend fresh credit to the corporate sector and have been unable to operate normally in offering trade financing.

But now the worries extend beyond Korea's borders to the global economy. Moreover, Koreans are still unsure when the recession will hit bottom and their disposable incomes start rising again.

There were 1.58 million unemployed in August, up from 4,65,000 a year ago. This trend is most likely to persist until the toll reaches around two million -- or a 10 per cent jobless rate.

The growing jobless rate has meant less disposable income at hand for consumers and shipments for domestic sales fell by a record 32 per cent year-on-year in August.

Economists said the focus now was on whether the "triple lows" are sustainable and whether the government can maximise the effect by taking more measures to boost the economy.

The IMF has forecast South Korea's gross domestic product would contract by seven per cent this year and one per cent next year, compared with 5.5per cent growth in 1997.