Aju Press - Asia News Hub

Journalist

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

Korea's July exports set 20-day record on chip strength SEOUL, July 21 (AJP) -South Korea is set to extend its record-setting export streak in July, with chip-led outbound shipments surging 52.3 percent in the first 20 days to a record $54.93 billion for the period, preliminary customs data showed Tuesday. Exports totaled $54.93 billion from July 1 to 20, while imports increased 20.0 percent from a year earlier to $42.72 billion, generating a trade surplus of $12.22 billion. Final monthly trade data will be released by the Ministry of Trade, Industry and Resources on Aug. 1. The export figure was the highest ever recorded for the first 20 days of July, surpassing the previous record of $36.9 billion set in 2024. Growth moderated from the first 20 days of June, when exports rose 60.2 percent to $61.92 billion. On a nominal basis, early July exports were 11.3 percent lower than during the comparable June period. July had 14.5 working days, one fewer than a year earlier. Adjusted for the calendar effect, average daily exports climbed 62.9 percent to $3.79 billion, accelerating from June's 49.7 percent increase. Semiconductor exports surged 180.6 percent from a year earlier to $22.11 billion. Chips accounted for 40.3 percent of total exports, slightly down from June's 41.2 percent share when semiconductor shipments reached $25.51 billion, but remained by far the country's largest export engine. Computer peripheral exports more than tripled to $2.04 billion. Shipments of ships, wireless communication devices and petroleum products rose 70.8 percent, 65.9 percent and 33.4 percent, respectively. Automobile exports fell 10.6 percent to $3.24 billion, while auto parts shipments declined 9.6 percent. Exports to China nearly doubled to $13.36 billion. Shipments to the United States rose 39.6 percent to $8.96 billion, while those to Vietnam climbed 82.4 percent to $6.21 billion. Exports to the European Union increased 30.3 percent, while shipments to Taiwan gained 41.8 percent. China, the United States and Vietnam together accounted for 51.9 percent of total exports. Imports reflected continued strength in the semiconductor sector. Semiconductor imports rose 54.9 percent to $6.50 billion, while imports of chipmaking equipment increased 56.9 percent to $2.15 billion. Crude oil imports climbed 27.5 percent, while imports of natural gas and coal rose 27.9 percent and 25.7 percent, respectively. Combined energy imports increased 27.4 percent. The trade surplus narrowed from $17.44 billion in the first 20 days of June as energy imports grew and exports eased from the previous month's exceptionally strong pace. Cumulative exports from Jan. 1 through July 20 rose 48.7 percent from a year earlier to $551.28 billion, while imports increased 17.1 percent to $401.37 billion. The cumulative trade surplus reached $149.91 billion. The Korea Customs Service said the preliminary figures may be affected by changes in the number of working days and remain subject to revision when the final monthly data are released. 2026-07-21 11:21:24
Won holds at 1,478 as strong dollar offsets BOK hike; bond yields climb SEOUL, July 20 (AJP) - The South Korean won ended nearly unchanged Monday as a strong dollar and renewed U.S.-Iran tensions offset support from the Bank of Korea’s interest-rate increase last week. Government bond yields rose as investors continued to price in the possibility of further monetary tightening. The won closed the daytime trading session at 1,478.4 per dollar, up 0.1 won from the previous session. The currency showed little reaction to the BOK’s decision Thursday to raise its benchmark interest rate by 25 basis points to 2.75 percent from 2.50 percent. The central bank cited stronger export- and investment-led growth, above-target inflation and persistent financial stability risks, while Gov. Shin Hyun-song left the door open to further rate increases depending on incoming data. The dollar index, which measures the greenback against a basket of six major currencies, remained above 100, limiting the won’s gains. Renewed military tensions between the United States and Iran also sustained safe-haven demand for the dollar. U.S. service members were killed in separate incidents involving Iranian missile and drone attacks in Jordan and Iraq, raising concerns that the conflict could spread across the region. The developments kept the won’s recovery limited even after the BOK delivered its first rate increase since November 2022. In the bond market, the yield on the three-year government bond rose 4.7 basis points to 3.895 percent, while the 10-year yield gained 3.9 basis points to 4.336 percent. The larger rise in the three-year yield, which is more sensitive to the policy outlook, reflected expectations that the BOK could raise rates again. The U.S. 10-year Treasury yield traded at around 4.57 percent Monday, roughly 23 basis points above the comparable Korean yield. Korean government bonds therefore continued to offer no nominal yield premium over U.S. Treasuries, potentially limiting their appeal to yield-seeking investors. The yield gap persisted despite foreign inflows linked to South Korea’s phased inclusion in the FTSE Russell World Government Bond Index. The country’s inclusion began in April and is scheduled to proceed in monthly stages through November. Foreign purchases linked to the index have so far failed to fully offset upward pressure on yields from expectations of further BOK tightening and renewed inflation risks stemming from the Middle East conflict. 2026-07-20 17:33:53
Korea's Q2 GDP to slow from Q1 but on track for around 3% annual growth SEOUL, July 20 (AJP) - South Korea's economy is expected to have expanded at a slower pace in the second quarter after a surprisingly strong start to the year, but growth is still likely to remain robust enough to keep the economy on track for around 3 percent expansion in 2026. The Bank of Korea will release its preliminary second-quarter gross domestic product data on Thursday, providing the first official gauge of whether the country's semiconductor-led export boom has continued to offset sluggish domestic demand and mounting external uncertainties stemming from the prolonged Middle East conflict. Economists expect quarterly growth to range between 0.5 percent and 1.0 percent, down from the first quarter's exceptional 1.8 percent expansion but comfortably above the central bank's May projection of 0.2 percent. In the January-March period, the economy grew 3.8 percent from a year earlier, driven by record semiconductor exports and strong investment. The momentum has largely continued through the second quarter. South Korea's exports reached a record $496.7 billion in the first half, fueled by booming semiconductor shipments totaling $192.4 billion, raising expectations that annual exports could exceed the $1 trillion mark for the first time. Among major forecasters, ING projects second-quarter growth of 1.0 percent from the previous quarter, the most optimistic estimate reviewed by AJP. The Dutch bank said that although export growth moderated, imports contracted even more sharply, allowing net exports to make a positive contribution to GDP. Government support measures to cushion the impact of higher energy costs also helped prevent a sharp slowdown in private consumption. Citi recently raised its second-quarter growth estimate to 0.7 percent from 0.3 percent after trade data showed net exports were considerably stronger than previously expected. KB Securities forecasts 0.5 percent quarterly growth, citing resilient export volumes and improving service-sector activity, while noting that stronger-than-expected contributions from net exports and services could lift the final figure further. Meritz Securities expects growth of around 0.7 percent as export volumes expanded more strongly than anticipated. Taken together, the forecasts point to a clear moderation from the first quarter's outsized performance but also suggest the economy has substantially outperformed the BOK's earlier expectations. Semiconductor exports, facilities investment related to chip production and net exports are expected to remain the principal drivers of growth, while weak construction investment and lingering effects from the energy shock likely weighed on domestic demand. The stronger-than-expected performance has prompted several institutions to raise their full-year outlooks. Citi now expects the economy to grow 3.7 percent this year, up from 3.5 percent previously, while ING lifted its forecast to 4.0 percent from 3.0 percent. Meritz Securities has also indicated it may revise its projection into the mid-3 percent range after Thursday's data. The government has recently revised up its growth target to around 3.0 percent, while the Bank of Korea indicated upgrade to its May projection of 2.6 percent in August. 2026-07-20 16:43:26
BOK to expand CBDC-linked deposit-token trial in Sept SEOUL, July 20 (AJP) - The Bank of Korea is preparing to begin the second phase of its deposit-token trial as early as September, expanding the experiment to peer-to-peer transfers, biometric authentication and government-fund disbursement. The central bank, the Financial Services Commission and the Financial Supervisory Service are building the required systems and completing regulatory procedures for the next phase of Project Hangang, according to financial industry sources. Under the project, the BOK issues a blockchain-based wholesale digital currency, which commercial banks use as a settlement asset to issue tokens backed by customer deposits. The number of participating banks will increase to nine as BNK Kyongnam Bank and iM Bank join the seven lenders involved in the first phase. The existing participants are KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, NH Nonghyup Bank, Industrial Bank of Korea and Busan Bank. Banks plan to simplify the registration process and introduce peer-to-peer transfers, biometric authentication and automatic conversions and withdrawals between conventional deposits and deposit tokens. They will also expand the number of online and offline merchants accepting the tokens through individual partnership agreements. Authorities are considering operating the second phase without setting a predetermined closing date. The trial will remain subject to the financial regulatory sandbox, however, which allows testing for a maximum of four years. The government also plans to test the use of deposit tokens for subsidies, official operating expenses and other public funds. Subsidies for the installation of electric-vehicle charging facilities are being considered as the first government payments to be distributed through the system, with a pilot ministry to be selected within this year. Spending purposes and expiration dates can be programmed directly into the tokens, allowing the government to restrict their use and prevent improper claims. Authorities plan to expand the experiment to other government expenditures and conduct a separate trial involving tokenized government bonds in 2027. Project Hangang began after the BOK and financial regulators unveiled a joint plan in October 2023, followed by system development and technical testing before the first live transaction trial ran from April to June 2025. During the first phase, about 81,000 digital wallets were opened at seven banks, with 114,880 transactions completed and 1.64 billion won converted from bank deposits into tokens. The trial confirmed that key functions, including token issuance, interbank settlement and programmable digital vouchers, could operate in a live environment, but its limited merchant network and functions made it difficult to assess sustained consumer demand. Participants cited a wider merchant network, simpler authentication and remittance services as key improvements, prompting the BOK to focus the second phase on convenience and broader practical use. 2026-07-20 11:36:35
Authorities halt new single-stock leveraged products amid chip-driven market volatility SEOUL, July 16 (AJP) - South Korea will temporarily halt new listings of single-stock leveraged products and ban advertising for existing ones, tightening regulations after their rapid growth raised concerns that they could amplify market swings in the country's semiconductor-heavy stock market. The minimum deposit required to trade domestic and overseas single-stock leveraged products will be tripled to 30 million South Korean won from 10 million won, with investors required to provide the full amount in cash. Deputy Prime Minister and Finance Minister Koo Yoon-cheol discussed the measures at a joint market monitoring meeting in Seoul on Thursday with Bank of Korea governor Shin Hyun-song, Financial Services Commission chairman Lee Eok-won and Financial Supervisory Service governor Lee Chan-jin. They attributed the recent market volatility to a combination of profit-taking and portfolio rebalancing after a sharp equity rally, divergent views on the global artificial intelligence cycle and semiconductor outlook, and South Korea's heavy economic and stock-market exposure to the chip sector. The products were introduced to address regulatory disparities between domestically and overseas-listed investment products and to broaden the domestic market. Authorities, however, said the market capitalization and trading volume of single-stock leveraged products had increased rapidly, raising concerns that they could add to market volatility. A total of 16 exchange-traded funds and two exchange-traded notes offering two-times long or inverse exposure to Samsung Electronics and SK hynix were listed on the Korea Exchange's main bourse on May 27. Since their listing, program-trading sidecars have been triggered 19 times on the KOSPI through Thursday, while marketwide circuit breakers have been activated five times. These measures reflect overall market volatility, although they do not necessarily mean that single-stock leveraged products were the direct cause of each disruption. Authorities will halt new listings of leveraged, inverse and covered-call products until market conditions stabilize. Securities firms and asset managers will also be barred from advertising or conducting promotional events for products that are already listed. Along with the higher deposit requirement, authorities will strengthen investor education and risk disclosures and increase the minimum trading unit for the products. Rules for liquidity providers will also be tightened to prevent market prices from deviating excessively from underlying asset values. The current deviation-management thresholds are 3 percent for domestic equity ETFs and ETNs and 6 percent for overseas equity products. Securities firms and asset managers that breach the strengthened requirements will face tougher sanctions. Authorities said they would continue monitoring trading flows and the market impact of single-stock leveraged products and consider additional measures if necessary. They said the immediate market reaction had been limited but pledged to closely monitor developments and proceed with measures to ease higher borrowing costs for small and midsized enterprises, self-employed owners and other financially vulnerable groups. 2026-07-16 17:41:00
Rate gap with US narrows to lowest level as BOK signals more hikes SEOUL, July 16 (AJP) - The gap between South Korea and U.S. interest rates narrowed to 1 percentage point, the smallest since February 2023, after the Bank of Korea (BOK) on Thursday raised its benchmark rate by 0.25 percentage point to 2.75 percent. The central bank also indicated that further rate hikes may be needed to control inflation and manage financial risks. The rate gap could narrow further if the BOK continues tightening while the Federal Reserve holds rates steady, although its governor Shin Hyun-song said future rate decisions would depend on trends in growth, inflation, foreign exchange rates, housing markets, and household debt. The seven-member board unanimously backed the rate hike, while the Fed kept its rate unchanged at 3.50 percent to 3.75 percent. The move narrowed the two countries' interest rate gap to 75 to 100 basis points from 100 to 125 basis points. The maximum gap, measured against the upper end of the U.S. range, is now at its smallest since February 2023. One additional quarter-point rate hike by the BOK, while the Fed remains on hold, would further narrow the gap to between 50 and 75 basis points. Softer-than-expected U.S. consumer and producer inflation data reduced the futures-implied probability of a July Fed increase to 10.2 percent. "We believe further rate hikes are still needed," Shin said, adding that future decisions would be based on inflation, economic growth, and financial stability. The remark indicates that the BOK has not predetermined its future policy path and will continue to assess economic conditions before making further decisions. Shin did not give a direct view on the 3.50 percent terminal-rate scenario. He instead pointed to second-quarter GDP and GDI data due next week, July inflation figures due Aug. 4 and developments in the exchange rate, housing market and household lending as key inputs for future decisions. If the Fed remains on hold, a BOK rate of 3.00 percent would reduce the maximum gap, measured against the upper end of the U.S. range, to 75 basis points, while a rate of 3.25 percent would narrow it to 50 basis points. The differential would fall to 25 basis points at 3.50 percent, although these are mechanical scenarios rather than BOK forecasts. A narrower gap could reduce the relative yield disadvantage of won-denominated bonds and short-term assets, easing one source of pressure on the currency and foreign capital flows. The relationship is not mechanical, however, as the won is also shaped by the global dollar cycle, foreign equity transactions, exports, oil prices and geopolitical risks. "The exchange rate remains at a high level and has fluctuated widely," Shin said, adding that the central bank needed to remain attentive to the related risks. He said the BOK was examining how the narrowing gap and round-the-clock onshore won trading affect offshore non-deliverable forward activity, which has yet to contract noticeably, and plans to publish separate research on the issue. The won weakened to the mid-1,500 range against the dollar on foreign stock outflows and broad dollar strength before recovering to the upper 1,400 range as foreign exchange supply-demand conditions improved. The largest external variable remains the Fed's actual policy path and its effect on the global dollar, with renewed U.S. inflation or oil-price pressure capable of reviving expectations for further tightening. Foreign trading in South Korean equities also directly affects demand for the won, and the BOK cited foreign stock outflows as one of the main factors behind the currency's recent weakness. In the opposite direction, strong semiconductor-led exports and a large current-account surplus could increase foreign-currency supply and ease some pressure on the won. May's balance-of-payments data, however, showed how that support could be offset by financial outflows. Korea posted a current-account surplus of US$38.61 billion, while nonresidents' portfolio investment in Korean securities fell by $24.65 billion, including a $31.05 billion decline in equity investment, partly offset by a $6.4 billion increase in debt investment. South Korean residents also increased their overseas portfolio investment by $6.24 billion. The current and financial accounts do not translate one-for-one into exchange-rate movements, but the figures illustrate how foreign equity selling and residents’ overseas investment can limit the immediate support for the won even when export-related foreign-currency inflows are exceptionally strong. Oil prices and developments in the Middle East are another major variable through their effects on South Korea's import bill and global demand for safe-haven assets. Higher crude prices and a weaker won could lift import prices, strengthening the case for further BOK tightening and indirectly contributing to an additional narrowing of the rate gap. Shin said the currency had stabilized somewhat from several weeks earlier but remained elevated, while import prices were still 20 percent higher than a year earlier. Domestically, semiconductor prices are likely to play a central role in determining the timing and pace of further BOK increases. First-quarter gross domestic product rose 3.8 percent from a year earlier, while gross domestic income surged 13.2 percent, largely reflecting an improvement in South Korea's terms of trade driven by higher chip prices. The BOK sees a risk that gains in corporate earnings, investment, wages and tax revenue could spread to consumption and add demand-side inflation to the remaining cost pressure, while 2026 growth is expected to considerably exceed its May forecast of 2.6 percent. Headline inflation stood at 3.2 percent in June and core inflation at 2.5 percent, while rising home prices in the Seoul metropolitan area and monthly household-loan growth of 8 trillion won to 9 trillion won provide additional arguments for further tightening. Policymakers will review second-quarter GDP and GDI data due next week, followed by July core and living-cost inflation figures on Aug. 4, before deciding the timing and pace of their next moves. The bilateral gap could narrow rapidly if the Fed stays on hold while the BOK continues raising rates, but that would remove only one disadvantage facing won-denominated assets rather than guarantee foreign inflows or sustained currency appreciation. Financial markets showed a limited response to the decision. The won traded slightly firmer at 1,483 per dollar at 2 p.m., while the three-year Korean Treasury bond yield fell 0.4 basis point to 3.862 percent and the 10-year yield edged up 0.2 basis point to 4.329 percent at the morning close, suggesting that the quarter-point increase had been largely priced in. 2026-07-16 14:57:48
BOK delivers its first hike since January 2023 SEOUL, July 16 (AJP) - As widely expected, the Bank of Korea (BOK) on Thursday bumped up its benchmark interest rate by 25 basis points to 2.75 percent for the first time in three and a half years to contain imported price pressure and feverish leveraged investment. A combination of factors shifted the central bank toward a tightening bias after it had kept the policy rate unchanged since cutting it to 2.50 percent in May last year. Consumer prices rose 3.2 percent from a year earlier in June, remaining above 3 percent for the second consecutive month and drifting further away from the central bank's 2 percent target. The BOK has warned inflation will remain elevated throughout the second half of the year. The government, in its revised economic outlook, raised its growth forecast for this year to 3.0 percent from 2.0 percent on stronger-than-expected expansion driven by an unexpected boom in semiconductor demand. Korea's economy grew 1.8 percent quarter on quarter and 3.8 percent year on year in the first quarter. Outstanding personal credit loans at Korea's five largest banks rose from 108.67 trillion won at the end of June to 110.06 trillion won as of July 14, an increase of 1.39 trillion won despite tighter lending rules as the stock market turned red-hot. The hike marked the BOK's first rate increase since January 2023, when it raised the policy rate from 3.25 percent to 3.50 percent amid post-pandemic inflationary pressure. All 10 economists surveyed by AJP had forecast a quarter-point increase at the July meeting, with nine expecting the policy rate to rise once more to 3.00 percent by the end of the year. 2026-07-16 09:52:07
Lee orders swift measures for single-stock leveraged ETFs amid market volatility SEOUL, July 15 (AJP) - President Lee Jae Myung on Wednesday ordered financial authorities and the Korea Exchange to swiftly draw up measures for leveraged exchange-traded funds (ETFs) linked to Samsung Electronics and SK hynix amid concerns over heightened stock-market volatility. The matter is expected to be discussed Thursday at a meeting of South Korea's four main economic and financial authorities, commonly known as the F4, as regulators consider stronger protection for investors. The F4 brings together the Ministry of Economy and Finance, the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service. Lee raised the issue during a joint government policy briefing at Cheong Wa Dae, asking Financial Supervisory Service governor Lee Chan-jin about the controversy involving single-stock leveraged ETFs. The governor admitted the regulator's responsibility as a market supervisor. Lee then turned to Korea Exchange chairman Jeong Eun-bo and asked officials to prepare supplementary measures without delay. "Please swiftly draw up the necessary measures," Lee said, stressing that normalizing and strengthening the capital market remains his key policy priority. Single-stock leveraged ETFs, launched in the domestic market on May 27, amplified the daily price swings of individual stocks including those of the country's two biggest chipmakers. Their launch has sparked debate over whether heavy trading in these funds could make swings in the underlying stocks, related derivatives, and the broader market even bigger. Buy and sell sidecars have been triggered 36 times on the benchmark KOSPI so far this year, with 17 of those activations occurring since the leveraged ETFs were launched, according to news outlet Newsis. Five of the 13 circuit breakers activated across the KOSPI and junior KOSDAQ since 2000 have also occurred since May 27. The figures show that the launch of these products coincided with a period of unusually sharp market moves, but do not by themselves establish that the ETFs directly caused the trading halts. Authorities are expected to examine the funds' trading structure, liquidity management, their interaction with spot and derivatives markets and the risk of losses among individual investors. Kim Yong-beom, Lee's chief policy secretary, said last week that the government would closely review the products' market impact at the next F4 meeting and decide whether additional measures were needed. The FSS chief has previously expressed regret over the products' introduction, saying last month that the regulator should perhaps have taken stronger action before accepting their securities registration statements. The Financial Services Commission also held a closed-door meeting Tuesday with major brokerages and asset management companies to discuss potential safeguards. Financial firms, meanwhile, agreed this week to strengthen risk warnings tailored to investors' ages and portfolios, improve mandatory education for leveraged-product trading and consider raising minimum deposit requirements to curb excessive investment. The government's measures are likely to focus on tighter entry requirements, clearer risk disclosures and stronger liquidity and operational controls, with the broad direction expected to emerge after Thursday's F4 meeting. 2026-07-15 15:52:58
South Korea stays awash in cash, bolstering case for rate hike SEOUL, July 15 (AJP)-South Korea's financial system is becoming increasingly awash with cash, adding to the Bank of Korea's case for an interest-rate hike that could come as early as Thursday, as abundant liquidity continues to fuel red-hot asset markets from stocks to housing. Broad money, or M2, under the Bank of Korea's current definition averaged 4,184.4 trillion won ($2.81 trillion) in May, up 5.8 percent from a year earlier, slightly faster than April's 5.7 percent increase. On a seasonally adjusted basis, M2 expanded by 32.2 trillion won, or 0.8 percent, from the previous month, accelerating from a 0.6 percent rise in April. An alternative calculation under the central bank's previous methodology painted an even stronger picture of liquidity growth. Under the old definition, which included investment fund shares, M2 averaged 4,789.0 trillion won, up 11.7 percent from a year earlier and 2.2 percent from the previous month. Annual growth accelerated from 10.4 percent in April, extending a run of double-digit increases. The difference between the two measures largely reflected investment fund shares, which are excluded from the revised definition. Those holdings surged 61.7 percent from a year earlier, contributing 6.1 percentage points to the old M2's annual growth and underscoring how strongly money has flowed into investment products during this year's asset rally. The composition of money holdings also illustrated where liquidity is accumulating. Transferable savings deposits jumped by 24.3 trillion won in May after increasing by just 700 billion won in April as more funds migrated in highly liquid accounts to join the booming stock market. Money trusts with maturities of less than two years rose by 3.8 trillion won, reversing a 3.2 trillion-won decline a month earlier, as semiconductor companies increased trust deposits. By contrast, time deposits and installment savings with maturities of less than two years fell by 4.7 trillion won, mainly because households reduced their holdings. The divergence became even more apparent when viewed by sector. Nonfinancial corporations increased their M2 holdings by 30.1 trillion won from the previous month, while other financial institutions added 11.8 trillion won. Social security organizations, local governments and other public-sector entities increased holdings by another 3 trillion won. Households and nonprofit organizations, meanwhile, reduced their money balances by 19 trillion won, suggesting retail investors continued shifting cash into assets outside traditional bank deposits as stock and property markets gathered momentum. The central bank cautioned against interpreting the figures as a direct measure of household wealth or income, noting that money holdings are affected by borrowing, consumption, investment activity and shifts into nonmonetary financial assets. Other liquidity indicators pointed in the same direction. Narrow money, or M1, averaged 1,398.2 trillion won, rising 10 percent from a year earlier and 1.9 percent from the previous month. Liquidity at financial institutions, known as Lf, climbed 8 percent on year to 6,309.0 trillion won, while the broadest liquidity measure, L, increased 9.2 percent to 8,053.8 trillion won. The figures reinforce a dilemma facing policymakers ahead of Thursday's monetary policy meeting. While higher borrowing costs are intended to cool inflation and curb speculative demand in stocks and housing, the latest data suggest the financial system remains flush with liquidity, giving policymakers another reason to tighten policy even as higher interest rates risk weighing on an economy still heavily dependent on exports. 2026-07-15 15:10:49
Seoul reaffirms 3% growth target, addresses high prices SEOUL, July 15 (AJP) - President Lee Jae Myung pressed economic policymakers Wednesday to identify the structural causes of South Korea’s high living costs and address barriers delaying the country’s inclusion in MSCI’s developed-market index. The government reaffirmed its projection that Asia’s fourth-largest economy will grow 3.0 percent this year, supported by strong semiconductor exports and investment in artificial intelligence. “South Korea is being described as an expensive country by global standards, and there must be reasons for that,” Lee said during a joint policy briefing by the Ministry of Economy and Finance, the Financial Services Commission and other economic agencies. He called on officials to identify and remove the market and distribution structures behind persistently high consumer prices rather than relying mainly on short-term price controls. Prime Minister Han Sung-sook also urged the government to focus on longer-term reform of distribution networks, particularly those involving food and everyday consumer goods. Lee cited petroleum prices, which tend to rise quickly when international oil prices increase but fall slowly when global prices decline, as an example of abnormal practices becoming accepted as normal. Finance Minister Koo Yun-cheol said the economy grew 1.8 percent from the previous quarter in the first three months of the year and was on course to expand 3.0 percent for the full year. The government also aims to keep annual inflation below 3 percent while pursuing its “3-4-5” vision of raising the potential growth rate to 3 percent, becoming one of the world’s four largest exporters and lifting per capita income to $50,000. The potential growth target is a medium- to long-term objective separate from the government’s 3.0 percent real GDP growth forecast for this year. To sustain growth beyond the semiconductor upcycle, authorities plan to concentrate fiscal, financial and regulatory support on semiconductors, AI data centers and physical AI, while preparing measures for employment-weakened manufacturing and construction. The government will also introduce tax credits for domestic production of strategically important goods and strengthen early-warning systems for supply-chain disruptions highlighted by the conflict in the Middle East. Lee separately questioned officials over South Korea’s failure to enter MSCI’s watch list for a potential upgrade to developed-market status in its latest annual review. “We intend to move forward step by step at our own pace toward MSCI inclusion,” Koo said. “It is not that things are going badly.” Koo cited the launch of round-the-clock onshore foreign exchange trading this month as a key measure to improve market accessibility and said additional solutions would be prepared by the first half of next year. MSCI’s concerns, however, extend beyond trading hours to restrictions on offshore won transactions, liquidity during overseas hours and operational burdens involving foreign investor accounts, settlements and short selling. The effectiveness of the expanded foreign exchange market and whether global investors can use it without significant operational constraints are therefore expected to influence future assessments. Lee also asked what measures were being taken to restore confidence in the domestic stock market. Financial Services Commission Chairman Lee Eog-weon said authorities were expanding rewards for reporting stock manipulation, strengthening shareholder protection and accelerating the delisting of companies that no longer meet listing standards. The government also plans to ease entry barriers for technology companies and redirect financial resources away from excessive property investment toward advanced industries, innovative businesses and regional development. The discussion later turned to fraudulent claims involving government subsidies, with Lee calling for stronger rewards for whistleblowers and tougher restrictions on entities found to have deliberately abused public support programs. Officials said more than 10,000 suspected cases were under investigation and that repeat offenders could face participation restrictions or corporate dissolution. “With the introduction of a CBDC, a purpose can be assigned to the currency and transactions can be traced more easily, making it possible to prevent fraudulent claims at the source,” Koo said. The proposal would involve purpose-bound digital payment instruments for distributing and settling public funds, rather than necessarily representing an immediate rollout of a retail central bank digital currency. Opening the meeting, Lee praised officials for their work over the past year but said the administration’s remaining three years and 11 months would be critical for implementing long-term policies and institutional reforms. 2026-07-15 13:06:28