AJU PRESS ASIA FIRST NEWS AGENCY

Journalist

Kim Yeon-jae
Kim Yeon-jae김연재
ReporterBank of Korea & Market, Macroeconomics
Kim Yeon-jae is a journalist at AJU Press (AJP's English platform),
covering macroeconomics, international finance, and geopolitics.
He closely tracks central bank monetary policies, global energy supply chains,
and the Korean defense industry. "Peering into the risks behind the euphoria."
Latest by Kim Yeon-jae
  • War may be ending, but the inflation bill is yet to arrive
    War may be ending, but the inflation bill is yet to arrive SEOUL, June 18 (AJP) - The United States and Iran have signed a memorandum of understanding to end the Gulf conflict, but the war bill has yet to arrive. The inflation shock unleashed by the monthslong Strait of Hormuz blockade is still working its way through central bank decisions, reviving upward pressure on interest rates and the U.S. dollar across Asian financial markets. The Bank of Japan and the European Central Bank have already tightened policy. The Bank of Korea may be next in July. The U.S. Federal Reserve on Thursday signaled that it could soon join them. Washington and Tehran signed a provisional agreement aimed at restoring traffic through the Strait of Hormuz and easing U.S. sanctions on Iranian oil. Oil prices reacted immediately. Brent crude fell to $77.41 a barrel and U.S. West Texas Intermediate to $74.43, both their lowest levels since early March, as markets priced in the return of Middle Eastern supply. But the agreement is not a peace treaty. It is a 14-point memorandum built around a 60-day negotiating period, leaving major issues unresolved, including Iran's nuclear program, sanctions relief and the long-term rules governing passage through the strait. Even if toll-free navigation is temporarily restored, transit terms could become a new source of friction once the two-month window expires. The agreement aims to normalize shipping within 30 days. Yet many shipowners may wait for clearer signs that the deal will hold before returning vessels, suggesting that supply chains could take longer to recover. The economic damage, meanwhile, has already been done. When fears of a Hormuz blockade peaked in March, Dubai crude surged to around $130 a barrel. South Korea was particularly exposed, with roughly 70 percent of its crude imports dependent on the strait. The resulting shock to prices, logistics and monetary policy has yet to fully run its course. The Fed's latest meeting illustrated how those effects are now feeding into policy decisions. The Fed kept its benchmark rate unchanged at 3.50 percent to 3.75 percent after its June 16-17 meeting. The decision, however, was far from dovish. Officials raised their 2026 inflation outlook, lifting their personal consumption expenditures forecast to 3.6 percent from 2.7 percent and their core PCE forecast to 3.3 percent from 2.7 percent. The stronger signal came from the dot plot. The median estimate for the federal funds rate at the end of this year rose to 3.8 percent from 3.4 percent in March. Of the 18 officials who submitted projections, nine now expect at least one additional rate increase this year. Fed Chair Kevin Warsh did not submit his own forecast. Warsh reinforced the message at his first post-meeting press conference, saying no rate cut was discussed. He noted that inflation had remained above the Fed's 2 percent target for more than five years and reiterated the central bank's commitment to restoring price stability. The Fed also adopted a more hawkish tone, removing forward-guidance language on future policy adjustments and citing supply shocks, including energy, as a source of persistent inflation. Markets reacted immediately. The two-year Treasury yield rose 13 basis points to 4.18 percent, while the 10-year yield climbed 5 basis points to 4.49 percent. The dollar index gained 0.9 percent to 100.39, moving back above the 100 mark, while the S&P 500 fell 1.2 percent to 7,420. For Asia, however, the picture is more complicated than simply cheaper oil. Lower energy prices improve trade balances and ease pressure on households. But a stronger dollar weakens local currencies, tightens financial conditions and raises import costs. For Asian central banks, the U.S.-Iran agreement has therefore shifted, rather than eliminated, the source of inflation pressure. The focus is moving from oil itself to interest rates and exchange rates, while the effects of the Hormuz shock continue to filter through monetary policy. The BOJ this week raised its policy rate to 1.0 percent from 0.75 percent, taking rates above 1 percent for the first time in 31 years. The ECB raised its deposit rate to 2.25 percent last week. The BOK has yet to act, but its rhetoric has become noticeably more hawkish. Senior Deputy Governor Ryoo Sang-dai said Thursday that the Fed, following tightening by the ECB and BOJ, had pointed to the possibility of further policy adjustments in response to inflation pressures, suggesting a broader shift among major central banks. A day earlier, Governor Shin Hyun-song personally laid out the case for inflation remaining elevated "for a considerable period," projecting headline inflation to hover around 3 percent in the second half of the year. He said the surge in fuel prices would continue to have a lagged effect even after oil returned to prewar levels, while the exchange rate remained near crisis-period levels. He also warned that rising income from record semiconductor earnings and stock market gains could build additional demand-side inflation pressure. The remarks amounted to an early warning ahead of July's rate-setting meeting. Local market moves explain policymakers' caution. The won strengthened to 1,513 per dollar on June 17 from 1,539 on June 5, while the three-year government bond yield fell to 3.71 percent from 3.88 percent. Cheaper oil helps inflation and the trade balance, but a stronger dollar works in the opposite direction by raising import prices and bond yields while weakening the currency. If the Fed's tightening bias persists, that pressure will only intensify. For Asian markets, the risk is that the U.S.-Iran memorandum arrived too late to revive the old rate-cut narrative. The inflation shock triggered by the Hormuz blockade has already pushed the world's major central banks back toward tightening. 2026-06-18 17:06:24
  • World Cup 26: Portugal stumble, England respond in style
    World Cup 26: Portugal stumble, England respond in style SEOUL, June 18 (AJP) - Portugal opened their 2026 FIFA World Cup campaign with a flat draw against DR Congo on Wednesday local time, or Thursday in Korea, while England answered doubts with a convincing victory. Ghana beat Panama with a stoppage-time winner, while Colombia overpowered an inexperienced Uzbekistan side to take early control of Group K. Portugal were held 1-1 by DR Congo at Houston Stadium in Houston, Texas, in one of the most disappointing performances by a major contender so far. Joao Neves gave Portugal an early lead in the sixth minute, heading in Pedro Neto’s cross. But DR Congo struck back deep into first-half stoppage time, when Yoane Wissa headed in Arthur Masuaku’s cross to make it 1-1. Portugal had more of the ball, but their attack often looked disconnected despite a midfield built around Bernardo Silva, Bruno Fernandes, Vitinha and Neves. At times, Portugal appeared almost split into a 5-0-5 shape, leaving little rhythm through the middle and giving DR Congo chances to counter. Portugal finished with only one shot on target, according to Reuters, and some match data also gave DR Congo the higher expected-goals total. The draw left Group K wide open and put early pressure on Portugal before matches against Uzbekistan and Colombia. England made a stronger statement in Group L, beating Croatia 4-2 at Dallas Stadium in Arlington, Texas. The Three Lions had entered the tournament under lowered expectations after an uneven buildup, but their attack looked sharp when it mattered. Harry Kane put England ahead from the penalty spot in the 12th minute before scoring again in the 42nd minute after Croatia had equalized through Martin Baturina. Croatia, third-place finishers at the 2022 World Cup, drew level again through Petar Musa early in the second half. But Jude Bellingham quickly restored England’s lead, finishing from inside the box, before Marcus Rashford sealed the win late on. For Kane, the two goals in the opening match of his third World Cup were a reminder that he remains England’s most reliable finisher. Ghana needed a dramatic finish to beat Panama 1-0 at Toronto Stadium in Toronto, Canada. Panama controlled much of the game and often looked more composed in possession. The Black Stars, who reached the World Cup quarterfinals in 2010, struggled to produce the authority expected from one of Africa’s traditional powers. But Caleb Yirenkyi scored in the fifth minute of stoppage time, turning in the winner to give Ghana all three points. The win was valuable, but Ghana’s recent run of one draw and five losses in six warm-up matches still seemed to weigh on their performance. Colombia delivered the cleanest win of the day, beating Uzbekistan 3-1 at Estadio Azteca in Mexico City. Daniel Munoz opened the scoring in the 40th minute, finishing after a pass from Luis Diaz. Uzbekistan, playing their first World Cup match, equalized around the hour mark when Abbosbek Fayzullaev headed in a rebound for his country’s first goal in tournament history. But Colombia quickly regained the lead, with Diaz scoring from a Gustavo Puerta pass in the 65th minute. Jaminton Campaz added a late third goal after a long pass caught Uzbekistan’s defense out. For Uzbekistan, the match brought a historic first goal but also showed the cost of defensive mistakes and lost concentration in key moments. Wednesday’s results left Portugal under scrutiny, England looking more settled, Ghana relieved and Colombia in control of Group K after South America’s second win of the tournament. 2026-06-18 16:04:29
  • Seoul waives gas tariffs, extends diesel subsidies
    Seoul waives gas tariffs, extends diesel subsidies SEOUL, June 18 (AJP) - South Korea will cut tariffs on liquefied natural gas and liquefied petroleum gas to zero, extend diesel subsidies for transport operators and broaden tariff relief on food imports as the government moves to contain cost-of-living pressure from higher energy and commodity prices. Deputy Prime Minister and Finance Minister Koo Yun-cheol chaired the 11th ministerial task force meeting on consumer price stabilization at the Government Complex Seoul on Thursday. The government said geopolitical risks had eased somewhat after U.S. President Donald Trump signed a memorandum of understanding aimed at ending the war with Iran, helping push global oil prices lower. But officials warned that global energy production, transport infrastructure and logistics networks may take time to fully normalize, leaving pressure on consumer prices intact. “Just because the waves in front of us have subsided does not mean the reefs under the surface are gone,” Koo said. He said the government would use all available tools to stabilize prices and ease the burden on households. Petroleum product prices rose 24.2 percent from a year earlier in May, following gains of 21.9 percent in April and 9.9 percent in March. Consumer inflation also accelerated to 3.1 percent in May from 2.6 percent in April and 2.2 percent in March. As part of the package, diesel subsidies for freight and passenger transport operators, which were set to expire at the end of June, will be extended through the end of September. The subsidy will also be expanded to chartered buses. The program covers 70 percent of the portion of diesel prices above 1,700 won per liter, with support capped at 280 won per liter. The government will also expand tax and tariff relief for energy products. From the second half of this year, quota tariffs on LNG, LPG and crude oil used to produce LPG will be lowered to zero. The government will cut the individual consumption tax on LNG used for power generation by 15 percent from July through December. A 25 percent flexible fuel tax cut on butane, widely used as a household and small-business fuel, will be extended by one month through the end of July. The government will also expand tariff support for food and agricultural inputs. Tariff relief will be extended for three imported fruits — bananas, pineapples and mangoes — and 10 food ingredient items including processed egg products. Nine additional items, including seven food ingredients and two feed ingredients, will be newly covered by quota tariffs. Including 27 existing items, a total of 49 products will receive support. The government said it will designate 17 food ingredients as closely monitored items to make sure tariff cuts are passed on to consumers through lower prices. It will also strengthen inspections across import and distribution channels. The government plans to reinforce its use of artificial intelligence to monitor prices more closely. AI will be used to collect and analyze prices of key food and daily necessities across production and distribution stages, while improving models used to forecast supply and price movements. The government plans to build an “Affordable Consumption App” in the second half of the year to provide real-time price and discount information by retailer. The app is aimed at helping consumers compare prices more easily and make more informed purchasing decisions. The government will also work with local governments to keep public utility charges broadly frozen in the second half of the year. A broader package to stabilize consumer prices and reduce the burden on low-income and vulnerable groups will be announced soon, officials said. 2026-06-18 13:36:43
  • Feds tightening signal barely dents Asian rally
    Fed's tightening signal barely dents Asian rally SEOUL, June 18 (AJP) - The U.S. Federal Reserve's signal of joining a global tightening path to contain post-war inflation went largely unnoticed in Asia, where markets remained engrossed in AI fever and the prospect of the Strait of Hormuz reopening. Seoul authorities assessed the Fed's decision as part of a broader shift among major central banks toward tighter monetary policy, following recent rate increases by the European Central Bank and the Bank of Japan. Markets remained bullish despite the Fed’s hawkish signal. The KOSPI closed above the 9,000 mark for the first time, rising 2.25 percent to 9,063.84, as semiconductor and AI-related shares continued to lead the rally. Japan’s Nikkei 225 also finished at a record high, rising 1.65 percent to 71,053.49 after briefly climbing as high as 71,398.58 during the session. Authorities said the U.S.-Iran ceasefire agreement had helped calm volatility in Korean financial and foreign-exchange markets, but warned risks remained until there was concrete progress on reopening the Strait of Hormuz and sustained stability in oil prices. The Ministry of Economy and Finance, the Bank of Korea and financial regulators held back-to-back meetings in the morning to assess the Fed decision and its implications for Korean financial and currency markets. Deputy Prime Minister and Finance Minister Koo Yun-cheol chaired this year's fourth expanded macroeconomic and financial policy meeting at the Government Complex Seoul, joined by Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-weon and Financial Supervisory Service Governor Lee Chan-jin. The Bank of Korea separately held a market-monitoring meeting at 8 a.m., chaired by Senior Deputy Governor Ryoo Sang-dai, to review global market developments following the Federal Open Market Committee meeting and their implications for local markets. The Fed unanimously kept the federal funds target range unchanged at 3.50 percent to 3.75 percent following its June 16-17 meeting. The hold itself was widely expected. What drew attention was the combination of higher inflation projections, a more hawkish dot plot and Chair Kevin Warsh's firm message on price stability during his first post-meeting press conference. The Fed shortened its statement and removed forward-guidance language on the timing and extent of future policy adjustments. It said the U.S. economy was expanding at a solid pace despite elevated uncertainty linked partly to the Middle East conflict, while productivity growth and capital investment remained strong. Its assessment of the labor market also improved, with the Fed saying job gains had kept pace with labor-force growth, replacing earlier language that employment growth had remained subdued on average. The inflation message turned firmer. The Fed said price growth remained above its 2 percent target and added that the committee "will deliver price stability," making clear that the policy hold should not be interpreted as a dovish pivot. Updated projections reinforced that message. The Fed lowered its 2026 real gross domestic product growth forecast to 2.2 percent from 2.4 percent in March, while trimming its unemployment-rate forecast to 4.3 percent from 4.4 percent. Inflation projections, however, moved sharply higher. The Fed raised its 2026 personal consumption expenditures inflation forecast to 3.6 percent from 2.7 percent and lifted its core PCE forecast to 3.3 percent from 2.7 percent. The dot plot delivered the clearest hawkish signal, with the median estimate for the federal funds rate at the end of this year rising to 3.8 percent from 3.4 percent in March. Projections for 2027 and 2028 were also revised higher, while the longer-run estimate remained unchanged at 3.1 percent. Warsh did not submit his own dot, leaving 18 projections in the latest chart. For markets, however, the higher median projection was enough to shift expectations toward tighter policy rather than rate cuts. Warsh said at the press conference that no rate cut had been discussed during the meeting. He stressed that U.S. inflation had remained above target for more than five years and reaffirmed the Fed's commitment to restoring price stability. He also ruled out a near-term review of the 2 percent inflation target and said the current policy stance remained broadly restrictive, although its impact varied across sectors. Warsh confirmed he was reviewing the Fed's broader communications framework, including the future role of the dot plot and other tools used to guide market expectations. The won ended the daytime session at 1,527.1 per dollar in Seoul, down 13.7 won from the previous session, as the Fed’s hawkish signal revived dollar pressure despite easing oil prices. Bond yields also moved higher, with the three-year government bond yield rising 4.0 basis points to 3.750 percent and the 10-year yield climbing 4.7 basis points to 4.118 percent. 2026-06-18 10:44:27
  • Won, bonds stay quiet as BOJ risk fades, Fed decision looms
    Won, bonds stay quiet as BOJ risk fades, Fed decision looms SEOUL, June 17 (AJP) - South Korea’s currency and bond markets remained calm Wednesday as investors looked past the Bank of Japan’s rate hike and shifted their attention to the Federal Reserve’s first policy decision under Chair Kevin Warsh. The won’s market average rate strengthened 5.3 won to 1,514.75 per dollar, showing limited volatility despite Tuesday’s BOJ decision to raise interest rates to 1 percent for the first time in 31 years. Korean government bond yields also fell, with longer maturities outperforming the short end. The three-year yield declined 0.7 basis point to 3.710 percent, while the 10-year yield dropped 3.9 basis points to 4.071 percent. The larger fall in the 10-year yield suggested longer maturities were more supported, partly reflecting expectations that the Fed’s updated projections could soften the case for further rate increases. The short end was less able to fall as markets remained wary of the Bank of Korea’s tightening bias, while longer maturities were more exposed to moves in U.S. Treasury yields and global duration demand. The Japanese central bank raised its short-term policy rate by 25 basis points to 1 percent from 0.75 percent on Tuesday, bringing Japanese rates back into the 1 percent range for the first time since 1995. The decision marked another step in Japan’s monetary policy normalization after the BOJ ended negative rates in March 2024, widening the contrast with Korea and the United States, where central banks have lowered rates over the same period. The shift has narrowed Japan’s policy-rate gaps with both Korea and the United States, easing one source of pressure behind yen weakness. The BOJ move also came after repeated remarks from U.S. Treasury Secretary Scott Bessent that were read by markets as indirect support for Japan’s rate normalization. Bessent told Reuters in May that BOJ Governor Kazuo Ueda was an “excellent central banker” and that he was confident Ueda would do “what he needs to do” if given sufficient independence by Japan’s government. The remarks did not amount to a direct call for a BOJ rate hike, but they were seen as a sign that Washington was comfortable with Japan’s policy normalization at a time of yen weakness and wide U.S.-Japan rate differentials. With the BOJ event now absorbed, the main focus has shifted to the Fed’s June 16-17 policy meeting, the first chaired by Warsh. The Fed is widely expected to keep its benchmark rate unchanged at 3.75 percent, with the decision due at 3 a.m. Thursday in Seoul. Investors will focus on the updated dot plot and Warsh’s first post-meeting press conference for clues on whether policymakers are moving toward a more neutral stance or keeping the door open to further tightening. For the won, a steady Fed decision and a less hawkish dot plot could help limit upward pressure on the dollar and U.S. yields after weeks of volatility around oil prices, geopolitical risks and foreign capital flows. But the relief could be limited if Warsh emphasizes inflation risks or the need to continue reducing the Fed’s balance sheet, a message that could keep U.S. yields elevated even without a rate increase. 2026-06-17 17:46:42
  • World Cup 26: Europe sweeps, Asia holds ground, Messi lifts South America
    World Cup 26: Europe sweeps, Asia holds ground, Messi lifts South America SEOUL, June 17 (AJP) - Europe restored order at the 2026 FIFA World Cup on Tuesday local time, or Wednesday in Korea, as France, Norway and Austria all won their opening matches while Asia’s unbeaten start came to an end. Argentina also gave South America its first win of the tournament, with Lionel Messi delivering a record-tying hat trick in a victory over Algeria. The day marked a sharp turn from the early group-stage pattern, when Asian teams had gone unbeaten and South American sides had failed to win. France opened Group I with a 3-1 win over Senegal at New York/New Jersey Stadium in East Rutherford, New Jersey. The victory allowed France, World Cup finalists in 2018 and 2022, to protect their status as one of Europe’s strongest sides against the recent Africa Cup of Nations runners-up. Senegal were aggressive in the first half and created several dangerous moments, but France took control after the break. Kylian Mbappe opened the scoring in the 66th minute after being set up by Michael Olise. Bradley Barcola doubled France’s lead in the 82nd minute, only two minutes after coming on as a substitute. Ibrahim Mbaye pulled one back for Senegal in stoppage time, but Mbappe struck again moments later with a long-range finish to seal the win. The brace underlined why France remain one of the tournament favorites. Norway followed with an even more emphatic result, beating Iraq 4-1 at Boston Stadium in Foxborough, Massachusetts. It was Norway’s first World Cup match in 28 years, and Erling Haaland made his tournament debut count with two goals. Haaland scored the opener in the 29th minute, sliding in to finish a cross from David Moller Wolfe with his heel. Iraq briefly fought back when Aymen Hussein equalized nine minutes later, giving the team a moment of hope in its first World Cup appearance since 1986. But Haaland restored Norway’s lead before halftime after pouncing on a poor back pass and beating goalkeeper Jalal Hassan to the ball. Leo Ostigard made it 3-1 in the 76th minute from a Martin Odegaard corner, before an own goal by Hussein just before the final whistle completed Norway’s scoring. Iraq entered the tournament as one of the last teams to qualify through the inter-confederation playoff route, and the gap in quality was clear against a Norway side whose attacking power makes it stronger than its FIFA ranking might suggest. Argentina then became the first South American team to win at this World Cup, cruising past Algeria 3-0 at Kansas City Stadium in Kansas City, Missouri. Messi, playing in a record-setting sixth World Cup at the age of 38, scored all three goals. He opened the scoring in the 17th minute, added a second early in the second half and completed his first World Cup hat trick in the 76th minute. The three goals took Messi to 16 career World Cup goals, drawing him level with Germany’s Miroslav Klose for the all-time tournament scoring record. The win also eased Argentina into its title defense and ended South America’s wait for a victory after Brazil, Paraguay, Ecuador and Uruguay all failed to win their opening matches. Austria completed Europe’s perfect day with a 3-1 victory over Jordan at San Francisco Bay Area Stadium in Santa Clara, California. Romano Schmid put Austria ahead in the 21st minute with a powerful strike from outside the box. Jordan, making its World Cup debut, refused to fade and equalized early in the second half through Ali Olwan. The goal gave Jordan its first-ever World Cup goal and reflected a spirited performance from a team that caused Austria problems with its pace and direct attacks. Austria regained the lead in the 76th minute when a corner from Marcel Sabitzer went in off Yazan Al Arab, the FC Seoul defender anchoring Jordan’s back line. Marko Arnautovic, who had earlier seen a goal disallowed, sealed the win with a stoppage-time penalty. The result gave Austria its first World Cup victory in 36 years and strengthened its position in Group J. For Asia, the day brought an abrupt end to a strong early run. South Korea and Australia had won their openers, while Japan, Qatar, Saudi Arabia and Iran had all drawn, but Iraq and Jordan both lost despite flashes of resistance. Africa also endured a difficult day, with Senegal and Algeria both beaten after Egypt, Morocco, Cape Verde and Ivory Coast had earlier shown that African sides could trouble more established opponents. 2026-06-17 17:28:58
  • BOK chief spells it out: inflation is here to stay and rate hike is coming
    BOK chief spells it out: inflation is here to stay and rate hike is coming SEOUL, June 17 (AJP) - The new Bank of Korea governor left little room for doubt: inflation is heading higher and will not come down anytime soon, whether or not the monthslong Gulf war ends this week. The central bank said Wednesday that inflation would remain elevated for a "considerable period," with price pressure gradually shifting from oil and currency shocks to wages and domestic demand. It projected consumer inflation to hover around 3 percent through much of the second half of the year. The message amounted to a textbook case for policy tightening, delivered with unusual weight as Bank of Korea Governor Shin Hyun-song personally led the regular inflation briefing instead of leaving it to director-general level officials. He was joined by Deputy Governor Lee Ji-ho, the head of the central bank's research department and officials overseeing inflation and employment analysis. "It would take some time before the energy supply chain returns to pre-war levels and international oil prices stabilize," Shin said. In its report, the BOK projected consumer inflation to remain around 3 percent in the second half of this year. Core inflation, which excludes food and energy prices, is expected to stay in the mid-to-high 2 percent range. The outlook marks a clear shift from December, when the BOK expected inflation to remain close to its 2 percent target on weaker global oil prices and stable core inflation. Kim Young-joo, director-general of the BOK's Inflation and Employment Department, said inflationary pressure was changing its source rather than disappearing. "Oil-related upward pressure will ease next year, but demand-side pressure will gradually grow, keeping both headline and core inflation above the target," Kim said. The first phase of the inflation shock came from oil prices, a weak won and higher transport costs. The second phase could come from rising wages, income gains and stronger domestic demand. Consumer prices rose 2.4 percent from a year earlier in the first five months of this year, up from 2.2 percent in the second half of 2025. Inflation had hovered around the BOK's 2 percent target before the Gulf crisis but accelerated to 3.1 percent in May, the first reading above 3 percent since March 2024. Living-cost inflation rose to 3.3 percent in May, while core inflation climbed to 2.5 percent. The weak won has added to the burden. The dollar averaged 1,467.35 won in December and 1,491.39 won in May, before rising further to an average of 1,526.58 won in June through June 16. Oil prices have retreated from wartime highs, with WTI and Brent crude falling below $80 a barrel on Tuesday after renewed U.S.-Iran talks raised hopes that shipping through the Strait of Hormuz could normalize. Shin, however, cautioned against being swayed by short-term market moves. "Over the past day or two, oil prices have fallen and other asset prices such as stocks and bonds appear to have shifted into a risk-on mode," he said. "But rather than reacting to daily market fluctuations, we should make judgments based on long-term economic fundamentals." He added that oil prices, much like financial assets, can swing sharply with changes in investor sentiment, making it too early to conclude that the recent decline would be sustained. "The impact of high oil prices can spread beyond energy to other sectors of the economy. The medium- to long-term second-round effects are what matter," Shin said. The BOK said any decline in oil prices could be gradual because of infrastructure repairs and restocking demand, while earlier oil-price gains could continue feeding into domestic prices with a lag. "Cost-side pressure from high oil prices and a weak won will gradually spread beyond petroleum products," Kim said. He added that the delayed effects of higher oil prices could also increase pressure for public utility fee hikes in the second half. The BOK pointed to the Russia-Ukraine war as a precedent, saying crude-price shocks tend to spread from petroleum products to non-energy items with a lag of about six months, including processed food, dining-out services and manufactured goods. The report also flagged wages as a possible second-round inflation channel. Special bonus payments in the IT sector jumped 60.6 percent in the first quarter, though the central bank said the inflationary impact would depend on whether those gains remain concentrated in a few companies or spill over into other industries. Shin tied those risks directly to the bank's policy stance. "We take seriously the fact that higher inflation could add to the economic burden on the public," Shin said. "We will closely monitor inflation trends and respond actively until we are confident that inflation will stabilize at the target level." Since taking office in April, Shin has been unequivocal about the policy shift. At his first rate-setting meeting in May, he indicated that rates would likely move higher before eventually coming down, while keeping the benchmark interest rate unchanged at 2.5 percent for a full year. He further signaled urgency during the central bank's 76th anniversary event last week, saying the BOK would not be late in raising interest rates if inflation risks intensified. The central bank's latest dot plot also pointed to two to three rate hikes ahead. The BOK's next policy meetings are scheduled for July 16 and Aug. 27. Shin, however, brushed aside the possibility of a single 50-basis-point move, saying conditions were not severe enough to warrant the kind of emergency hike seen in previous crises. 2026-06-17 17:00:13
  • Former trade deputy to spearhead U.S. investment body
    Former trade deputy to spearhead U.S. investment body SEOUL, June 17 (AJP) - Former Deputy Minister for Trade Park Jong-won has been named the inaugural head of the Korea-U.S. Strategic Investment Corporation, a day before the Special Act for Korea-U.S. Strategic Investment Management takes effect to launch the state-backed body tasked with overseeing South Korea’s $350 billion investment commitment to the United States. The Ministry of Economy and Finance and the preparatory committee for the new state entity announced the appointment Wednesday. Park, 57, served as deputy minister for trade at the Ministry of Trade, Industry and Energy until October last year. During his career at the industry ministry, Park held senior posts overseeing middle-market enterprise policy, regional economic policy, automobiles and aerospace, and semiconductors and displays. The new corporation will be responsible for raising, managing and operating funds tied to the $350 billion strategic investment package agreed under a Korea-U.S. memorandum of understanding signed in November last year. The package includes investments in strategic industries and shipbuilding cooperation, as Seoul moves to implement its commitments under the bilateral investment framework. The legal basis for the corporation was established under the Special Act for Korea-U.S. Strategic Investment Management, which passed the National Assembly in March and goes into effect Thursday. The corporation will operate for 20 years from the date of its registration. Its authorized capital is set at 2 trillion won ($1.32 billion), to be paid in cash by the government in annual installments. The special act is the legislative follow-up to months of tariff-driven negotiations that began after Washington imposed a 25 percent reciprocal tariff on South Korean goods in April last year. Seoul later agreed to a framework that lowered the tariff rate to 15 percent in exchange for a $350 billion U.S. investment package, including $150 billion in shipbuilding cooperation. The two countries signed the strategic investment MOU in November, but the tariff threat remained a key source of pressure as Washington pressed Seoul to turn the framework into law. 2026-06-17 14:49:38
  • BOK further builds up rate hike rationale, seeing inflation around 3% 2H
    BOK further builds up rate hike rationale, seeing inflation around 3% 2H SEOUL, June 17 (AJP) - South Korea's annual inflation rate is expected to run close to 3 percent for the first time in three years this year as the broad impact of the three-month Gulf crisis is likely to spill into the second half even if the conflict ends, the Bank of Korea (BOK) warned Wednesday, building the case for an interest rate hike as early as July. In a report on consumer prices released Wednesday, the central bank estimated headline inflation would hover around 3 percent in the second half. Core inflation, excluding food and energy, is projected to stay in the mid-to-high 2 percent range. Inflationary pressure will likely persist into next year as income gains from higher wages and stock returns gradually replace oil-related cost pressures, the BOK said. The latest assessment marks a sharp reversal from its previous semiannual inflation review in December, when the BOK projected inflation would remain safely around its 2 percent target. In the near term, petroleum prices are likely to remain elevated, while later in the year the oil shock is expected to spread to non-energy core items. Consumer prices rose 2.4 percent from a year earlier in the first five months of this year, up from 2.2 percent in the second half of 2025. Inflation, which had been stable around 2 percent before the outbreak of the Iran war, jumped to 3.1 percent in May, the first reading above 3 percent since March 2024. Living-cost inflation accelerated to 3.3 percent in May, adding pressure on lower-income households that spend a larger share of their income on necessities. Core inflation also rose to 2.5 percent in May as higher fuel surcharges pushed up airfares and package tour prices. The first-half pickup was driven mainly by petroleum and service prices. Agricultural, livestock and fishery products, by contrast, helped ease some of the upward pressure. Before the war, the weak won and elevated fresh food prices caused by volatile weather had been the main inflation drivers. The conflict complicated the outlook by triggering a surge in energy costs that is filtering through to groceries, production inputs and service charges on top of persistent currency weakness. Another emerging source of inflation pressure is rising income from the AI boom, with employees and shareholders of beneficiary companies receiving multimillion-won rewards. The benchmark KOSPI has more than doubled since the beginning of the year. The dollar averaged 1,467.35 won in December and 1,491.39 won in May. In June, it averaged 1,526.58 won through June 16, more than 5 percent higher than the year-to-date average. The oil environment has softened as tensions in the Gulf have eased. The three major crude benchmarks fell below $80 a barrel on June 17 after renewed U.S.-Iran talks revived hopes that oil flows through the Strait of Hormuz could recover. That is well below the wartime highs seen earlier this year, but still above the level that underpinned the BOK's more benign view in December. The BOK said oil prices could continue to decline if U.S.-Iran negotiations make progress and shipping traffic through the Strait of Hormuz normalizes. But the adjustment is likely to be gradual because of infrastructure repairs and restocking demand. The central bank also warned that earlier gains in oil prices could continue to filter through the economy with a lag even if spot prices retreat further. The report is likely to reinforce expectations that the BOK could raise interest rates as early as its July policy meeting. The central bank held its benchmark rate at 2.50 percent last month, but board members Chang Yong-sung and Ryoo Sang-dai dissented in favor of a 25-basis-point increase. The BOK's latest dot plot also leaned heavily toward tighter policy, with 19 of 21 six-month rate projections pointing to a policy rate above the current level. Market analysts increasingly expect the BOK to raise rates by 25 basis points in July, or by August at the latest, citing higher inflation and growth forecasts, elevated oil prices and a weaker won. The BOK cited the Russia-Ukraine war as a guide to how oil shocks propagate through the economy. During that episode, higher crude prices were rapidly reflected in petroleum products, while indirect effects on non-energy goods began to emerge about six months later. A similar pattern could unfold this time, the central bank said. Cost pressures could spread to processed foods, dining-out services and manufactured goods even after the direct impact of higher oil prices begins to fade. Government measures have so far cushioned some of the pressure, including caps on refinery supply prices, expanded fuel-tax cuts and frozen public utility fees. However, the BOK warned that pressure to raise utility charges could build later this year as the oil shock works its way through the economy with a lag. Wages are another source of risk. Special bonus payments in the IT sector surged 60.6 percent in the first quarter. The inflationary impact would remain limited if the gains stay concentrated among a small number of companies. But broader spillovers into other sectors could amplify overall price pressures, the report said. Inflation expectations have also moved higher. Households' one-year inflation expectations rose to 2.8 percent in May, while short-term expectations among experts moved into the mid-2 percent range. Long-term expectations among experts, however, remained slightly below 2 percent. The BOK said it will closely monitor inflation conditions, as price pressures are expected to remain elevated for a considerable period. Bond yields retreated sharply as expectations of a rate-hike cycle prompted investors to take profits on earlier bets, with longer-dated securities leading the decline. By midday Wednesday, the three-year government bond yield had slipped 1.4 basis points to 3.70 percent, down sharply from 3.94 percent last Thursday. The 10-year and 20-year government bond yields fell 3.0 basis points and 3.3 basis points, respectively, to 4.08 percent and 4.22 percent. 2026-06-17 14:02:13
  • Won, bonds stay calm despite BOJ hike; credit spread widens slightly
    Won, bonds stay calm despite BOJ hike; credit spread widens slightly SEOUL, June 16 (AJP) - South Korea’s foreign exchange and bond markets remained largely steady Tuesday despite the Bank of Japan’s first rate hike to 1 percent in 31 years, while corporate credit showed mild signs of caution following default concerns at JoongAng Group affiliates. The won closed at 1,513.5 per dollar, little changed from the previous session. Korean government bond yields fell. The three-year yield dropped 2.7 basis points to 3.717 percent, while the 10-year yield declined 0.8 basis point to 4.110 percent. Unsecured three-year corporate bond yields also fell 1.9 basis points to 10.178 percent. The decline was smaller than the fall in three-year government bond yields, meaning the credit spread widened slightly. Corporate bond yields also fell, but by less than government bond yields, leaving credit spreads slightly wider - suggesting that lower-rated credit did not fully join the government bond rally, as investors remained cautious after default and rehabilitation concerns at JoongAng Group affiliates. The move came after JTBC failed to repay 20.6 billion won in securitized borrowings, triggering rehabilitation filings by five JoongAng Group affiliates, including JoongAng Holdings, JTBC, Contentree JoongAng, Megabox JoongAng and JoongAng P&I. So far, however, the market appears to be treating the case largely as an idiosyncratic credit event rather than the start of a broader corporate bond sell-off. The Japanese central bank raised its short-term policy rate by 25 basis points to 1 percent from 0.75 percent, taking Japanese rates back into the 1 percent range for the first time since September 1995. The current short-term policy rate is not directly identical to the official discount rate used at the time, but the move marks Japan’s return to a rate level not seen in more than three decades. The BOJ also said it would reduce government bond purchases as planned through the January-March period of 2027, before keeping monthly purchases at around 2 trillion yen from April. The rate hike marked the BOJ’s fifth increase since it ended negative rates in March 2024, and its fourth 25-basis-point hike in the current normalization cycle. Still, the decision did not deliver a major hawkish surprise, with no signal of a faster tightening path or a sharper reduction in bond purchases. Before the meeting, TD Securities had described a June hike as a foregone conclusion, while Wells Fargo expected only a limited immediate currency reaction, saying energy prices and Federal Reserve policy remained bigger drivers for the yen. The yen also showed a limited reaction after the decision, reducing spillover pressure on other Asian currencies, including the won. In Seoul, foreign investors bought more than 1.5 trillion won worth of KOSPI shares, supporting demand for the won and broader risk sentiment. The benchmark KOSPI briefly slipped into negative territory during intraday trading, but extended gains after the BOJ announcement and traded more than 2 percent higher around the 8,720 level. The BOJ decision also came as Governor Kazuo Ueda missed the meeting after being hospitalized for treatment of an infected liver cyst, according to the central bank. Attention is now turning to the Federal Reserve, where Chair Kevin Warsh is set to lead his first Federal Open Market Committee meeting on June 17 local time. The Fed is widely expected to keep its benchmark rate unchanged at 3.50 percent to 3.75 percent, with investors watching Warsh’s first post-meeting press conference and updated economic projections for clues on whether U.S. rates could still rise later this year. 2026-06-16 17:34:37