Journalist

Lee Hugh
  • OPINION: The compass for Seouls FX policy now points to Tokyo
    OPINION: The compass for Seoul's FX policy now points to Tokyo The Federal Reserve has cut its rate target range again this week, but the news barely rippled across Korean markets. The dollar strengthened, Korean stocks softened and yields inched upward — hardly the reaction one expects after a major policy decision from Washington. That muted response reflected an important shift in global finance: the Fed may still set the rhythm, but it no longer commands the stage. Markets registered the U.S. rate cut and immediately turned their gaze to Japan, where far more consequential changes are brewing. For more than a decade, investors have been conditioned to read every signal from the Fed as a defining market event. This time, they moved on. And they were right to. The Fed’s third consecutive cut — bringing the policy range to 3.50–3.75 percent — was fully anticipated and delivered with unmistakable caution. This was not a return to accommodative policy; it was a technical adjustment in an environment where the Fed’s room for maneuver is limited. The narrowing of the U.S.–Korea rate gap may ease some pressure on the won, but it won’t reverse the powerful outward flow of Korean capital into global markets. Nor does it free the Bank of Korea from its domestic constraints, including a housing market sensitive to any hint of loosening. Simply put, the U.S. rate cut has already played its part. The story now moves elsewhere. Japan’s Shift Is the Real Disruptive Forc Japan, long the quiet spectator in global monetary dynamics, is suddenly the decisive variable. After decades of anchoring global liquidity with near-zero rates, the Bank of Japan is edging toward normalization. Even a modest rate hike — a move unremarkable in most economies — would send tremors through the global financial system. That is because the yen carry trade is not a niche strategy; it is a structural pillar of global liquidity. Trillions of dollars in positions worldwide have been built on the assumption that Japanese money will remain cheap, the yen will stay weak and volatility will remain low. These conditions are evaporating. Japan’s 10-year government yield has been pressing toward multi-decade highs, speculative yen shorts are stretched and the currency is no longer one-directional. Markets know the implications. Every major episode of global market stress over the last 25 years — from the 1998 Asian crisis to the 2008 collapse, to the 2015–16 turbulence and the early-2020 shock — involved a surge in the yen and a disorderly unwinding of leveraged positions. Japan’s normalization would not merely shift sentiment; it would reprice risk across every major asset class globally. In that sense, the Bank of Japan’s next step is not a regional issue. It is the defining global risk of the coming year. Korea Lies Directly on the Fault Line Korea is one of the markets most exposed to this shift — not because its fundamentals are weak, but because it sits at the intersection of global capital flows shaped by both the United States and Japan. A disorderly carry-trade unwind would push up volatility in the won, trigger foreign rebalancing and pressure both equities and bond yields. But Korea also stands to benefit if it positions itself strategically. As rate differentials across the United States, Japan and Korea narrow, and as weaker emerging markets struggle with instability, Korea’s institutional credibility and relative resilience could enhance its standing as a safe regional alternative. The opportunity is real — but only if it is earned through preparation, not assumed by default. Policy Must Catch Up With Reality Korea’s macro playbook must evolve as the global axis of risk shifts. First, monitoring Japan must become as central as tracking the Fed. The yen’s trajectory, Japanese government bond yields, shifts in speculative positioning — these are now core indicators, not peripheral curiosities. Second, Seoul must treat interest rates, currencies and capital flows as an integrated system. Fragmented management will not withstand the level of volatility Japan could unleash. Third, Korea must strengthen its market infrastructure. Thin liquidity in FX and derivatives markets amplifies shocks. That vulnerability is no longer tolerable. Fourth, the country must communicate risk more directly to households and retail investors, whose aggressive overseas allocations have become a structural feature of the Korean market. The volatility ahead is not cyclical; it is systemic. The U.S. rate cut may dominate headlines, but it is no longer the hinge on which the global financial system turns. Japan’s slow exit from ultra-loose monetary policy represents a far more consequential shift — one that could reshape liquidity, valuations and volatility across the world. Korea does not get to choose whether this transformation happens. It only gets to choose how prepared it will be. What is clear is that the axis of global financial risk has already begun to tilt. It is no longer aligned solely with Washington. It is moving unmistakably toward Tokyo. And Korea’s ability to navigate the next phase depends on how quickly it internalizes that change. * The author is the managing editor of AJP. 2025-12-11 19:52:42
  • Korea hopes to let fabless catch up to fab power through $520 billion mega spending
    Korea hopes to let fabless catch up to fab power through $520 billion mega spending SEOUL, December 11 (AJP) - That South Korea is a semiconductor powerhouse is established fact: it is home to the world’s largest memory-chip production base. But in the fabless sector — the chip-design layer that defines system-semiconductor competitiveness — the country remains a laggard. That gap is driving an urgent and ambitious push to cultivate proprietary chip architecture capabilities. The government-led vision calls for more than 700 trillion won (about $518 billion) in public–private investment through 2047 to expand manufacturing capacity, elevate system-chip design capabilities, and build a national talent pipeline. Government documents show that by 2031, 1.26 trillion won will go toward AI-specialized chips, 2.6 trillion won into compound semiconductors, and 3.6 trillion won into advanced packaging, along with a 300-billion-won graduate-level semiconductor university intended to produce 300 MS/PhD engineers each year. Korea’s semiconductor strength remains overwhelmingly concentrated in memory, leaving the industry exposed to boom-and-bust cycles and dependent on design decisions made by U.S. chip architects, most notably Nvidia. While Samsung Electronics and SK hynix dominate memory globally, Korea’s fabless firms hold barely 1 percent of the global market—far behind the United States’ 72 percent and Taiwan’s 8 percent. Only one domestic firm, LX Semicon, is ranked among the world’s top 50 fabless companies. The combined revenue of Korea’s top ten fabless firms amounts to just 1.17 percent of global fabless sales. Chronic engineering shortages and limited access to affordable prototype production have long constrained growth. Industry experts say the government’s strategy reflects a structural truth: a world-class foundry cannot thrive without a strong base of domestic design customers. “Korea has extremely strong memory makers, but a healthy foundry business requires a wide range of fabless customers constantly bringing new designs and challenges,” said Gong Byung-don, a professor at POSTECH. “That was the foundation of Taiwan’s ecosystem. For 15 to 20 years, dozens of mid-sized design houses grew around TSMC, and that accumulated demand is what made the foundry giant possible.” To close Korea’s structural gap, the government will establish a 4.5-trillion-won “shared foundry”—a 12-inch, 40-nanometer fab that sets aside dedicated production capacity for domestic chip designers. Officials say the facility will ease prototyping bottlenecks, cut early-stage costs, and mirror Taiwan’s MPW and shuttle-run system that enabled rapid iteration among its small and mid-sized chip-design houses. The broader industrial blueprint links the fabless hub in Pangyo, the Yongin mega-fab cluster, and advanced packaging bases in Gwangju and Busan into an integrated value chain supporting design, production, testing, and assembly. Policymakers argue that AI accelerators, automotive semiconductors, and power devices will increasingly shape global chip demand—and that Korea must compete in these segments to reduce overreliance on memory cycles. Analysts say the initiative also responds to an AI-driven shift in global semiconductor power, with fabless firms such as Nvidia, AMD, and U.S. startups dictating the roadmap for next-generation chips. With hyperscalers pouring unprecedented capital expenditure into AI accelerators, governments see strategic value in securing both design and manufacturing capabilities to safeguard supply chains. Korean fabless firms have long argued that the lack of a dependable domestic manufacturing partner forced them abroad, weakening collaboration between designers and manufacturers and slowing commercialization. Gong said improved access to early-stage production could meaningfully change the landscape. “Test runs, MPWs and prototype fabrication matter enormously for small fabless firms,” he said. “But Korea still faces a market-access challenge. Domestic demand alone is not enough, and Korean startups must be able to reach U.S. and global customers to scale.” He added that while Korea has narrowed the technical gap, constraints remain. “In AI-specific chips, Korea has reached perhaps 80 to 90 percent of global competitiveness. But talent flows mainly into major corporations, and small fabless firms still struggle to secure diverse customers in a highly concentrated domestic market.” If the plan succeeds, officials believe Korea could raise its fabless market share to 10 percent by 2030 and build a semiconductor industry driven by both system-chip innovation and manufacturing scale. But they acknowledge the challenges: intensifying global competition for design talent, the entrenched dominance of U.S. and Taiwanese ecosystems, and the need for domestic firms to break quickly into AI and next-generation system-chip markets. Still, the government argues that combining mega-cluster development, expanded AI-chip R&D, and a dedicated fabless production line marks Korea’s most ambitious semiconductor realignment in decades — an attempt to build an industry powered not only by memory but by a full spectrum of system semiconductors. 2025-12-11 17:48:50
  • Defensive of KRW, Seouls attention shifts to potential rate hike in Japan after U.S. rate cut
    Defensive of KRW, Seoul's attention shifts to potential rate hike in Japan after U.S. rate cut SEOUL, December 11 (AJP) - A U.S. rate cut typically delivers immediate relief to Korean financial markets. This time, it barely moved sentiment. Investors quickly pivoted to risks emerging across the Pacific — namely the possibility of a Japanese rate hike that could unleash sweeping reversals of international capital leveraged through decades of zero-interest Japanese funding. As widely expected, the U.S. Federal Reserve delivered a third consecutive rate cut, lowering the federal funds rate to 3.50–3.75 percent and narrowing the gap with Korea’s base rate at 2.50 percent. A smaller interest differential usually encourages capital to remain in Korea. That pattern did not materialize. The dollar jumped 6.70 won to 1,473.30. The KOSPI fell 0.6 percent and the KOSDAQ slipped 0.04 percent on Thursday. The 10-year government bond yield inched up to 3.378 percent from Wednesday's 3.371 percent. BOJ policy and JGB yields fuel unwind fear The yen carry scare has returned. The Bank of Japan is under pressure to move on interest rates as long-term yields — those attached to financial products with maturities of one year or more — rise faster than authorities expected, heightening inflation risk. BOJ Governor Kazuo Ueda acknowledged the shift during a parliamentary budget committee session on Tuesday, reiterating earlier signals pointing toward an eventual rate hike. Japan for decades tolerated a weak yen to boost export competitiveness and fight deflation. The “yen carry trade” — in which global investors borrow cheap yen and invest in higher-yielding assets abroad — was central to this strategy. The trade thrived when Japanese interest rates stayed pinned at zero while U.S. and global rates surged during the tightening cycle. But with Japanese inflation now hitting the 2 percent target and concerns of overshooting rising, the BOJ’s stance is changing. A shift toward Japanese tightening — as the U.S. loosens — raises the risk of a carry trade unwind, which can drain capital from markets heavily reliant on foreign funds. Korea is particularly vulnerable when the won hovers near crisis-level ranges. Deputy chiefs overseeing fiscal, monetary, and financial policy convened an emergency macro-financial meeting Thursday, warning that vulnerabilities in the bond and FX markets could intensify under diverging global monetary conditions. The won fell 3.2 percent against the dollar in November, steeper than the Taiwanese dollar’s 1.9 percent decline and the Japanese yen’s 1.4 percent. Much of the downward pressure stems from a combination of rapid M2 money supply expansion and persistent net outflows stemming from individuals’ and institutions’ high overseas investment appetite. Analysts agree that a carry-trade unwind could accelerate the won’s decline but stop short of calling the situation a crisis. “Unlike last year, when yen futures were net short, this year long positions dominate. The market has already anticipated a BOJ rate hike,” said Cho Yong-gu, researcher at Shinyoung Securities. He added that for the Korean won and bond yields to stabilize, a BOJ rate hike could paradoxically be helpful, as it would calm super long-term JGB yields and prevent broader turmoil in Asian currency markets. Japanese government bond yields have been stoking unwind fears. The 10-year JGB yield has nearly doubled in a year, rising from 1.054 percent on Dec. 9, 2024 to 1.956 percent on Wednesday — surpassing the 1.87 percent level recorded in December 2008. A surge driven partly by heavy Japanese government bond issuance to fund stimulus has amplified inflation concerns, making BOJ tightening more urgent. Experts also bet on BOJ tightening Markets remain divided on the BOJ’s next move, as government and central bank signals continue to diverge. Heo Seong-woo, researcher at Hana Securities, said that expectations of rising inflation and wage growth — pushing the BOJ toward a December rate hike — have contributed to climbing JGB yields. “Core CPI, excluding fresh food, has risen to 3 percent, and super-core CPI, excluding energy, has increased to 3.1 percent. Prices are clearly climbing, and the government bond bid-to-cover ratio was poor compared to last year. The BOJ has no choice but to raise rates.” Yen market positioning also supports the case for tightening. Researcher Cho of Shinyoung noted that the yen’s exchange rate is above 155 per dollar, approaching the 162 level reached in July when the carry trade last unwound. He added that the 160 mark is considered a psychological ceiling in Tokyo markets. “We must remember that July’s unwind occurred during a decoupling — the U.S. Fed was cutting rates while the BOJ was tightening,” Cho said, arguing that another rate hike is “predictable.” 2025-12-11 17:40:17
  • Fine dust returns to Seoul
    Fine dust returns to Seoul SEOUL, December 11 (AJP) - Light rain tapered off early on the morning of December 11, but northwesterly winds carried fine dust back into the city. Viewed from Namsan in central Seoul, the skyline appeared muted and hazy beneath the incoming dust. 2025-12-11 17:38:14
  • Annual charity campaign gets under way
    Annual charity campaign gets under way SEOUL, December 11 (AJP) - With the year-end campaign to help those in need just ahead of Christmas, an installation dubbed the "charity thermometer" in downtown Gwanghwamun has been displaying its progress to encourage passersby to chip in. The thermometer stood at 37.1 degrees Celsius on Thursday, after the launch of the annual campaign by the Community Chest of Korea on the first day of this month. With this year's goal to collect 450 billion Korean won (around US$306 million), its temperature rises by one degree for every 1 percent of the fundraising target. 2025-12-11 17:37:38
  • PHOTOS: Experience the Beauty of Contemporary Crafts at COEX
    PHOTOS: Experience the Beauty of Contemporary Crafts at COEX SEOUL, December 11 (AJP) - The 2025 Craft Trend Fair opened December 11 at COEX Hall A in Seoul, marking the event's 20th anniversary since its launch as the International Craft Fair in 2006. The four-day fair, running through December 14, is hosted by the Ministry of Culture, Sports and Tourism and organized by the Korea Craft and Design Foundation. It features individual craft artists, small studios, companies, domestic and international institutions, and galleries. Visitors can explore diverse craft items including tableware, kitchenware, furniture, lighting, decorative objects, vases, bags, clothing, and accessories. The fair aims to promote the popularization and industrialization of craft culture while presenting the expandability of crafts and proposing the future of craft culture. Admission is 10,000 won, with operating hours from 10:00-19:00 on December 11-13 and 10:00-18:00 on December 14. 2025-12-11 17:36:17
  • Yen carry trade unwind weighs on Asian stocks despite Fed rate cut
    Yen carry trade unwind weighs on Asian stocks despite Fed rate cut SEOUL, December 11 (AJP) - Asian markets slipped or traded flat on Thursday as investors braced for a potential Bank of Japan interest rate hike and a broader unwinding of the yen carry trade. The U.S. Federal Reserve’s earlier rate cut offered limited support, with sentiment pressured further after the Fed signaled a more hawkish policy outlook that tempered hopes for additional easing. The Korean won weakened to 1,472.4 per dollar as of 4:40 p.m., down 5.8 won, amid expectations that capital could shift toward Japan should rates rise there. South Korean government bond yields were mixed. The three-year yield edged up 0.6 basis points to 3.101 percent, while the 10-year yield slipped 0.7 basis points to 3.378 percent, with both remaining above the 3 percent level. The benchmark KOSPI finished 0.59 percent lower at 4,110.62. Institutional investors drove the decline with net sales of 776.6 billion won ($520 million). Foreign investors purchased 347.2 billion won, while retail investors bought 408.8 billion won. Chipmakers led the downturn. SK hynix fell 3.75 percent to 565,000 won, while Samsung Electronics eased 0.65 percent to 107,300 won. Export-oriented names were also dragged lower: Hyundai Motor, typically a beneficiary of a weaker won, closed 2.31 percent down at 295,500 won. The day’s most active theme centered on redevelopment prospects for the Seoul Express Bus Terminal. Shinsegae climbed 4.28 percent to 256,000 won, while Dongyang Express surged 30 percent to 60,900 won and Chunil Express jumped 26.56 percent to 457,500 won. The tech-heavy KOSDAQ ended virtually unchanged at 934.64. Japan’s Nikkei 225 dropped 0.9 percent to 50,148.82 as renewed expectations of a BOJ rate increase pressured exporters and raised speculation that Prime Minister Sanae Takaichi’s stimulus plans may be put on hold. Heavy industry stocks led losses, with Mitsubishi Heavy Industries plunging 4.59 percent to 4,050 yen ($26). Automakers fared better on views they were already undervalued: Toyota dipped 0.19 percent to 3,110 yen and Honda slipped 0.22 percent to 1,572 yen. Semiconductor stocks were mixed. Advantest jumped 4.42 percent to 21,040 yen, while Tokyo Electron fell 1.57 percent to 32,600 yen. Taiwan’s TAIEX retreated 1.32 percent to 28,024.75, dragged down by chipmakers. TSMC lost 2.33 percent to 1,470 Taiwan dollars ($47), and MediaTek tumbled 4.45 percent to 1,395 Taiwan dollars, breaking below the NT$1,400 mark. Mainland Chinese markets also weakened on concerns about yen carry trade unwinding. The Shanghai Composite slipped 0.7 percent to 3,873.32, while the Shenzhen Component dropped 1.27percent to 13,147.39. Hong Kong’s Hang Seng Index was little changed at 25,530. Early gains evaporated on fears of capital outflows, but the index’s U.S. dollar peg and expectations that the Fed’s rate cut would ease valuation pressure helped limit losses. 2025-12-11 17:21:42
  • Monthlong winter festival to illuminate Seoul
    Monthlong winter festival to illuminate Seoul SEOUL, December 11 (AJP) - Workers were busy preparing light displays at Cheonggyecheon Stream in central Seoul on Thursday, just a day before this year’s winter-themed festival. During the annual festival, which runs until early next month, several tourist spots in downtown Seoul and nearby areas will be turning into a winter wonderland. Gwanghwamun Square, Cheonggyecheon Stream, and Bosingak Bell Pavilion will welcome visitors with glittering light displays and festive decorations. 2025-12-11 17:13:10
  • PHOTOS: National Museum of Korea sets all-time visitor record
    PHOTOS: National Museum of Korea sets all-time visitor record SEOUL, December 11 (AJP) - The National Museum of Korea's annual visitor count has surpassed 6 million for the first time in its history. The achievement underscores the growing interest in Korean history and culture both domestically and internationally, the museum said. The museum held a commemorative ceremony on Thursday to celebrate the record-breaking achievement, which was attended by Yu Hong-jun, the Director of the National Museum of Korea. This year’s record of over 6 million visitors is the highest annual attendance recorded since the museum first opened its doors on Dec. 3, 1945. 2025-12-11 16:57:24
  • Seoul aims to correct misunderstanding in public policy with live government briefings
    Seoul aims to correct "misunderstanding" in public policy with live government briefings SEOUL, December 11 (AJP) - South Korean bureaucrats are often “misunderstood” as lazy or corrupt, but if such perceptions reflected reality, the country could never have advanced to the level admired by much of the world, President Lee Jae Myung said Thursday as he addressed government officials at the Sejong Government Complex for the first time since taking office in June. Again for the first time, each ministry and public office’s briefing to the president was broadcast live. “There is no need to be nervous. This will be fun,” Lee said, speaking casually to stone-faced senior officials appearing before the president and cameras. Koo Yun-cheol, deputy prime minister for the economy, reported that the government aims to lift Korea’s potential growth rate above 1.8 percent next year, emphasizing policies designed to spur corporate investment. Lee also ordered faster progress from a task force dedicated to “rationalizing punishment for economic wrongdoings,” arguing that Korean criminal law too often penalizes working-level employees rather than primary beneficiaries of misconduct. “Somewhere called ‘pang’ has broken regulations this time,” he said, referring obliquely to Coupang, which is under investigation after a massive data breach affecting more than 30 million users. Lee said such irregularities persist because penalties remain weak. Ahead of the session, ministries received internal guidelines stating that briefings would be “principally live-streamed, with Deputy Minister and Director General-level officials in attendance, and exceptions for non-disclosure made only when necessary—for example, on diplomatic or security grounds.” The televised format is part of the presidential office’s broader push toward what it describes as “discussion-based and participatory governance.” The shift has changed work rhythms in both Seoul and Sejong. Weekend work has become routine, officials say, as ministries prepare for live policy briefings. Senior officials at the Director-General level and above, who may be questioned directly by the president, are memorizing data and rehearsing answers to anticipated questions. Many are making extra efforts to avoid misstatements or hesitation in front of both the president and the public. This year’s briefing also breaks bureaucratic precedent. Such sessions are traditionally held at the start of the year, but the administration opted to convene the meeting at year’s end as part of its transparency initiative. The live-briefing series spans 19 ministries, five departments, 18 agencies, seven commissions, and 228 public institutions, along with six related organizations, including the Financial Supervisory Service. Sessions will rotate between Seoul, Sejong, and Busan in the coming weeks. 2025-12-11 16:50:46