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

Korean households' stock and fund buying nears $40 bn in Q1, nearly matching foreign sales SEOUL, July 07 (AJP) - South Korean households’ purchases of equity securities and investment fund shares nearly doubled to 61.4 trillion won ($40 billion) from 34 trillion won in the first quarter, the latest data underscoring the stock craze that gripped the country as investors watched the benchmark KOSPI surge in the first half. Foreign investors sold nearly the same amount, offloading a net 62.1 trillion won worth of Korean equities and investment funds, more than seven times the 8.5 trillion won sold in the previous quarter, Bank of Korea data showed Tuesday. The BOK said the domestic sector posted net lending of 84.3 trillion won ($55.1 billion) in the January-March period, up from 51.9 trillion won in the previous quarter. Households and nonprofit institutions serving households remained the largest net-lending sector, with net lending rising to 79.2 trillion won from 67 trillion won. Their financial asset transactions climbed to 96.3 trillion won from 84.3 trillion won, driven by the surge in purchases of equity securities and investment fund shares. The central bank said much of the increase in household deposits came from investor cash parked at securities firms rather than ordinary bank deposits. Deposits at financial institutions rose to 29.4 trillion won from 12.8 trillion won even as bank deposits declined, suggesting households shifted money into brokerage accounts, stocks and funds. Households continued to sell bonds, with net disposals of 7.4 trillion won in the first quarter after selling a net 10.4 trillion won in the previous quarter. Equity securities and investment fund shares accounted for 28.8 percent of household financial assets at the end of March. The overseas sector moved in the opposite direction. Its net borrowing widened to 84.3 trillion won from 51.9 trillion won as nonresidents stepped up sales of Korean equities. Financial asset transactions by the overseas sector swung to a net disposal of 20.9 trillion won from a net acquisition of 46.4 trillion won. Nonresidents sold a net 62.1 trillion won of Korean stocks and investment funds, compared with net sales of 8.5 trillion won in the fourth quarter. Appetite for foreign equities remained strong. Koreans' overseas stock investment totaled 40.3 trillion won, down from 61.5 trillion won in the previous quarter but still large, while overseas direct investment increased to 28.9 trillion won from 18.1 trillion won. The pattern helps explain the unusual combination of a soaring KOSPI and a weak won. Household money moved toward stocks, funds and brokerage accounts, while foreign selling and residents' overseas investment sustained demand for dollars. Nonfinancial corporations also shifted into a larger net lending position. Their net lending rose to 20.8 trillion won from just 100 billion won in the fourth quarter as financial asset transactions increased to 137 trillion won from 58.4 trillion won. Corporate borrowing from financial institutions rose to 32.2 trillion won from 10.6 trillion won. Direct financing, however, swung to a net repayment of 7.9 trillion won from net borrowing of 21.4 trillion won, while corporate bond financing shifted to a net repayment of 11.8 trillion won from net issuance of 15.9 trillion won. The general government's net borrowing widened to 23.3 trillion won from 19 trillion won. Government bond issuance surged to 49.7 trillion won from 3 trillion won, helping explain recent upward pressure on long-term Korean bond yields amid concerns over heavy debt supply. At the end of the first quarter, the domestic nonfinancial sector held financial assets of 14.77 quadrillion won against financial liabilities of 8.335 quadrillion won, leaving net financial assets of 6.435 quadrillion won. The ratio of financial assets to financial liabilities for households and nonprofit institutions rose to 2.60 from 2.54 at the end of the previous quarter. Separately, the BOK said the household debt-to-GDP ratio fell to 85.3 percent in the first quarter as nominal GDP grew 4 percent while household debt increased 0.6 percent. The central bank cautioned, however, that the decline should be assessed together with the continued rise in household debt and the renewed pickup in borrowing seen in the second quarter. 2026-07-07 12:37:59
Seoul's 24-hour FX market tests local banks' staffing capacity SEOUL, July 06 (AJP) - South Korea began round-the-clock foreign exchange trading on Monday, but while the country's largest lenders are relying on overseas dealing desks to cover the new hours, smaller regional banks say they are scrambling to find enough people to stay awake. "We need more staff, but there are limits to how quickly we can hire people for this," one foreign-exchange official at a regional bank told AJP on condition of anonymity. "We will probably introduce rotating shifts internally." Another regional-bank official said recruitment was not a near-term solution. "For now, we are looking at two options: rotating shifts and new hiring," the official said. "Because recruitment takes a lot of time, we are thinking of responding first through rotating shifts." The new framework, launched Monday, allows dollar-won spot trading to run from 6 a.m. Monday to 6 a.m. Saturday during U.S. daylight-saving time. The opening and closing times will shift to 7 a.m. during U.S. winter time. The launch marks the final step in South Korea's transition to a near 24-hour onshore foreign-exchange market. Trading hours had already been extended in July last year from the previous 9 a.m.-3:30 p.m. schedule to 9 a.m.-2 a.m. the following day. The immediate challenge for banks is covering the four-hour gap between the previous 2 a.m. market close and the start of the regular Seoul business day. Korea's five major lenders—KB Kookmin, Shinhan, Hana, Woori and NH NongHyup—have spent the past year preparing by expanding staffing, reorganizing overseas operations and strengthening London dealing desks, according to multiple industry sources. Some are expected to use capital-markets teams in Singapore, London and New York, while others will rely primarily on London because Korea's early morning overlaps with London's trading day. Regional banks, however, face a different reality. Unlike the country's largest lenders, their foreign-exchange business is centered on customer transactions, trade finance and liquidity management for local exporters and importers. Most lack extensive overseas dealing operations in financial centers such as London and New York. "Even if we automate the process, it is ultimately people who have to look at it and make judgments," the first official said. "We need people to conduct the final checks, but that is not easy at this point." "It is true that we are stretched compared with other banks that have branches in places such as London and New York," the official added. Trading volumes have so far remained subdued as foreign banks appear to be observing how the new system settles in. "So far, foreign banks are closely watching market moves after the opening, and we do not see trading volume exploding," the second official said. "But if trading volume increases later, we will have to expand the number of rotating staff or hire new employees." The staffing challenge extends beyond banks' existing non-deliverable forward (NDF) operations. While NDF desks can monitor offshore won movements, the new 24-hour onshore dollar-won market requires banks to support deliverable spot transactions, settlement, price-making, risk management and operational supervision throughout the trading session. Some lenders are expected to redeploy FX derivatives dealers or rely more heavily on automated hedging systems, but bankers say additional manpower remains unavoidable. Foreign-exchange brokers have also adjusted staffing plans, introducing overnight shifts and rotating schedules ahead of the launch. The Ministry of Economy and Finance and the Bank of Korea said banks, securities firms, brokers and exporters had prepared for the new framework through changes to internal rules, staffing, systems and test trading. The 24-hour regime applies to the interbank dollar-won market rather than all retail foreign-exchange services. Customer remittances, currency exchange and corporate FX transactions during overnight hours will continue to depend on each institution's staffing, systems and risk-management policies. Market participants say the longer trading window could strengthen South Korea's case for inclusion in MSCI's developed-market index, although success will ultimately depend on offshore liquidity, tighter bid-ask spreads and sustained foreign participation rather than trading hours alone. 2026-07-06 17:40:02
Business shutdown at record pace as Korea's self-employed squeeze deepens SEOUL, July 06 (AJP) -South Korea saw nearly 84 business closures for every 100 new business registrations last year, the highest ratio in 12 years, reflecting a sharp slowdown in entrepreneurship amid a prolonged economic downturn. A record 317,406 businesses that had operated for five years or more shut down last year, accounting for 32.5 percent of all closures. More than half cited sluggish business conditions as the reason for closing, the highest share since 2009 in the aftermath of the global financial crisis. The number of active food service businesses fell 1.9 percent from a year earlier to 798,969 at the end of 2025, dropping below the 800,000 mark, according to National Tax Service data released Monday. New openings in the sector fell 13.6 percent to 130,114, the steepest decline since comparable data began in 2011. Closures totaled 142,557, exceeding new openings and leaving the sector with a net decline of 12,443 businesses, five times larger than the previous year’s decrease of 2,491. The decline was concentrated among restaurants that had survived for years. A total of 41,659 restaurants that had operated for at least five years shut down last year, the largest number since comparable data began in 2007. Restaurants with more than 20 years of operation also posted a record 2,797 closures, up 61 percent from 2021. Across all industries, the number of active businesses stood at 10.32 million at the end of last year, up 1.7 percent from a year earlier, the slowest growth since comparable data began in 2005. New businesses fell 4.1 percent to 1.17 million, extending their decline for a fifth consecutive year and marking the lowest level since 2014. Closures declined 3.2 percent to 975,681 after exceeding 1 million for the first time in 2024, but the ratio of closures to new openings rose to 83.5 percent, the highest since 2013. Separate industrial data showed a similar gap between the broader service-sector recovery and conditions facing restaurants. Accommodation and food service output rose 0.9 percent on-year in the first five months of 2026, compared with a 4.2 percent increase in overall service output, according to KOSIS and industrial activity data. Within the sector, accommodation output rose 2.7 percent, while restaurants and bars increased just 0.6 percent. Self-employed borrowers’ loans from financial institutions stood at 1,095.5 trillion won at the end of the first quarter, the largest amount since related data began in 2012, according to Bank of Korea data submitted to Rep. Park Sung-hoon. Overdue loans reached 22.3 trillion won, up 2 trillion won from the end of 2025 and also the largest on record, while the delinquency rate rose to 2.04 percent, the highest since the second quarter of 2015. Korea Credit Data said total loans held by individual business owners stood at 732.2 trillion won in the first quarter, up 3 trillion won from the previous quarter, while delinquent loans rose 12.6 percent to 14.6 trillion won. Of the 3.608 million individual business owners with loans, 501,000, or 13.9 percent, were classified as closed businesses, according to KCD. KCD also said average sales per individual business establishment rose 1.89 percent from a year earlier to 42.58 million won in the first quarter, while average costs increased 3.36 percent to 32.59 million won. Profit, measured as sales minus costs, fell 2.63 percent to 9.99 million won, and the operating margin declined 1.09 percentage points to 23.5 percent. The Bank of Korea said in its June Financial Stability Report that loans to self-employed borrowers accounted for 28.5 percent of all financial-sector loans at the end of the first quarter. The central bank said risks in the self-employed sector were concentrated among small-scale businesses, face-to-face service operators, real estate-related borrowers, older self-employed borrowers and vulnerable borrowers. 2026-07-06 13:04:28
Korea's FX market shifts to 24-hour system in bid to globalize won SEOUL, July 06 (AJP) -South Korea's foreign exchange market began operating on a near 24-hour basis Monday, a milestone reform aimed at making the won more accessible to global investors and strengthening the country's case for inclusion in developed-market indexes. Under the new framework, spot trading will run continuously from 6 a.m. Monday to 6 a.m. Saturday during U.S. daylight-saving time, with the opening and closing shifting to 7 a.m. during U.S. winter time. Deputy Prime Minister and Finance Minister Koo Yun-cheol visited Hana Bank's dealing room in central Seoul at 7:30 a.m. to inspect market conditions on the first day of the new trading regime. Officials from the Ministry of Economy and Finance, the Bank of Korea, Hana Financial Group and Hana Bank attended alongside dealers from domestic banks, overseas branches and exporting companies. The reform marks the final step in a gradual expansion of Korea's FX trading hours. The onshore market operated from 9 a.m. to 3 p.m. between 2005 and 2016 before the closing time was extended to 3:30 p.m. Trading hours were lengthened again in July 2024 to run until 2 a.m. the following day, overlapping with London trading. Despite the launch, the Korean won weakened in early Monday trading, with the U.S. dollar approaching the 1,530-won level. The finance ministry described the overhaul as more than a simple extension of trading hours, calling it a core piece of financial-market infrastructure needed to bring Korea's foreign-exchange market closer to developed-market standards. The ministry said the reform reflects confidence in Korea's external fundamentals, including a record current-account surplus and rising foreign demand for Korean assets following the country's inclusion in the World Government Bond Index. Koo called the launch the starting point for the won's global expansion, saying investors, exporters and importers will be able to trade the currency without being constrained by Seoul business hours. The government expects the longer trading window to allow companies to manage currency risks in real time while creating new business opportunities for domestic financial institutions and brokers. Bank of Korea Assistant Governor Kwon Min-soo said the broader trading session should deepen liquidity and broaden participation in the foreign-exchange market. He added that authorities would closely monitor market conditions and the impact of the new framework. Market participants attending Monday's meeting expressed support for the reform and said banks and companies planned to make active use of the expanded trading environment. The launch also comes as Seoul continues its long-running effort to gain admission to MSCI's developed-market index. MSCI last month kept South Korea in its emerging-market category in its 2026 market classification review, again citing foreign-exchange accessibility as one of the main obstacles. The index provider said the won remains a non-deliverable offshore currency and that liquidity during Korea's extended onshore trading hours has yet to reach the level needed to support execution comparable with developed markets. Market analysts say the extended trading session could strengthen Korea's MSCI case if it enables foreign investors to exchange and hedge won positions throughout global trading hours while reducing reliance on offshore non-deliverable forwards. A deeper overnight market could also improve price discovery and transparency. Whether the reform succeeds, however, will depend less on the official trading schedule than on the liquidity it attracts, bid-ask spreads, foreign participation and settlement efficiency during offshore hours. Other market-access issues also remain under MSCI's review, including omnibus accounts, in-kind transfers, pre-settlement funding requirements and operational burdens related to short-selling compliance. The impact on the bond market is expected to be indirect. Government bonds themselves will not trade around the clock, but overnight moves in the dollar-won exchange rate and swap market may be reflected more quickly when Seoul's bond market opens. If the won becomes more stable and hedging conditions improve, the new system could support foreign demand for won-denominated government bonds as WGBI-related inflows accelerate. Conversely, sharp currency swings during relatively thin overnight trading could weigh on bond prices by raising concerns over imported inflation, financial stability and the Bank of Korea's policy outlook. The finance ministry said maintaining market stability and ensuring smooth settlement under the expanded trading system remain the government's top priorities. Authorities plan to maintain around-the-clock market monitoring while pressing ahead with additional reforms, including a full-scale offshore won settlement system scheduled to begin operation in January 2027. 2026-07-06 10:37:50
Bond rally signals sobriety on Korea's economy – weak without chips SEOUL, July 03 (AJP) - From the look of the sovereign bond market in July, South Korea's economy is running solidly on strong exports while inflation, despite energy shocks from the prolonged Gulf crisis, remains broadly contained around 3 percent, suggesting the Bank of Korea may need no more than one additional rate hike from the current 2.50 percent. Compared with the wild swings in equities and the won's slide to near three-decade lows, South Korea's bond market has remained remarkably stable, supported by steady foreign inflows since the country's sovereign debt joined the FTSE Russell World Government Bond Index in April. The bond rally has also brought the Bank of Korea's terminal rate back into focus, with investors increasingly questioning how far the central bank can tighten policy when sluggish domestic demand remains masked by the semiconductor-led export boom. The three-year government bond yield fell 1.9 basis points to 3.728 percent by midday Friday, while the benchmark 10-year yield dropped 2.1 basis points to 4.162 percent. Both yields are now about 20 basis points below their June 8 peaks of 3.940 percent for the three-year yield and 4.348 percent for the 10-year benchmark. Unlike the equity market, battered by record foreign selling, the bond market has attracted steady foreign inflows. According to the Ministry of Economy and Finance, foreign investors bought a net 37.3 trillion won ($26.9 billion) of Korean government bonds on a trade-date basis between March 30 and June 26 following WGBI inclusion. On a settlement-date basis, net purchases totaled 30.7 trillion won between April 1 and June 26. The WGBI effect has been most visible in the cash bond market and around month-end portfolio rebalancing rather than in every intraday move. On June 30, traders cited foreign futures buying, month-end WGBI demand and solid absorption of a 30-year government bond auction as drivers of a broad rally. Foreign investors on Friday bought three-year government bond futures but sold 10-year contracts, suggesting the day's rally was driven not only by WGBI-related inflows but also by improving domestic and global market conditions. The recent strength in bonds therefore reflects a combination of structural foreign demand and growing confidence that the Bank of Korea may not need to tighten policy much beyond 3 percent. Inflation, the weak won, rising home prices and household debt all provide arguments for further tightening. At the same time, softer consumption, fragile small businesses and uneven domestic demand continue to raise doubts about how restrictive monetary policy can become without weighing excessively on the broader economy. The debate is therefore shifting beyond whether the Bank of Korea will raise its benchmark rate from 2.50 percent to 2.75 percent or even 3.00 percent. The more important question is whether policymakers can justify pushing rates above that level and maintaining restrictive policy for an extended period. The central bank has left that option open. At its May policy meeting, the Bank of Korea kept its benchmark rate unchanged at 2.50 percent. Two Monetary Policy Board members dissented in favor of a 25-basis-point increase, while the central bank raised its 2026 growth forecast to 2.6 percent and its inflation forecast to 2.7 percent. The next policy meeting is scheduled for July 16. Governor Shin Hyun-song said in mid-June that inflation was likely to remain above target for a considerable period and that policy should respond in a timely manner to preserve price stability. Economists remain divided over how high rates may eventually rise. ING economist Kang Min-joo said the Bank of Korea had moved closer to another increase but cautioned that the benefits of the semiconductor-led expansion might not spread evenly across the broader economy. Higher energy costs and inflation could weigh disproportionately on services and construction, supporting a more gradual tightening path. Some domestic analysts still expect the policy rate to reach 3.25 percent. Cho Yong-gu of Shinyoung Securities and Kong Dong-rak of Daishin Securities said the Bank of Korea's updated policy guidance and increasingly hawkish communication strengthened the case for two additional hikes this year, bringing the benchmark rate to 3.00 percent by year-end and 3.25 percent in early 2027. Kim Myung-sil of iM Securities and Yoon Yeo-sam of Meritz Securities pointed to the Bank of Korea's August forecast revision as the next key milestone. Another upward revision to growth and inflation projections could shift the median policy outlook toward 3.25 percent or encourage more board members to support rates above that level. Woori Financial Research Institute has taken an even more aggressive view, projecting two rate hikes in the second half of this year and two more in the first half of next year, lifting the benchmark rate to 3.50 percent. The divergence in forecasts reflects an increasingly uneven recovery. The Bank of Korea's composite consumer sentiment index rose 0.5 point to 106.6 in June, remaining above the long-term average of 100. Beneath the headline improvement, however, the picture was less encouraging. Current living conditions stood at 94, expectations for future living conditions at 97 and the outlook for the broader economy at 92, all below the neutral threshold. While booming equity markets and exports have lifted overall sentiment, households remain considerably less optimistic about their own finances and the domestic economy. Inflation continues to limit the scope for a stronger recovery in consumption. Consumer prices rose 3.2 percent from a year earlier in June, while the living necessities index increased 3.4 percent. Core inflation, excluding food and energy, remained at 2.5 percent. Producer prices have also stayed elevated. The producer price index rose 0.8 percent from the previous month and 8.5 percent from a year earlier in May, reflecting broad-based increases in both industrial goods and services and adding further cost pressures on businesses. Retail spending has improved only marginally. Retail sales edged up 0.1 percent from April and 1.7 percent from a year earlier in May. Sales of durable goods, including automobiles, declined both on a monthly and annual basis, offset by gains in semi-durable and non-durable goods. Service-sector output rose 1.3 percent from the previous month and 4.9 percent from a year earlier in May, driven largely by financial and insurance activities as the stock market rally boosted trading and related services. The economy expanded a stronger-than-expected 1.8 percent in the first quarter from the previous three months, led overwhelmingly by semiconductors and related investment. Private consumption rose just 0.6 percent, compared with a 6.6 percent increase in facility investment and a 5.9 percent rise in exports driven largely by information technology products and semiconductors. Exports reached a record $496.7 billion in the first half, with semiconductors accounting for nearly half of total shipments, raising hopes that annual exports could surpass the $1 trillion milestone for the first time. In contrast, nearly 976,000 businesses closed last year, with an overall closure rate of 8.64 percent. Among six major small-business sectors, the closure rate reached 11.08 percent, led by retail at 15.40 percent and restaurants at 15.14 percent. More than half of all closures were attributed to deteriorating business conditions. In May, the number of self-employed people with employees rose by 80,000 from a year earlier, while those without employees increased by 29,000, pointing to continued business turnover but persistently weak profitability. For now, the bond market is looking beyond the chip boom, betting that weak domestic demand will keep inflation contained enough to make an aggressively restrictive monetary policy unnecessary. 2026-07-03 16:57:41
Indonesian Rupiah's Decline Signals Warning for South Korea The Indonesian Rupiah has fallen to a record low, reigniting concerns of a currency crisis in Asia. A combination of a current account deficit, foreign capital outflow, weakened fiscal credibility, and increased money supply has shaken confidence in the currency. While it is difficult to directly compare Indonesia's situation with South Korea, which boasts a large current account surplus and ample foreign reserves, experts caution that South Korea should monitor the Rupiah's decline due to simultaneous occurrences of won depreciation, rising money supply, and structural dollar demand. Rupiah Surpasses 18,000 Mark, Reviving Crisis Concerns Last month, the Rupiah surpassed 18,000 per dollar, marking its lowest point in history. On June 30, it continued to trade around 17,900 per dollar, maintaining its downward trend. The immediate cause appears to be the strength of the dollar. However, the Rupiah's weakness is viewed as a precursor to financial crisis for several reasons. Foreign capital has been fleeing the Indonesian stock market this year. According to Reuters, foreign investors have sold a net $3.89 billion in Indonesian stocks in 2026, with the Jakarta Composite Index dropping nearly 30% at one point. The current account recorded a deficit of $4.01 billion in the first quarter, the largest since the fourth quarter of 2019. Additionally, President Prabowo Subianto's key promise of a 335 trillion Rupiah (approximately $29 billion) free nutrition program has increased fiscal burdens. Authorities hastily reduced the budget to 268 trillion Rupiah and are considering further cuts of about 40 trillion Rupiah, but the fallout continues. Concerns also linger over the MSCI index. MSCI has extended its review of Indonesia's emerging market status until November. If it determines that market accessibility improvements are insufficient, Indonesia could be downgraded from emerging to frontier market status. While it is premature to declare a repeat of the 1997-98 Asian financial crisis, the simultaneous occurrence of currency depreciation, capital outflow, fiscal instability, and questions about foreign reserves is raising alarm bells. Current Account Deficit and Foreign Capital Outflow Compound Issues The first vulnerability is the current account. According to Indonesia's central bank, the country recorded a current account deficit of $4 billion in the first quarter, equivalent to 1.09% of GDP. A current account deficit does not automatically signal a crisis. However, if it persists, reliance on external capital inflows will inevitably increase. The problem is that this external capital is becoming unstable. Continued foreign selling exacerbates stock market weakness and increases dollar demand, which in turn puts pressure on the Rupiah. Kim Geun-ah, an emerging markets strategist at Hana Securities, noted in a report on June 26 that the risk of a downgrade remains due to MSCI's extended review of Indonesia's status. She explained that foreign investors are likely to remain cautious until they see actual implementation of market accessibility improvements. Indonesia's foreign reserves stood at $144.9 billion at the end of May, down $1.3 billion from the previous month. This marks five consecutive months of decline since January. The central bank stated that this amount covers 5.6 months of imports and 5.5 months of government external debt repayments. While this exceeds the international standard of three months of imports, prolonged currency defense could accelerate the decline more than expected. Indonesia Raises Interest Rates and Cuts Free Meal Budget Indonesia's central bank has already entered defense mode. In its June monetary policy meeting, it raised the benchmark BI Rate by 0.25 percentage points to 5.75%. Interventions in both the spot and derivatives markets have also been intensified. To attract foreign portfolio capital, the interest rate structure for Rupiah-denominated securities has been adjusted. The government is also under fiscal pressure. The Korea International Trade Association's Jakarta office cited concerns over government fiscal discipline and policy credibility as factors behind the Rupiah's decline. There are growing fears that President Prabowo's expansion of free meals, subsidies, and social spending could lead to increased issuance of government bonds and borrowing, raising risk premiums across Indonesian financial assets. In fact, the Indonesian government has completely suspended its free meal program during the school vacation period from June 22 to July 13. The National Nutrition Agency and other relevant departments plan to provide free meals only during the school term moving forward. The government is also considering cutting the related budget by about 40 trillion Rupiah this year. While the program has not been abolished, the Rupiah's decline and fiscal burdens are beginning to constrain politically significant spending plans. It is not accurate to say that Indonesia is on the brink of a currency crisis. Its foreign reserves still exceed the minimum standards required by international financial institutions, and inflation remains under control. The central bank is also utilizing both interest rates and market interventions. However, the current situation exemplifies the typical "emerging market stress" scenario, characterized by a weak currency, current account deficit, foreign capital outflow, and concerns over fiscal credibility. This is why warnings about a potential crisis in Indonesia's economy are emerging. South Korea Faces Won Weakness, but Direct Comparison is Challenging South Korea is also grappling with a weakening won. On June 30, the won-dollar exchange rate closed at 1,549.4 won, up 4.2 won from the previous trading day, influenced by the yen's largest weakness in 40 years. At one point during the day, it surpassed 1,550 won for the first time in 16 trading days. The average won-dollar exchange rate for June was 1,526.59 won, marking the third highest level in history after January 1998's 1,701.5 won and February's 1,626.8 won during the financial crisis. It was also higher than the average exchange rate of 1,461.98 won during the global financial crisis in March 2009. While both the won and Rupiah are experiencing weakness in a strong dollar environment, South Korea differs from Indonesia in that it continues to generate foreign currency inflows rather than outflows. According to the Korea Customs Service, South Korea recorded a trade surplus of $36.1 billion in June, surpassing the $30 billion mark for the first time. This surplus was driven by a recovery in semiconductor exports and improvements in the goods balance. South Korea's foreign reserves also stood at $426.99 billion at the end of May, nearly three times that of Indonesia. Based solely on foreign reserves, the likelihood of South Korea facing a foreign currency shortage in the short term is limited. The challenge for South Korea lies in the insufficient supply of dollars in the domestic foreign exchange market. Domestic investors' overseas securities investments, the National Pension Service and financial institutions' expansion of foreign assets, and companies' preference for holding dollars are contributing to downward pressure on the won. Old M2 at 10% Level is Concerning; Excess Liquidity Must Be Monitored However, there are valid reasons for South Korea to take lessons from Indonesia's situation. Both countries are experiencing rapid increases in money supply compared to major economies. According to the Bank of Korea, the M2 money supply growth rate in April was 5.7% year-on-year. However, when considering the old M2, which includes income securities, the growth rate reached 10.3%. This rate is similar to or even steeper than Indonesia's money supply growth, which recorded annual M2 growth rates of 9.2% in April and 10.8% in May. Concerns about expanding money supply, fiscal spending, and capital outflows have led to shaken confidence in the Rupiah, which may also be a warning sign for the won. During the same period, the M2 growth rate in the United States was about 4.7% in April and about 5.6% in May, while Japan remained at around 2.5%. Russia's M2 growth rate was 12.3% in April and 13% in May, but this was largely due to wartime fiscal policies stemming from the Ukraine conflict. If excess liquidity increases dollar demand while the exchange rate approaches crisis levels, it could undermine confidence in the won. This is why South Korea should heed the lessons from the Rupiah's decline.* This article has been translated by AI. 2026-07-03 08:04:00
Korea's FX reserves edge up in June as ranking slips SEOUL, July 03 (AJP) -South Korea's foreign exchange reserves rose slightly in June, helped by a stronger dollar, but its global ranking slipped one notch, reflecting the cost of defending a stubbornly weak won, central bank data showed Friday. The country's foreign exchange reserves stood at $427.36 billion at the end of June, up $370 million from $426.99 billion in May, when the coffers shrank by $880 million, according to the Bank of Korea. The U.S.. dollar averaged at 1,491.26 won in May and 1,521.4 won, the highest in nearly three decades, to suggest continued pressure for policymakers to defend the local currency. The BOK said reserves edged higher as foreign currency deposits by financial institutions increased, offsetting market stabilization measures, including foreign exchange swap transactions with the National Pension Service. Securities accounted for the largest share of the reserves at $380.34 billion, or 89.0 percent of the total. Deposits stood at $22.27 billion, or 5.2 percent, while Special Drawing Rights totaled $15.64 billion, or 3.7 percent. Gold holdings were unchanged at $4.79 billion, while the country's reserve position at the International Monetary Fund stood at $4.31 billion. Compared with the previous month, deposits increased by $920 million, while securities declined by $330 million. SDR holdings and the IMF reserve position fell by $140 million and $90 million, respectively. South Korea's global ranking slipped to 13th as of the end of May, the latest month available for international comparison. The country ranked 12th a month earlier, but Singapore moved ahead with $430.1 billion in reserves, compared with South Korea's $427.0 billion at the end of May. China remained the world's largest holder of foreign exchange reserves with $3.4422 trillion, followed by Japan with $1.3059 trillion and Switzerland with $1.0767 trillion. Russia ranked fourth with $747.4 billion, while India came fifth with $686.3 billion. 2026-07-03 07:20:47
Korean football leadership faces civic complaint after World Cup shame SEOUL, July 02 (AJP) - The fallout from South Korea's group-stage exit at the 2026 FIFA World Cup is spreading beyond football, as the Korea Football Association faces renewed legal and political pressure over its leadership and decision-making. Hong Myung-bo, who resigned as head coach after South Korea failed to reach the round of 32, KFA President Chung Mong-gyu and former KFA technical director Lee Lim-saeng have been named in a complaint filed by the People's Livelihood Countermeasure Committee, a conservative civic group. The group said Thursday that it filed a complaint with the Seoul Metropolitan Police Agency against Chung, Lee and Hong on allegations including coercion, intimidation, obstruction of business and breach of trust. The group claimed that members of the KFA's National Teams Committee came under pressure from Chung and others during the national team coach selection process, leading to Hong's appointment. It also accused Hong of breach of trust, arguing that he failed to produce results despite receiving a high salary. The complaint remains an allegation by a civic group. Investigators or courts have not determined that any of the accusations are true. The same group filed a complaint against Chung and Lee in July 2024 over Hong's appointment. The related case was recently transferred from Jongno Police Station to the financial crime investigation unit of the Seoul Metropolitan Police Agency. The controversy over Hong's appointment dates back to July 2024. After dismissing Jurgen Klinsmann, the KFA spent months searching for a new coach before bringing back Hong, then manager of Ulsan HD. The appointment immediately drew criticism over fairness and transparency. In a 2024 audit, the Ministry of Culture, Sports and Tourism concluded that Lee had played a role in interviewing and recommending final candidates without proper authority under KFA rules. The ministry also said Hong's interview process differed from that of foreign candidates, with no written questions prepared in advance and no observers present. It further found that the KFA effectively reduced the role of its board to a formality by announcing Hong's appointment first and approving it later through written board consent. In November 2024, the ministry released the final results of its special audit and asked the KFA to impose heavy disciplinary measures, including suspension, against Chung and other officials. It also ordered the KFA to restart the national team coach appointment process in accordance with its rules. The KFA challenged the ministry's measures in court, but the Seoul Administrative Court ruled in April that the ministry's corrective demands were lawful. The World Cup result revived the appointment controversy. South Korea finished the group stage with one win and two losses, failed to qualify for the knockout round and saw Hong resign immediately after the elimination. The timing leaves South Korea facing another coaching vacuum before a major tournament. The 2027 AFC Asian Cup will be held in Saudi Arabia from Jan. 7 to Feb. 5 next year. The KFA now has about six months to appoint a new coach and rebuild the team's tactical direction. The pattern has become familiar. Shin Tae-yong left after the 2018 World Cup and Paulo Bento took over, while Bento left after the 2022 World Cup and Klinsmann was appointed. With Hong now gone, the national team must go through another reset before an Asian Cup cycle. Distrust toward the KFA is not limited to the senior national team job. In 2022, the association faced criticism over whether some high-profile former players, including members of South Korea's 2002 World Cup semifinal team, were receiving preferential access to the top-level P license coaching course. Chung's leadership has also been discussed against issues outside football, including public scrutiny over HDC Group's handling of the deadly Gwangju Hwajeong I-Park apartment collapse. The case was not directly related to the KFA. The latest complaint shows that the KFA controversy is moving beyond sports administration into the political arena. The People's Livelihood Countermeasure Committee has often been described in Korean media as a conservative civic group that files complaints on political and social issues. The move also came as Jin Jong-oh, an Olympic shooting champion and lawmaker from the conservative People Power Party, has been stepping up criticism of the KFA. The overlap in timing has given the World Cup fallout a sharper political edge, even as there is no confirmed link between the civic group's complaint and Jin's campaign. Jin called the exit a "predictable tragedy" and said he would launch a KFA whistleblower center. The government and ruling bloc are also responding. President Lee Jae Myung said South Korea's failure to reach the round of 32 reflected "a failure of organization and personnel." Lee added that results are obvious when loyalty and factional preference are placed above competence in choosing an "incapable commander." Lee also called on the Ministry of Culture, Sports and Tourism to identify the causes of the failure, prepare measures to prevent a recurrence and push ahead with sports administration reform. Chung has already indicated that he will step down after the World Cup. But Hong's resignation, civic complaints, police scrutiny, political pressure and the approaching Asian Cup are now converging into a wider demand for reform. The KFA is now left with the task of appointing a new coach while restoring transparency and accountability in its decision-making. 2026-07-02 17:31:06
Korea-Japan weak currency coupling tells different stories SEOUL, July 02 (AJP) - For South Korean policymakers battling a persistently weak won, the culprit is relatively straightforward: heavy foreign selling of Korean equities and an insatiable domestic appetite for dollar-denominated assets. The picture is more puzzling in Japan. Despite record foreign buying of Japanese stocks this year, the yen has continued to languish near multi-decade lows, defying the conventional expectation that capital inflows should support a country's currency. The apparent contradiction reflects a growing separation between equity investment and foreign-exchange positioning. Global investors can buy Japanese shares while simultaneously limiting or eliminating their exposure to the yen through futures, currency-hedged exchange-traded funds, forwards and swaps. According to Tokyo Stock Exchange data, overseas investors bought a net 10.94 trillion yen worth of Japanese cash equities in the first half of this year. That surpassed the 8.3 trillion yen of net purchases recorded during the first half of 2013, at the beginning of the Abenomics era. The inflows have been driven by the artificial intelligence investment boom and growing expectations that Japanese companies will continue improving corporate governance and capital efficiency. Global investors increasingly view Japan's semiconductor equipment, materials, components and data center-related companies as key beneficiaries of the AI supply chain. The shift has already reshaped Japan's corporate landscape. SoftBank Group has overtaken Toyota Motor in market capitalization on expectations for AI infrastructure growth, while Kioxia has also moved ahead of the automaker as investors bet on surging memory demand from AI data centers. Foreign buying has expanded well beyond semiconductor equipment makers such as Tokyo Electron to include electronic materials, optical fiber, power infrastructure and other AI-related businesses. Improving shareholder returns and stronger pressure on Japanese companies to enhance capital efficiency have further reinforced foreign demand. Yet buying Japanese stocks does not necessarily translate into buying the yen. Although cash equities on the Tokyo Stock Exchange are traded in yen, international investors can maintain exposure to Japanese stocks while largely avoiding currency risk. CME lists both yen- and dollar-denominated Nikkei 225 futures, while currency-hedged ETFs, forwards and swaps allow investors to capture Japanese equity returns without fully bearing the risk of further yen depreciation. As a result, capital can flow into Japanese equities without generating equivalent demand for the currency. That helps explain why record foreign purchases of Japanese shares have coincided with continued weakness in the yen. The incentive to hedge remains strong. As of July 2, the dollar traded around the 162-yen level, leaving many overseas investors reluctant to assume additional yen exposure while increasing allocations to Japanese stocks. Asset managers note that foreign investment in Japanese equities inherently creates currency risk. Selling yen through forward contracts or swaps allows them to neutralize that exposure while retaining their equity positions. The challenge is that public data offer little visibility into the scale of those hedging activities. Japan's Ministry of Finance securities investment statistics and Tokyo Stock Exchange investor trading data reveal how much foreigners buy or sell Japanese shares, but not whether they subsequently hedge their currency exposure. That makes the current market dynamic better understood as investors buying Japanese companies while keeping much of their currency exposure in dollars rather than yen. The currency's weakness also reflects structural macroeconomic factors, including the wide interest-rate differential between the United States and Japan and lingering skepticism over how quickly the Bank of Japan can normalize monetary policy. In other words, investors can be bullish on Japan's corporate earnings without necessarily being bullish on its currency. The divergence also has implications for South Korea. Foreign selling of Korean equities tends to generate immediate won-selling and dollar-buying pressure. By contrast, foreign purchases of Japanese stocks accompanied by currency hedges generate far less demand for the yen. In effect, global investors are rotating part of their exposure from Korea's semiconductor rally into Japan's AI supply chain while continuing to keep their currency preference tilted toward the U.S. dollar. 2026-07-02 16:40:39
World Cup 26: England survive DR Congo scare, U.S. advance SEOUL, July 02 (AJP) - England survived a major scare to reach the last 16 of the 2026 FIFA World Cup, while co-host United States advanced despite a red-card setback that left a bitter aftertaste to an otherwise hard-fought win. Belgium also moved on, but only after a dramatic late comeback against Senegal that raised as many questions as it answered. England came from behind to beat DR Congo 2-1 at Atlanta Stadium in Atlanta, Georgia, on Wednesday, in a match that kicked off at noon local time. DR Congo stunned England in the seventh minute, when Brian Cipenga capitalized on a defensive lapse and a misjudged bounce to give the African side an early lead. England struggled for long stretches after falling behind. DR Congo defended with discipline, goalkeeper Lionel Mpasi produced a series of saves and England were repeatedly forced into low-percentage attacks. But Harry Kane rescued England in the second half. The England captain equalized in the 75th minute with a close-range header, finally breaking through after sustained pressure. Kane struck again in the 86th minute. He received the ball near the edge of the area, turned across the front of the box and drove a powerful shot into the top corner to complete the comeback. The win sent England into a round-of-16 meeting with Mexico at Mexico City Stadium on July 5. That match is expected to be a difficult test. England will have only three days to adjust before facing a co-host in Mexico City, where altitude, crowd pressure and Mexico's current form could all become factors. Mexico has won all four of its matches in the tournament without conceding a goal. Belgium produced the day's most dramatic escape, beating Senegal 3-2 after extra time at Seattle Stadium in Seattle, Washington. The match kicked off at 1 p.m. local time. Senegal looked on course for the last 16 after taking a 2-0 lead. Habib Diarra opened the scoring in the 25th minute, finishing from close range after Ismaila Sarr's header came back off the post. Sarr doubled Senegal's lead in the 51st minute with a powerful finish after controlling a long pass from Moussa Niakhate. Belgium looked disjointed for much of the match, but Romelu Lukaku's halftime introduction eventually changed the game. Lukaku pulled one back in the closing minutes, turning in Thomas Meunier's low cross at the near post. Belgium then forced extra time when Youri Tielemans headed in Leandro Trossard's delivery, completing two goals in the final minutes of regulation. The turnaround was completed deep in extra time. After a video review, Lamine Camara was judged to have fouled Tielemans as the ball flashed across the face of goal. Tielemans converted the penalty in the 125th minute, sending Belgium through. Senegal had one last chance to respond, but Pape Sarr missed a free kick from a dangerous position in the final moments. Belgium showed it still has enough quality and experience to survive a knockout crisis, but the performance did little to ease concerns over its overall level. The Red Devils will face the United States in the round of 16 in Seattle on July 6. The U.S. beat Bosnia and Herzegovina 2-0 at San Francisco Bay Area Stadium in Santa Clara, California, in a match that kicked off at 5 p.m. local time. Folarin Balogun opened the scoring just before halftime, finishing a chaotic but important chance to give the co-hosts a 1-0 lead. But the match turned in the second half when Balogun was sent off after a video review. The striker caught Bosnia defender Tarik Muharemovic on the ankle with a high challenge, leaving the U.S. to play much of the second half with 10 men. The setback could have destabilized the home side. Instead, the U.S. found a second goal. Malik Tillman scored in the 82nd minute with a free kick from a dangerous central position, bending the ball past the wall and beyond goalkeeper Nikola Vasilj. Bosnia had a man advantage and 10 minutes of stoppage time, but failed to make sustained pressure count. The closest chances came late, when Bosnia fired two sharp efforts narrowly wide in the seventh and eighth minutes of added time. The U.S. also threatened on the counterattack despite being a man down, repeatedly finding space behind Bosnia's pushing back line. The win sent the Americans into the last 16, but Balogun's suspension now leaves them with a major attacking problem before facing Belgium. The U.S. showed grit, discipline and transition threat under pressure. But the red card means its next match will come without its starting striker, turning a strong home victory into a complicated step forward. 2026-07-02 14:02:15