Journalist
Kim Yeon-jae김연재
duswogmlwo77@ajupress.com
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."
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
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BOK warns higher rates could cool asset risks but strain households SEOUL, June 24 (AJP) -Higher interest rates could help cool leveraged bets on stocks and property, but they would also increase burdens on households and create fresh financial risks, the Bank of Korea warned on Wednesday, as senior officials continued to signal that the benchmark rate would rise from the current 2.50 percent. In its June Financial Stability Report, the central bank said Korea’s financial system remains broadly stable, supported by stronger economic growth, resilient financial institutions and sound external payment capacity. But the report pointed to a growing policy dilemma as financial and foreign exchange markets become more volatile, housing prices in Seoul and surrounding areas rise again, and investors take on more leverage to chase asset gains. The BOK, which has kept its base rate at 2.50 percent since last cut in May last year, judged that rates would need to be raised “at an appropriate time” after weighing inflation pressure, economic conditions and financial stability risks. In a separate analysis, the central bank said higher market rates could help ease financial imbalances by restraining debt-funded asset investment and reducing the risk of further asset-price gains. Jang Jeong-su, deputy governor of the BOK, said at a press briefing that rate hikes could help reduce medium- to long-term financial instability. The effect, however, would not be one-sided, he said. “Rate hikes can lower volatility and vulnerabilities in real estate and stock markets, but they can also increase the burden on vulnerable borrowers,” Jang said. The BOK’s Financial Stress Index, which measures short-term stress, stood at 17.2 in May, remaining in the cautionary zone. The Financial Vulnerability Index, which tracks medium- to long-term vulnerabilities, rose to 46.0 in the first quarter, slightly above its long-term average of 45.7. Lim Kwang-kyu, director general of the BOK’s Financial Stability Department, said the FSI is a coincident indicator of short-term stress, while the FVI shows how much financial instability has accumulated over a longer horizon. He said the FSI had risen during the Middle East crisis before easing recently, but added that both indicators remain in the cautionary zone and require close monitoring. Household debt remains one of the central bank’s biggest concerns. Jang said Korea’s high household debt ratio is a problem the economy still needs to solve, although the ratio could decline if nominal gross domestic product continues to grow. But he cautioned that recent nominal GDP growth has been concentrated in specific sectors, making it difficult to view the improvement as broad-based. “Given the steep rise in property prices, we need to stay alert to household debt risks,” he said. Household credit stood at 1,993.1 trillion won at the end of the first quarter, up 3.5 percent from a year earlier. The household debt-to-disposable-income ratio fell to 134.1 percent from 139.7 percent at the end of the third quarter last year, but the share of vulnerable borrowers rose to 6.7 percent by number of borrowers from 6.4 percent over the same period. Household loan growth has also accelerated again. Monthly household loans increased by an average of 2.7 trillion won in the fourth quarter of last year and 3 trillion won in the first quarter, before rising by 3.5 trillion won in April and 9.3 trillion won in May. The BOK said housing transactions ahead of the end of temporary tax relief for multiple-home owners were reflected in loans with a lag, while other loans, including borrowing linked to stock investment, also increased. The central bank warned that the stabilizing effect of higher lending rates could be weakened if profit-taking from the stock market flows into housing. If demand for homes in non-regulated areas strengthens amid rising lease prices, household debt growth could pick up again, the BOK said, calling for consistent management of expectations for further home-price gains. Leveraged stock investment has emerged as another risk, with the rapid rise in Korean stocks compared with major overseas markets appearing to be a key driver, Jang said. “It is true that there are concerns about external effects, where even investors who did not borrow to invest could suffer losses from forced selling,” he said, adding that the BOK would continue to consult with relevant authorities. Asked about recent swings in the KOSPI, Jang said it was difficult to predict whether foreign selling pressure had fully run its course. “If the market rises sharply in a short period, it could again trigger foreign selling,” he said. Foreign investors pulled a net $83.37 billion from Korean securities from January through June 9. Stock investment posted a net outflow of $94.81 billion, while bond investment recorded a net inflow of $11.44 billion. The BOK said the won-dollar exchange rate rose with high volatility due to Middle East-related geopolitical risks and foreign selling of Korean stocks, but foreign currency funding conditions remained broadly favorable and Korea’s external payment capacity stayed strong. Jang said Korea’s failure to be added to MSCI’s developed-market watch list does not erase the progress made in market reforms, saying MSCI has viewed Korea’s reform efforts positively. He said continued work to extend foreign exchange trading hours and establish an offshore won settlement system could eventually lead to inclusion. Hwang Kun-il, the Monetary Policy Board member who oversaw the preparation of the report, said in a separate message that risks from vulnerable sectors, market volatility, rising home prices and leveraged asset investment require continued attention. 2026-06-24 13:56:38 -
Financial authorities seek to calm concerns after MSCI setback SEOUL, June 24 (AJP) - South Korean financial authorities said Wednesday that it expects to be included in MSCI’s developed-market index in due course if it continues to press ahead with foreign exchange and capital market reforms, after the country again failed to make the index provider’s watchlist for a possible upgrade. The Ministry of Economy and Finance and the Financial Services Commission said in a joint statement that MSCI recognizes the government’s efforts and progress in modernizing Korea’s foreign exchange and capital markets. The two agencies said some reform measures are still under way, while even completed measures need more time before their effects are fully felt by investors. The government said it will quickly activate regular communication channels with major overseas investors to review how reform measures are being used in practice and reflect market feedback. MSCI said in its 2026 annual market classification review released Tuesday that Korea will remain classified as an emerging market, without being placed on the watchlist for a possible upgrade to developed-market status. Korea will therefore stay in MSCI’s emerging market index alongside markets such as China and India. MSCI acknowledged measures announced by Korean authorities to address long-standing investor concerns, but said investors still believe fundamental issues have not been fully resolved. The index provider cited continued limits on offshore won trading and insufficiently tested liquidity during extended onshore foreign exchange trading hours as key reasons behind Korea’s failure to make the watchlist. It also pointed to limited use of omnibus accounts and in-kind transfers, as well as operational burdens related to short-selling rules and settlement procedures. Korea was added to MSCI’s emerging market index in 1992 and placed on the developed-market watchlist in 2008, but failed to win an upgrade due to issues including the absence of an offshore won market, foreign investor registration requirements and restrictions on index data usage. MSCI removed Korea from the watchlist in 2014, and the country has since remained outside even the preliminary review stage for developed-market inclusion for more than a decade. 2026-06-24 10:35:21 -
Won weakens on Fed jitters, bond yields fall as safety bid offsets FX pressure SEOUL, June 23 (AJP) - The Korean won weakened against the dollar on Monday as the Federal Reserve’s hawkish stance kept pressure on Asian currencies, while government bond yields fell as a sharp stock selloff pushed investors toward safer assets. The won ended the daytime session in Seoul at 1,538.90 per dollar, weakening by 1.90 won from the previous session. The currency came under pressure as investors reassessed the Fed’s policy path after its June meeting delivered a more hawkish dot plot and a firmer message on inflation. The dollar stayed supported by expectations that U.S. rates could remain high for longer, or even rise again, keeping markets focused on the interest-rate gap between Korea and the United States. Weak risk sentiment added further pressure on the won. The benchmark KOSPI tumbled 9.99 percent to close at 8,203.84, with both a sidecar and a marketwide circuit breaker triggered during the session. Foreign investors net sold 4.13 trillion won ($2.68 billion) worth of local shares, adding to pressure on the currency. Bond yields moved lower despite the weaker won. The three-year government bond yield fell 4.0 basis points to 3.770 percent, while the 10-year yield dropped 2.4 basis points to 4.171 percent. A weaker won and a hawkish Fed would normally put upward pressure on Korean yields. Currency weakness can add to import-price risks, while a tighter Fed path limits the Bank of Korea’s room to ease policy. But the scale of the equity selloff shifted the focus to risk aversion. The KOSPI’s nearly 10 percent drop, heavy foreign selling and the activation of trading curbs strengthened demand for government bonds, pushing yields lower despite continued currency weakness. The move appeared to reflect a short-term safety bid rather than a clear shift toward expectations for easier monetary policy. Monday’s trading left Korean markets split across asset classes. The foreign exchange market was driven by Fed concerns, dollar strength and foreign equity selling, while the bond market took its cue from risk aversion triggered by the stock rout. 2026-06-23 17:22:48 -
Central banks recalibrate post-rate messaging SEOUL, June 23 (AJP) - The dot plot, long one of the U.S. Federal Reserve's most influential communication tools, is undergoing a rethink just as South Korea's central bank is embracing it, highlighting a broader dilemma confronting policymakers worldwide: how to guide markets without locking themselves into a path they may later regret. The divergence underscores a new reality for central banks. Inflation, exchange rates and interest-rate expectations have become harder to manage in an era of geopolitical shocks, volatile energy prices and rapidly shifting market sentiment, forcing policymakers to reconsider not just what they do, but how they communicate what they might do next. New Fed Chair Kevin Warsh offered an early indication of that shift when he declined to submit his own interest-rate projection at his first Federal Open Market Committee meeting on June 16-17. The Fed left its benchmark policy rate unchanged at 3.75 percent, but its dot plot turned more hawkish. The median projection 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 expected at least one rate increase this year. Warsh was not among them. At his June 17 press conference, Warsh said the Fed would review its communication framework, including the future of the dot plot. The central bank also removed forward-guidance language from its policy statement regarding the timing and extent of future policy adjustments. The dot plot shows where FOMC participants believe interest rates should stand in coming years. Since its introduction in 2012, investors have treated it as one of the most important guides to the future path of U.S. monetary policy. The tool has obvious advantages. It improves transparency by revealing the distribution of policymakers' views and helps align market expectations with central bank intentions. But the dots are conditional projections, not promises. Markets nevertheless tend to interpret them as commitments, making bond yields, currencies and equities highly sensitive to even small shifts in the chart. That transparency can become a constraint. Once investors anchor themselves to a projected rate path, changing economic conditions can force central banks into an uncomfortable choice: surprise markets or appear to be walking back earlier guidance. The Bank of Korea is moving in the opposite direction. Its monetary policy department recently outsourced a study titled "Effects of Monetary Policy Communication Using High-Frequency Data" to examine whether more explicit guidance can improve market functioning. The study will analyze intraday movements in interest-rate swaps, government bond futures and KOSPI 200 futures on policy-decision days to measure how BOK communication affects financial markets. Researchers will focus on two tools: conditional forward guidance that shows the three-month rate views of six Monetary Policy Board members, excluding the governor, and a six-month dot plot in which seven board members each submit three projections for the base rate. The BOK introduced its dot plot at the Feb. 26 policy meeting. After its May 28 meeting, 19 of the 21 dots were positioned above the prevailing base rate. Markets interpreted the chart as a relatively clear signal that policymakers were leaving open the possibility of rate increases in the second half of the year. The exchange-rate backdrop has made that communication challenge even more delicate. The won averaged 1,529.15 per dollar through June 22, its weakest monthly average since February 1998, when it averaged 1,626.7 during the aftermath of the Asian financial crisis. The currency weakened further on June 23, ending Seoul's daytime session at 1,538.90 per dollar as the Fed's hawkish stance continued to pressure emerging-market currencies. That has kept markets intensely focused on the interest-rate gap with the United States and the Fed's policy trajectory. The BOK's challenge has also become more complex. Oil prices and a weaker currency have revived inflation risks, while housing prices and household debt remain major domestic concerns. That increases the need to manage expectations before any actual policy move is made. BOK Governor Shin Hyun-song has long studied the role of communication in monetary policy. During his tenure at the Bank for International Settlements, he examined how central bank signals influence market pricing and investor behavior. At his parliamentary confirmation hearing on April 15, Shin indicated the BOK would maintain its current framework for the time being, arguing that newly introduced communication tools should be evaluated after accumulating sufficient experience. Other major central banks have already migrated toward more flexible language. The European Central Bank has moved away from signaling a specific rate path, instead emphasizing a data-dependent, meeting-by-meeting approach. After its June 11 meeting, the ECB said future decisions would depend on inflation prospects, underlying price pressures and the strength of monetary policy transmission. The Bank of England has adopted similar language. Following its June 18 meeting, policymakers said decisions would be made meeting by meeting, based on incoming data covering inflation, wages, growth, labor-market conditions and inflation expectations. The Bank of Japan does not publish a dot plot at all. It communicates through economic forecasts and the governor's press conferences. After raising its short-term policy rate to 1 percent on June 16, the BOJ employed deliberately conditional language, saying it would adjust the degree of monetary accommodation if the economy and prices evolve in line with its outlook. The evolution reflects a common lesson. Central banks still want to guide markets, but they increasingly want to avoid being trapped by a predetermined path. The BOK is effectively running an experiment by combining Fed-style dot plots with conditional forward guidance. Its new study is designed to measure how that mix influences expectations for interest rates, the won and domestic equities. As the Fed debates the future of the dot plot while the BOK tests its newest communication tools, monetary policy is becoming as much about managing words as managing rates. 2026-06-23 16:29:16 -
World Cup 26: Messi breaks record as Argentina, France, Norway advance SEOUL, June 23 (AJP) - Lionel Messi became the most prolific scorer in men's World Cup history, France overcame a long weather delay and Norway survived a late Senegal fightback as Argentina, France and Norway all advanced to the knockout stage on Monday local time. Jordan were eliminated after another comeback defeat in Group J, joining Turkiye and Haiti among the teams already out, while Senegal and Iraq were left with only a narrow third-place route in Group I. In Group J, Messi scored twice as Argentina beat Austria 2-0 in Arlington, Texas, sending the defending champions through with six points from two matches. The Argentina captain missed an early penalty but made amends in the 38th minute, moving past Germany’s Miroslav Klose on the all-time World Cup scoring list. He struck again deep into second-half stoppage time to take his tournament tally to 18 goals. Austria, who beat Jordan in their opener, stayed on three points and will face Algeria in their final group match. In Group I, France beat Iraq 3-0 in Philadelphia after the match was held up for nearly two hours because of heavy rain, thunderstorms and lightning risks. Kylian Mbappe gave France the lead in the 14th minute before play was stopped at halftime under local lightning safety protocols. The interruption was one of the most unusual weather-related stoppages at a World Cup since the 1974 West Germany-Poland match, when heavy rain delayed kickoff and left the pitch in Frankfurt waterlogged. Iraq failed to deal with the ball cleanly in the second half, and Mbappe punished the mistake for his second goal of the match. Ousmane Dembele then added a third to complete a comfortable win after an uncomfortable interruption. The result sent France through with six points from two matches, while Iraq stayed on zero points and were pushed to the brink of elimination. Norway joined France on six points after edging Senegal 3-2 in another Group I match. Marcus Pedersen put Norway ahead in the 43rd minute, before Erling Haaland struck twice after halftime in the 48th and 58th minutes. Senegal, however, refused to fade. Ismaila Sarr pulled one back in the 53rd minute and scored again in second-half stoppage time to make it 3-2. Senegal kept pushing until the final whistle and nearly equalized from a late corner, but Sarr’s header went over the bar. The win sent Norway into the knockout stage after only two matches in their first World Cup appearance in 28 years. Norway and France will now meet in the final round to decide top spot in Group I. Senegal, still without a point, must beat Iraq in their final group match to keep even a slim chance of advancing as one of the best third-placed teams. Iraq are not mathematically out because they face Senegal next, but their heavy goal-difference deficit leaves them needing a high-scoring win and help elsewhere. Group J ended with another painful collapse for Jordan, who lost 2-1 to Algeria in Santa Clara after taking the lead for the second match in a row. Nizar Al-Rashdan put Jordan ahead in the first half, giving the team its first-ever lead in a World Cup match. But Algeria turned the game around after halftime. Nadhir Benbouali equalized with a header in the 69th minute, before Amine Gouiri completed the comeback from close range in the 82nd minute. The win kept Algeria alive after their opening defeat to Argentina and moved them to three points. Jordan, who also scored first against Austria before losing 3-1, again failed to protect an early lead and were eliminated from knockout-stage contention in their debut World Cup. Jordan are now locked into bottom place in Group J even if they beat Argentina in their final match. Argentina have already advanced, while Austria and Algeria will meet in a direct fight for position behind the defending champions. 2026-06-23 15:12:12 -
Luxembourg looks to deepen partnership at National Day celebrations in Seoul SEOUL, June 23 (AJP) - Luxembourg marked its annual National Day at a reception in central Seoul on Monday, highlighting the country's deepening partnership with South Korea across various sectors including finance, advanced technology, and green growth. In his opening remarks at the reception which was held at The Hotel Shilla, a day ahead of the country's public holiday on June 23, Luxembourg Ambassador to Seoul Jacques Flies said the occasion provided an opportunity to reflect on the achievements of the two countries and look ahead to a more ambitious partnership. He said relations between Luxembourg and Korea had gained strong momentum over the past year, particularly in the financial sector, as the two countries seek to deepen economic cooperation. Flies highlighted closer cooperation in banking, payment services, and asset management, saying the Luxembourg Stock Exchange has helped connect South Korean issuers to global capital markets. He said South Korean entities have raised about 27 billion euros through 38 bonds listed in Luxembourg over the past two years, with some 2.8 billion euros listed on the Luxembourg Green Exchange, supporting sustainable development projects in South Korea. Citing green finance as a key area of Luxembourg's expertise, he said Luxembourg's membership in the Global Green Growth Institute, headquartered in Seoul, reflects its commitment to sustainable growth with South Korea. He also said cooperation was expanding into space, quantum technology, and healthcare, amid growing exchanges between companies and institutions in both countries. South Korea's ambassador and deputy minister for public diplomacy at the Ministry of Foreign Affairs, Lim Sang-woo, also delivered remarks at the event. He stressed the historical bond between the two countries which was forged during the Korean War (1950~1953), when Luxembourg sent troops to South Korea, more than a decade before the two countries established diplomatic relations in 1962. Lim recalled that Luxembourg dispatched more than 85 soldiers to the distant Asian country, despite still recovering from World War II and having a population of about 200,000 at the time. On behalf of the South Korean government, Lim also said his country would always remember the sacrifice of Luxembourg's soldiers and that their friendship has since grown into a broader partnership. Pointing to bilateral trade rising by more than 60 percent in 2025 from a year earlier, he expressed hope for further growth and exchanges. Lim also said Luxembourg's accession to the Global Green Growth Institute would create new opportunities for environmental cooperation between the two countries. "True friendship that transcends borders runs deeper than mere interests and stands firm in the face of any challenge," Lim said. He added that the relationship between South Korea and Luxembourg would become an "even more shining treasure" in the years to come. 2026-06-23 15:07:32 -
Korea consumer confident stays positive, but jitters rise over higher rates SEOUL, June 23 (AJP) - South Korea's consumer confidence remained positive for a second straight month, shrugging off the prolonged Gulf conflict on the back of a strong stock market, but the outlook deteriorated as concerns grew over higher rents and interest rates, central bank data showed Tuesday. According to the Bank of Korea, the Composite Consumer Sentiment Index edged up to 106.6 in June from 106.1 in May, marking a second consecutive month above the 100 threshold after recovering from Gulf-triggered energy jitters. A reading above 100 means consumers are more optimistic than the long-term average. The index had stood at 112.1 in February before falling to 99.2 in April, when higher oil prices, currency volatility and Middle East-related uncertainty weighed on household confidence. Assessments of current living conditions improved slightly to 94 from 93, while perceptions of current economic conditions rose to 86 from 83. Expectations for household finances were unchanged at 97, while the broader economic outlook slipped slightly to 92 from 93. Household income expectations remained steady at 100, and spending plans held firm at 110, supported by expectations of stronger income growth and hiring prospects amid robust exports and a buoyant stock market. Jitters over higher interest rates, inflation and housing prices, however, darkened the future outlook. The interest-rate outlook index jumped 12 points to 126, its largest monthly increase since December 2016. The BOK said expectations of a policy rate hike and higher market interest rates were reflected in the reading. The home-price outlook index rose eight points to 120, its highest level since January, as apartment sale and jeonse prices accelerated, particularly in Seoul and Gyeonggi Province. The index has now risen for three consecutive months after falling to 96 in March. Recent housing data illustrate why consumers are becoming more sensitive to home prices. Seoul apartment prices rose 0.27 percent in the week ended June 15, matching the previous week's pace, while Dongtan in Gyeonggi Province jumped 2.22 percent over the same period, the fastest increase nationwide. Inflation expectations also remained elevated. Consumers' perceived inflation rate over the past year stayed at 3.0 percent, while one-year-ahead inflation expectations remained unchanged at 2.8 percent. Three-year inflation expectations rose 0.1 percentage point to 2.7 percent, while five-year expectations held steady at 2.6 percent. Petroleum products remained the dominant factor shaping inflation expectations, cited by 77.5 percent of respondents. But that share fell by 7.7 percentage points from May as international oil prices retreated toward $70 a barrel after the United States and Iran made progress toward a memorandum of understanding aimed at ending the conflict. More consumers, meanwhile, pointed to rents and personal services as future price drivers. Public utility charges were cited by 29.6 percent of respondents, followed by agricultural, livestock and fisheries products at 28.6 percent. The survey was conducted from June 9 to 16 among 2,245 urban households nationwide. 2026-06-23 07:56:21 -
FIFA sends hidden message to South Korea before final group match SEOUL, June 22 (AJP) - FIFA has sent a playful message of support to South Korea ahead of their final group match at the 2026 FIFA World Cup. The world football governing body posted a series of photos of South Korean players on its official Instagram account Monday in Korea, along with the message, “Fighting for the final group match,” written in Korean. The post featured Cho Gue-sung, Eom Ji-sung, Lee Han-beom, Lee Kang-in, Hwang Hee-chan and Hwang In-beom. Each photo contained one Korean syllable at the top, forming a hidden message when read in order. The letters combined to read, “Even if you fall, again,” a phrase understood by fans as a call for the team to rise again after defeat. South Korea, led by head coach Hong Myung-bo, opened Group A with a 2-1 comeback win over Czechia before losing 1-0 to Mexico in their second match. The team sit second in Group A with three points and will face South Africa in their final group match on June 25. A draw would be enough for South Korea to secure a place in the knockout stage. 2026-06-22 18:00:29 -
SME loan delinquency rate at top five banks hits record high SEOUL, June 22 (AJP) - Loan delinquencies among small and medium-sized enterprises at South Korea’s five major banks rose to the highest level in data going back to January 2020, underscoring growing stress among smaller companies and self-employed borrowers. The average delinquency rate on won-denominated loans at KB Kookmin, Shinhan, Hana, Woori and NH NongHyup stood at 0.51 percent at the end of May, according to financial industry data released Monday. That was up 0.05 percentage point from 0.46 percent a month earlier and 0.14 percentage point from 0.37 percent at the end of last year. The deterioration was most pronounced among SMEs. Their average delinquency rate at the five banks reached 0.73 percent at the end of May, the highest since comparable data became available in January 2020. The figure rose from 0.50 percent at the end of last year to 0.65 percent at the end of April, before climbing another 0.08 percentage point in May alone. By comparison, the delinquency rate for loans to large companies rose to 0.09 percent from 0.03 percent over the same period. The delinquency rate for household loans increased more moderately to 0.35 percent from 0.30 percent. Signs of deeper credit stress also widened. The five banks’ average substandard-or-below loan ratio for won-denominated loans stood at 0.44 percent at the end of May. For SMEs, the ratio reached 0.68 percent, also the highest level in data going back to January 2020. That was more than twice the level for large companies at 0.30 percent and households at 0.27 percent. Substandard-or-below loans refer to loans classified as difficult to recover normally, including loans overdue for three months or longer. The increase suggests that rising delinquencies are beginning to translate into a broader buildup of bad loans. Individual banks also showed sharp deterioration in SME loan quality. At some banks, SME delinquency rates rose to their highest levels since 2016, pointing to the most severe repayment pressure in about a decade. Analysts say smaller companies are being squeezed by a combination of higher oil prices, a weaker won and rising market interest rates. The Middle East war has increased energy and raw material costs, while the won’s depreciation has raised import bills. Borrowing costs have also moved higher. The three-year Korean Treasury bond yield stood at 3.731 percent at the end of May, up 13.6 basis points from the end of April, according to the Korea Financial Investment Association. The 10-year and 30-year yields rose 14.5 basis points and 21.6 basis points, respectively. Higher market rates tend to feed into bank lending rates with a lag. SMEs and self-employed borrowers are particularly vulnerable because they depend more heavily on bank loans than large corporations and often carry a higher share of floating-rate debt. The data also point to a widening divide between export-led large manufacturers and domestic demand-oriented small businesses. While semiconductor exports have supported Korea’s headline trade recovery, many smaller firms in services, real estate and rental businesses are facing weaker cash flows. A commercial bank official said delinquency rates were rising quickly among SMEs in real estate, rental and service sectors, warning that the credit-quality gap by company size could widen further if domestic and external uncertainties persist. Financial authorities are monitoring the trend closely. The Financial Supervisory Service said earlier that the delinquency rate on won-denominated loans at domestic banks rose to 0.61 percent at the end of April, up 0.05 percentage point from a month earlier, and pledged to encourage banks to strengthen loss-absorbing capacity and support debt restructuring for vulnerable borrowers. 2026-06-22 17:53:56 -
Asia's currencies wobble again, but this is not another IMF moment SEOUL, June 22 (AJP) - Asia's currencies are flashing warning signs again, stirring uncomfortable memories of the late 1990s, when one collapsing exchange rate after another triggered a regional financial meltdown. This time, however, the story is fundamentally different. From South Korea’s won and Indonesia’s rupiah to the Philippine peso, parts of Asia have come under renewed pressure as Gulf energy disruptions raise inflation risks, U.S. interest rates remain elevated and Asian savings increasingly migrate toward dollar assets. The pressure is not uniform. The Indonesian rupiah has weakened more sharply than the won this year, while the Philippine peso has also struggled. The Malaysian ringgit and Thai baht have been more resilient on a year-to-date basis, but remain exposed to the same forces: energy costs, dollar rates and shifting capital flows. Yet policymakers are showing little of the panic that once accompanied such numbers. This time, the pressure is less about Asia running out of dollars than about Asian savings moving into dollar assets. That distinction may define a new era of currency management across the region. The average value of the won against the U.S. dollar in June has slipped to its weakest level since 1998, when South Korea was under an International Monetary Fund bailout. According to Bank of Korea data, the won traded at an average of 1,521.4 per dollar between June 1 and 19, based on daytime closing prices in Seoul. The average marked the weakest monthly level since February 1998, when the won averaged 1,626.7 per dollar. It was also weaker than the 1,453.3 average recorded in March 2009 during the global financial crisis. The won has remained above the psychologically important 1,500 level for 24 consecutive trading sessions since May 15. Yet the resemblance to earlier crises largely ends there. Asia’s currency pressure is broad, but uneven The Indonesian rupiah, Malaysian ringgit and Thai baht have all experienced even larger declines this year, while Taiwan and India have seen substantial foreign capital outflows. Taiwan has recorded roughly $22 billion in equity outflows and India about $31 billion. South Korea has experienced an even larger withdrawal, with around $78 billion leaving the market by June 12. Several forces are converging simultaneously. The Gulf conflict has revived concerns over energy security. The Federal Reserve has maintained a higher-for-longer interest rate stance. At the same time, Asian investors themselves are increasingly allocating savings and leveraged funds to U.S. equities and other dollar-denominated assets. The result is a region-wide imbalance in which structural demand for dollars is steadily overwhelming traditional support from trade surpluses. That is a very different phenomenon from the one that destabilized Asia nearly three decades ago. The latest Gulf tensions have reminded policymakers that Asia remains uniquely exposed to energy disruptions. About a fifth of global oil and liquefied natural gas trade passes through the Strait of Hormuz, and many Asian economies remain heavily dependent on Middle Eastern supplies. South Korea imports more than 70 percent of its crude oil from the region. Japan, Taiwan and India also rely heavily on Gulf energy. Every spike in oil prices now carries a triple effect. Higher import bills weaken currencies. Weaker currencies amplify imported inflation. Inflation risks, in turn, limit central banks' ability to cut interest rates to support growth. The dynamic has become particularly challenging because it is colliding with another long-term trend: Asia's capital is increasingly moving abroad. This is not a replay of 1997 In late 1997, South Korea's official foreign exchange reserves stood at just $24.2 billion, while usable reserves had fallen to only $9.2 billion. More than half of the country's $120 billion in external debt was short-term borrowing due within a year. Today, the numbers tell a different story. South Korea held $426.99 billion in foreign exchange reserves at the end of May. It posted a $28.29 billion current account surplus in April, while its net international investment position stood at $753.6 billion at the end of the first quarter. These are hardly the balance sheets of an economy facing a solvency crisis. The stress is instead emerging from the financial account. In other words, Korea is not suffering from a shortage of dollars. It is facing an abundance of won chasing dollars. The same pattern is increasingly visible elsewhere in Asia. Korea's vulnerability stems from several overlapping factors. The interest rate gap with the United States remains significant. The Bank of Korea's benchmark rate stands at 2.5 percent, while the upper bound of the Federal Reserve's target range remains at 3.75 percent. The differential makes dollar assets more attractive than won-denominated investments. At the same time, foreign investors have become persistent sellers of Korean equities. According to the Bank of Korea, foreign investors withdrew a net $31.83 billion from Korean stocks in May, the largest monthly outflow since comparable data began. Bond inflows of $5.68 billion were nowhere near enough to offset the exodus. Paradoxically, Korea's stock market rally has amplified the pressure. The KOSPI continues to set record highs, expanding the value of foreign-held shares. Even modest profit-taking can therefore generate substantial dollar demand. Asia's capital is becoming a global market force The growing importance of East Asian capital has become significant enough to draw attention from Washington. U.S. Treasury Secretary Scott Bessent has repeatedly underscored the importance of Asian currencies, capital flows and monetary policy decisions as factors that can influence global financial markets. Japan's decision to raise interest rates to 1 percent for the first time in more than three decades has exposed a new source of anxiety in Washington: the possibility that Asian capital could flow back home. Japanese households and institutions collectively hold some of the world's largest pools of overseas assets, including roughly $1.1 trillion in U.S. Treasuries, making Japan the largest foreign holder of American government debt. According to Japanese media reports, Bessent privately encouraged Japanese policymakers to normalize monetary policy sooner rather than later, warning that delaying action could eventually require more aggressive tightening. The episode highlights an increasingly important reality. Asian interest rates no longer matter only for domestic economies. They have become global financial variables. Higher Japanese yields could encourage domestic investors to repatriate funds, reducing demand for U.S. Treasuries and potentially pushing up borrowing costs in the United States itself. Domestic liquidity is adding another layer of pressure. Broad money, or M2, rose 5.7 percent year-on-year in April, reaching 4,153.9 trillion won. At the same time, Korean households, pension funds and institutions continue accelerating their overseas investments. The National Pension Service plans to raise its allocation to overseas equities to 37.2 percent by the end of this year, up from 35.9 percent. Institutional investors already held more than $500 billion in foreign securities at the end of March. The trend reflects a broader shift in investor behavior. South Korea is no longer merely an export-driven economy. It is becoming a major exporter of capital. That creates recurring dollar demand, leaving the won more vulnerable whenever global rates, energy prices or foreign equity flows turn against Korea. 2026-06-22 17:53:37