Journalist

Kim Yeon-jae
  • KDI bumps up 2026 growth estimate to 2.5%, chips drive half of upgrade
    KDI bumps up 2026 growth estimate to 2.5%, chips drive half of upgrade SEOUL, May 13 (AJP) -State think tank Korea Development Institute on Wednesday projected South Korea’s economy to grow at its fastest pace in three years at 2.5 percent this year, while inflation is expected to accelerate to 2.7 percent — a combination suggesting the economy may sidestep stagflation fears for now even as growth momentum is likely to cool next year alongside moderating chip demand. At the same time, the institute warned inflation risks were intensifying from both demand and supply pressures and called for flexible monetary policy, including the possibility of interest rate hikes should inflation expectations become unstable. “Should the possibility of persistently high inflation increase, rates would need to rise,” KDI said in its revised economic outlook, while adding that uncertainty remains too high to determine the timing of any potential move. Its latest outlook marks a sharp 0.6 percentage-point upgrade from the institute’s February forecast issued before the outbreak of the Middle East conflict and reflects stronger-than-expected first-quarter growth, when the economy expanded 1.7 percent from the previous quarter. The state-run think tank raised its inflation forecast for this year by 0.6 percentage point, warning that rising global oil prices and recovering domestic demand were adding upward pressure on consumer prices. “The Korean economy has continued its recovery trend as growth expanded at a relatively strong pace, driven by the semiconductor boom and expanding domestic demand,” the KDI said. The KDI expects the economy to grow 1.7 percent in 2027, while describing both this year and next year as an expansionary phase because growth is projected to exceed the country’s estimated potential growth rate. Still, the recovery remains heavily skewed toward semiconductors. According to the KDI, semiconductor exports accounted for more than half of the upward revision in this year’s growth outlook. “Compared with the negative impact from the Middle East war, the positive effect from semiconductor exports was larger,” Jung Kyu-chul, head of KDI’s macroeconomic and financial policy division, said during a briefing in Sejong. “Out of the 0.6 percentage-point upward revision, semiconductors contributed more than 0.3 percentage point.” Jung estimated the Middle East war shaved roughly 0.5 percentage point off growth, while supplementary budget spending added about 0.2 percentage point. He added that surging semiconductor demand and supply shortages had sharply lifted chip prices, suggesting growth could improve further if production capacity expands more quickly. The KDI, however, warned that prolonged high oil prices could derail the outlook. The institute assumes Dubai crude will average $91 per barrel this year before easing to $82 next year, compared with $69 last year, while the won-dollar exchange rate is assumed to remain near the current 1,475 won level. The think tank projected exports would rise 4.6 percent this year on robust semiconductor demand before moderating to 2.2 percent next year, while the current account surplus is expected to reach a record $239 billion this year. Private consumption is forecast to increase 2.2 percent this year and 1.5 percent next year despite inflationary pressures from the Middle East conflict, supported by improving income conditions and government stimulus measures. Jung added that rising stock prices were also likely to support consumption through wealth effects. The KDI also projected employment would continue improving moderately, with the number of employed persons increasing by 170,000 in both this year and next year despite demographic changes. The institute additionally urged the government to focus fiscal spending on boosting potential growth and supporting vulnerable households while improving spending efficiency. It specifically called for reforms to basic pensions and local education subsidies, which are projected to exceed 100 trillion won next year. 2026-05-13 14:30:52
  • Koreas M2 growth runs twice Japans, deepening inflation and FX dilemma
    Korea's M2 growth runs twice Japan's, deepening inflation and FX dilemma SEOUL, May 13 (AJP) - South Korea’s liquidity expanded sharply in March, with much of the abundance funneling toward the red-hot asset market rather than helping to bolster weakening economic fundamentals and creating a headache for monetary authorities battling looming imported energy-triggered inflation and a stubbornly weak currency. The M2 money supply reached 4,132.1 trillion won ($2.76 trillion) in March, up 5.6 percent from a year earlier, according to the Bank of Korea on Wednesday. M2 includes cash, demand deposits and other highly liquid financial instruments. Under the BOK’s previous calculation standard, the figure would have stood at 4,625.1 trillion won, marking a 9.3 percent on-year increase. By either measure, liquidity growth is accelerating noticeably. The last time M2 growth exceeded 9 percent under the old standard was in April 2022, when it reached 9.4 percent, at a time when markets were still awash with liquidity injected during the Covid-19 pandemic. That period later prompted aggressive interest rate hikes by the U.S. Federal Reserve and other major central banks to absorb excess liquidity. Even under the revised standard introduced late last year — after criticism that the central bank’s loose policy stance had contributed to the won’s weakness against major currencies — Korea’s liquidity growth still more than doubled Japan’s roughly 2 percent pace and outpaced the eurozone’s 3.2 percent expansion during the same period. The surge comes amid growing rationale for monetary tightening. New Bank of Korea Governor Shin Hyun-song, Senior Deputy Governor Ryoo Sang-dai and recently retired monetary board member Shin Sung-hwan have all recently mentioned the possibility of an interest rate hike. The won on Wednesday hovered close to the psychologically sensitive 1,500-per-dollar mark, a level previously seen mainly during periods of financial crisis. Consumer prices rose 2.6 percent in April even as the impact of disruptions around the Strait of Hormuz has yet to fully reach Korean shores through higher energy costs. The government, meanwhile, continues to lean toward fiscal stimulus despite mounting concerns over debt and excess liquidity in an effort to pre-empt stagnationary risks. During a Cabinet meeting Tuesday, President Lee Jae Myung criticized calls for tightening as “populist” and signaled fiscal expansion in the second half and next year’s budget planning. Lee argued that the livelihood recovery support payments distributed last year generated roughly 430,000 won in additional consumption for every 1 million won provided. The government is currently preparing another round of high oil-price relief payments ranging from 100,000 won to 600,000 won per person depending on income level and region. The total package is expected to amount to 6.1 trillion won. The real question lies in the effectiveness of the stimulus measures. The money multiplier — calculated by dividing the new M2 measure by the monetary base — stood at 13.43 in March, continuing a steady decline from its peak of 14.5 in November 2023. The indicator measures how actively liquidity is being used across consumption, investment, lending and asset purchases. A lower multiplier suggests money is not circulating efficiently despite the growing supply. “The increase in money supply only becomes meaningful when consumption and investment expand, but currently only stocks and real estate are rising,” said Ahn Dong-hyun, an economics professor at Seoul National University. 2026-05-13 13:55:09
  • UPDATE: Job growth hits 16-month low in Korea in April, youth employment dips
    UPDATE: Job growth hits 16-month low in Korea in April, youth employment dips *Updated with additional information SEOUL, May 13 (AJP) — South Korea’s job growth slowed in April to its weakest pace since December 2024, when the country was grappling with the aftermath of the martial law episode, as the war in the Middle East dragged into a third month. The number of employed people aged 15 and older rose by 74,000 from a year earlier to 28.96 million in April, the Ministry of Data and Statistics said Wednesday. It marked the smallest gain in one year and four months, since December 2024, when the number of employed people fell by 52,000. The employment rate for the working-age population, aged 15 to 64, stood at 70 percent, up 0.1 percentage point from a year earlier. But youth employment continued to weaken. The employment rate for people aged 15 to 29 fell by 1.6 percentage points to 43.7 percent, extending its decline for a second straight year since May 2024. Concerns are growing because the weakness in youth employment cannot be explained simply by demographic decline. According to the statistics agency, the number of employed people in their 20s fell by 195,000 from a year earlier, while the youth employment rate has been declining for 24 consecutive months since May last year. The April drop was also sharper than in previous months, widening from declines of 0.7 percentage point in February and 0.9 percentage point in March. The youth unemployment rate stood at 7.1 percent, down 0.2 percentage point from a year earlier, but the figure does not necessarily point to an improvement. The number of people preparing for employment plunged by 43,000, or 6.4 percent, from a year earlier to 626,000, while the number of discouraged workers rose by 15,000. Polarization between experienced workers and newcomers also deepened. The number of unemployed people with prior work experience fell by 1.7 percent on year to 785,000, while the number of unemployed people with no prior work experience surged 21 percent to 68,000. Amid the continued bifurcation of the labor market, more people are staying in education or training. The number of economically inactive people enrolled in education or training rose by 96,000, or 3 percent, over the past 12 months — an unusual increase for April, when the figure typically declines or remains flat. This suggests that young people are delaying their entry into the labor market rather than exiting it altogether, waiting for job conditions to improve. The number of people in their 20s who said they were “taking a break” came to 376,000, down 16,000 from a year earlier, marking a second consecutive monthly decline. The overall increase in those taking a break was driven by people aged 60 and older, whose number jumped 8.4 percent on year to 1.18 million. By industry, employment increased in health and social welfare services by 261,000 and in arts, sports and recreation-related services by 54,000. But job losses continued in professional, scientific and technical services, down 115,000; manufacturing, down 55,000; and agriculture, forestry and fisheries, down 92,000. The decline in professional, scientific and technical services — sectors favored by younger workers and increasingly exposed to artificial intelligence — points to a shortage of quality entry-level jobs and a structural shift in the labor market that is worsening youth employment conditions. The Ministry of Economy and Finance and the Ministry of Employment and Labor on Wednesday unveiled the "Youth New Deal" to address the sluggish job market caused by the Middle East conflict and the shift toward AI. A central component is the "K-New Deal Academy," a vocational training program involving 70 companies, including the top 10 conglomerates, which aims to train 12,000 individuals to align skills with corporate demand. The "Youth Leap Boot Camp," a joint university-industry initiative, will also launch in July following university selections in June. Public and private internship programs are also set to begin recruitment this month. 2026-05-13 09:02:17
  • South Korea outpaces peers in Q1 growth; structural risks persist
    South Korea outpaces peers in Q1 growth; structural risks persist SEOUL, May 12 (AJP) — The South Korean economy was the best performer among major economies in the first quarter of this year, benefiting from a base effect from a contraction in the fourth quarter of last year and chip boom. South Korea's real gross domestic product (GDP) increased by 1.7 percent in the first quarter from the previous quarter - the highest growth rate among the 22 countries that have released first-quarter flash estimates as of Monday. This outperforms countries that have historically recorded higher growth, such as Indonesia (1.37 percent) and China (1.3 percent) - the only countries that saw growth exceeding 1 percent in the first quarter other than South Korea so far. Most other major advanced economies remained in the 0 percent range. The United States grew 0.5 percent while Japan expanded 0.1 percent. Major European economies including Portugal, the Netherlands and Italy also recorded zero or marginal growth of around 0.1 percent. The primary driver of the growth was a surge in semiconductor exports. Rapidly increasing production and exports of memory chips, fueled by expanding AI investment and demand for High Bandwidth Memory (HBM), led to a 5.1 percent increase in total exports compared to the previous quarter. The semiconductor boom also translated into facility investment and production normalization. As investments in semiconductor equipment and electronic devices increased to meet the expansion of AI servers and data centers, facility investment grew in the high 4 percent range compared to the previous quarter. The rapid growth in the first quarter, however, may be a "base effect" from the previous quarter's contraction. South Korea’s growth rate in the fourth quarter of last year was minus 0.2 percent, ranking as the second lowest among G20 member nations after Mexico (-0.8 percent). When growth in the previous quarter is negative, the following quarter's growth rate can appear significantly high simply through the normalization of production, exports, and investment. South Korea saw a 2.1 percent rebound in the third quarter of 2020, followed by a -3.0 percent contraction in the second quarter of that year due to the COVID-19 pandemic. The risk that growth could slow again depending on the semiconductor cycle also remains a concern. According to the central bank, semiconductors accounted for more than half of the manufacturing sector's contribution to growth, at approximately 55 percent. Without the semiconductor manufacturing sector, the first-quarter growth rate of 1.7 percent could have been cut by more than half. Above all, forecasts are emerging that the prolonged blockade of the Strait of Hormuz due to the conflict between the U.S. and Iran could significantly slow South Korea's economic growth. French investment bank Natixis recently slashed its real GDP growth forecast for South Korea from 1.8 percent to 1.0 percent, while British research firm Capital Economics lowered its outlook from 2.0 percent to 1.6 percent. 2026-05-12 17:04:51
  • India enters austerity drive as oil, gold imports strain forex reserves
    India enters austerity drive as oil, gold imports strain forex reserves SEOUL, May 12 (AJP) — India’s 1.5 billion people are being asked to travel less, farm more efficiently and, most notably, cut back on gold purchases, underscoring the severity of the blow the three-month-long Middle East energy shock is dealing to Asia’s fastest-growing major economy. In a national address on Sunday, Prime Minister Narendra Modi urged citizens to avoid buying gold for the next year, reduce unnecessary overseas travel and curb energy consumption as the government attempts to contain rising dollar demand amid deepening geopolitical turmoil in the Middle East. “Patriotism is not only about the willingness to sacrifice one’s life on the border,” Modi said in a speech in Hyderabad. “In these times, it is about living responsibly and fulfilling our duties to the nation in our daily lives.” The appeal marked one of Modi’s broadest public austerity campaigns since the Covid-19 pandemic, with the government also encouraging remote work arrangements, greater use of public transportation, carpooling and electric vehicles, while calling on farmers to reduce fertilizer consumption and energy use. Markets increasingly view the measures not as a simple conservation campaign, but as a broader macroeconomic stabilization effort aimed at containing foreign exchange pressures caused by soaring crude oil prices and rising imports. The vulnerability stems from India’s structural dependence on imported energy and gold, both priced in U.S. dollars. As the world’s third-largest crude oil importer after the United States and China, India imported about $123 billion worth of crude oil during the 2025 - 2026 fiscal year, making energy the single largest contributor to the country’s import bill. Gold ranked second, with imports reaching approximately $72 billion during the same period, reflecting India’s position as one of the world’s largest gold-consuming nations. The dual surge in oil and gold demand is intensifying pressure on the current account and the rupee at a time when geopolitical tensions are pushing global energy prices sharply higher. Following the collapse of negotiations surrounding the U.S.-Iran conflict and concerns over the security of the Strait of Hormuz, Brent crude prices climbed above $100 per barrel, heightening fears over inflation and widening external imbalances across Asia’s energy-importing economies. The challenge is particularly acute for India because gold functions not merely as a luxury product, but as a quasi-financial asset deeply embedded in household savings, rural wealth preservation, weddings and inheritance practices. When geopolitical uncertainty and inflation fears intensify, Indian households historically increase gold purchases as a safe-haven store of value, further boosting dollar demand and worsening pressure on the rupee. India’s foreign exchange reserves are already showing signs of strain. According to the Reserve Bank of India, reserves stood at $690.69 billion as of May 1, down sharply from $728.5 billion before the escalation of the Iran conflict in late February. While the absolute reserve level remains among the world’s largest, the pace of depletion has unsettled markets. Reserves fell by roughly $37.4 billion in March and another $7.8 billion in April as the central bank reportedly intervened aggressively to support the rupee through dollar-selling operations conducted via state-run banks. The rupee has lost around 10 percent of its value over the past year, with roughly half of that decline occurring since the outbreak of the Iran conflict and the escalation of regional tensions. The International Monetary Fund projects India’s current account deficit could widen to around $84 billion in 2026, reinforcing concerns that sustained energy shocks may further weaken external balances. India has faced similar external vulnerabilities before. During the 2013 “Taper Tantrum,” when emerging markets were rattled by signals of U.S. monetary tightening, New Delhi stabilized markets by sharply raising gold import duties and imposing restrictions on imports to protect the rupee and conserve reserves. Yet the current policy direction also exposes a paradox at the heart of India’s financial strategy. While the government is urging households to cut gold purchases, the central bank itself has steadily expanded its own gold holdings as part of a broader effort to diversify away from dollar-denominated reserve assets amid growing geopolitical fragmentation. India currently holds roughly 880 tons of gold reserves, ranking seventh globally. Gold’s share of the RBI’s foreign exchange reserves rose from 13.9 percent last September to 16.7 percent at the end of March this year. The RBI has also repatriated more than 100 tons of gold from overseas vaults back to domestic storage over the past year, moves widely viewed as part of a broader effort to strengthen sovereign financial resilience in an increasingly uncertain geopolitical environment. India now finds itself operating within a uniquely contradictory structure in which households are buying gold as protection against instability while the central bank simultaneously accumulates gold as a strategic reserve asset. But with private gold imports continuing to drain foreign exchange reserves and widen current account pressures, analysts expect New Delhi’s campaign to curb discretionary imports and conserve dollar reserves to intensify in the months ahead. 2026-05-12 16:43:38
  • Seoul hints at fiscal expansion for H2 and 2027, sending bond yields to hike-cycle highs
    Seoul hints at fiscal expansion for H2 and 2027, sending bond yields to hike-cycle highs SEOUL, May 12 (AJP) — President Lee Jae Myung on Tuesday openly challenged the long-held policy rationale for fiscal tightening to rein in South Korea’s highly leveraged economy, signaling a more expansionary fiscal stance for the second half of this year and 2026 as growth concerns deepen amid prolonged Middle East tensions. “This is a time for investment to bolster growth potential,” Lee said during an emergency cabinet meeting, ordering the government to draft an “aggressive fiscal” strategy in next year’s budget and the supplementary spending plans for the second half. Lee defended proactive government spending, arguing that stimulus coupons distributed last year generated additional consumption of roughly 430,000 won ($310) per recipient, which he said demonstrated that fiscal support can meaningfully revive the economy. He also pushed back against concerns over the country’s debt burden, claiming South Korea’s actual government debt level remained only around 10 percent of gross domestic product. The remark appeared to reference an International Monetary Fund calculation that estimated South Korea’s net debt at 10.3 percent of GDP. However, the IMF figure excludes substantial liabilities such as pension obligations and debt held by state-run enterprises. According to the Ministry of Economy and Finance, South Korea’s broader national debt measure, known as D1 and encompassing both central and local government debt, recently stood at around 49 percent of GDP. Public sector debt, or D3 — which also includes non-financial public institutions — is estimated at roughly 68 percent. Markets interpreted Lee’s comments as a clear signal of fiscal expansion as the government braces for slowing growth and mounting uncertainties from the prolonged conflict in the Middle East. Bond yields, already revisiting levels last seen during the 2023 tightening cycle, rose further on expectations of increased debt issuance tied to fiscal expansion. The benchmark three-year government bond yield climbed 4.6 basis points to 3.644 percent on Tuesday, while the 10-year yield rose 5.2 basis points to 4.002 percent — returning to levels seen in November 2023, when the Bank of Korea’s policy rate stood at 3.5 percent during the height of post-pandemic inflation fighting. Liquidity conditions, however, remain ample. According to the Bank of Korea, the growth rate of broad money supply, or M2, recently expanded about 4.9 percent from a year earlier, relatively elevated compared with other major economies such as the United States and Japan. At the same time, the money multiplier under the revised M2 standard stood at 13.56 as of February, well below levels above 20 seen before the 2008 global financial crisis. The money multiplier — calculated by dividing M2 by the monetary base — measures how effectively central bank liquidity circulates through the economy via deposits and lending. The figures suggest liquidity itself may not be the core problem, but rather weak transmission into actual consumption and investment. Some economists argue that improving the distribution and circulation of capital through structural reforms and targeted policy measures may be more effective than relying solely on debt-financed fiscal expansion. The Bank of Korea is scheduled to release its March money supply data on Wednesday. 2026-05-12 14:27:20
  • BOK holds BIS board seat for third straight term
    BOK holds BIS board seat for third straight term SEOUL, May 12 (AJP) —New governor Shin Hyun-song of the Bank of Korea has been elected to the Board of Directors of the Bank for International Settlements, extending South Korea’s representation at the top decision-making body of the global central banking community for a third consecutive term. The BOK said Tuesday that Shin officially began his three-year term on Monday after being elected as an elected director during a regular board meeting held at the BIS headquarters in Basel, Switzerland. The term is renewable. The central bank described the appointment as a sign of South Korea’s growing influence in international finance, noting that BOK governors have continuously held seats on the BIS Board since 2019 through successive appointments of former governors Lee Ju-yeol and Rhee Chang-yong. The BIS Board serves as the de facto supreme decision-making body overseeing the institution’s strategy, governance and operational direction. The board meets at least six times annually and supervises key functions including amendments to BIS statutes, membership approvals and appointments of senior executives. Board members also sit ex officio on the Economic Consultative Committee, which helps shape agendas for the BIS Global Economy Meeting, where governors from around 30 major central banks discuss global financial and monetary issues. The 18-member board consists of six ex-officio directors representing the founding member central banks of the United States, United Kingdom, France, Germany, Italy and Belgium, alongside the president of the Federal Reserve Bank of New York. The remaining 11 elected directors are selected by a two-thirds majority vote from among governors of other member central banks. Current elected member countries include Japan, China, India, Canada, Saudi Arabia and South Korea. Shin is widely regarded as one of Asia’s leading international finance experts. Before assuming the governorship of the BOK, he served for 12 years at the BIS as Economic Adviser and head of its Monetary and Economic Department until March this year. The BOK said Shin’s extensive BIS experience, South Korea’s active contribution to global monetary discussions and his international reputation were reflected in the appointment. The appointment also comes as South Korea’s role in global capital markets expands. The country operates one of the world’s largest non-deliverable forward currency markets alongside India, while expectations for long-term foreign capital inflows have strengthened following Korea’s inclusion in the World Government Bond Index. 2026-05-12 10:53:37
  • Wall Street bias leaves Korean won lagging despite equity boom
    Wall Street bias leaves Korean won lagging despite equity boom SEOUL, May 11 (AJP) - The bias toward Wall Street stocks among South Korean investors has eased, but not nearly enough to offset foreign divestment from Korean equities — a gap that helps explain the won’s stubborn weakness. According to data released by the Bank of Korea (BOK) last Friday, outbound stock investment by residents rose by $4 billion in March, slowing sharply from $13.46 billion in January and $8.64 billion in February. The central bank said a strong dollar and risk aversion likely cooled the overseas buying spree. The U.S. dollar climbed as high as 1,530 won after the outbreak of war in Iran in late February and averaged around 1,490 won in the postwar period. “The rise in the exchange rate weakened the incentive for new outbound investment, and investor caution grew as volatility in the U.S. stock market expanded,” Kim Young-hwan, director of the BOK’s Economic Statistics Department 1, said during a press briefing Friday. But while the pace of outbound investment slowed, domestic investment shrank even more sharply. In March, foreign investors posted a net outflow of $34.4 billion from the Korean market, nearly triple the $11.9 billion outflow in February. The BOK said a global risk-off shift triggered by geopolitical threats, combined with Korea’s “K-shaped” market structure — where nearly half of total market capitalization is concentrated in Samsung Electronics and SK hynix — amplified volatility in Korean equities. The fact that Korean investors continued to buy foreign stocks even amid deepening risk aversion points to their entrenched confidence in overseas markets. A recent study by the Korea Capital Market Institute (KCMI) found that investors in their 20s and 30s, as well as high-net-worth individuals who primarily invest in overseas exchange-traded products, tend to hold stocks much longer than domestic market investors. KCMI said that if the turnover rate of overseas investors is assumed at around 68 — calculated as shares traded divided by listed shares, multiplied by 100 — the combined turnover rate for domestic and overseas markets is roughly twice that level or higher. That suggests trading frequency is far higher in the domestic market, represented by the benchmark KOSPI and tech-heavy KOSDAQ. The result has been greater volatility in the Korean stock market and deeper distrust among long-term investors. Based on closing prices from Jan. 2 to May 11, the KOSPI’s average daily fluctuation was about 2.3 percent, far higher than the Nasdaq’s 1.6 percent, the S&P 500’s 1.1 percent and the Dow Jones Industrial Average’s 0.9 percent. In an “Issue Note” published last week, the BOK also said domestic stock investors tend to treat rallies in the Korean market as short-term valuation gains rather than opportunities for long-term investment. High volatility, the report said, has eroded investor confidence and discouraged patient capital. As overseas preference and foreign capital outflows overlap, the won has struggled to recover. On April 30, when the Bank of Japan intervened to strengthen the yen from 160 to 155 per dollar and the dollar index fell to 98, the Korean won still weakened by 4.3 won to close at 1,476.1 per dollar. Despite reduced concerns over the unwinding of the yen-carry trade, the won market swung sharply as foreign investors sold more than 1 trillion won ($679.35 million) worth of shares on the KOSPI alone. Even on Monday, when the KOSPI surged 4.3 percent to a record high of 7,822.24, the won weakened by 0.7 won to close at 1,472.4 per dollar. The decline reflected another heavy outflow from won-denominated assets, as foreign investors dumped 3.48 trillion won worth of Korean stocks. “As excessive trading in the domestic securities market has hindered investment performance, the perception of overseas markets — especially the U.S. — as long-term investment destinations remains strong,” said Kim Min-ki, a researcher at KCMI. He warned that won weakness will persist unless Korea addresses its chronic problems of market volatility and excessive concentration. 2026-05-11 17:46:46
  • Outgoing BOK dove delivers hawkish swan song amid inflation risks
    Outgoing BOK dove delivers hawkish swan song amid inflation risks SEOUL, May 11 (AJP) — Inflation has become increasingly worrisome and is likely to dominate upcoming monetary policy discussions at the Bank of Korea, outgoing Monetary Policy Board member Shin Sung-hwan said Monday, in a notable hawkish turn from one of the central bank’s most dovish voices. Shin, whose term ends Tuesday, admitted during a press conference that he had previously favored rate cuts, but said that if he were still to remain on the board, he would now be more concerned about inflation risks. Shin had been the sole dissenter advocating a rate cut when the BOK held its benchmark interest rate steady in January, April, August, October and November last year. “Inflation is always the policy priority,” he said, arguing that central banks should prioritize price stability over growth, particularly when inflation risks drifting above the BOK’s 2 percent target. He warned that if oil prices remain elevated through year-end, secondary inflationary pressures across the broader economy would become unavoidable, making the fight against inflation more difficult than initially expected. Shin identified the surge in global crude prices following the Middle East conflict as the single biggest variable facing policymakers. “We initially expected oil prices to stabilize around $70 per barrel by the end of this year, but under the current situation, it now appears likely to hover closer to $90,” he said. Brent crude climbed as high as $105 a barrel during intraday trading Monday, roughly 50 percent above prewar levels. Since joining the board in May 2022, Shin had been widely viewed as a representative dove within the committee. During his tenure, he issued seven dissenting votes in favor of rate cuts. Even as former Governor Rhee Chang-yong maintained a cautious policy stance, Shin consistently argued for easing to support weak domestic demand and relieve pressure on the real economy. But he said the environment had shifted rapidly in recent months. “Just as the housing market was already making it difficult to lower rates, the Middle East situation deteriorated immediately afterward,” Shin said. “At this point, it is not desirable to add inflationary pressure through a rate cut.” Shin also described “polarization” within the South Korean economy as the most difficult challenge during his tenure. “Economic growth represents the overall performance of the economy, but now we have a situation where a sector accounting for roughly 10 percent of the economy determines the headline figure,” he said, referring to the growing dominance of the semiconductor sector. He warned that disparities across industries have widened to the point where appropriate interest-rate levels differ sharply depending on the sector. In the past, strong growth in leading industries generated broader trickle-down effects across the economy, Shin said, but that transmission mechanism has weakened considerably. As a result, higher interest rates risk placing even greater burdens on already struggling sectors. Regarding the recent rise in government bond yields, Shin said a combination of surging long-term U.S. Treasury yields and mounting inflation expectations had contributed to the move. “Long-term U.S. interest rates reflect concerns over inflation expectations,” he said, adding that similar concerns are also likely influencing the rise in South Korean government bond yields. Shin is not the only BOK official signaling a more hawkish shift. “We need to stop thinking about lowering the benchmark interest rate and begin considering the possibility of raising it,” Ryoo Sang-dai said earlier this month during a press conference at the Asian Development Bank annual meeting in Samarkand, Uzbekistan. Ryoo added that clearer signals regarding the BOK’s future policy direction could emerge during the May monetary policy meeting. Bond prices continued to fall amid a growing atmosphere for an interest rate hike. The yield on the three-year government bonds closed at 3.598 percent, up 2.9 basis points, while the ten-year yield finished at 3.950 percent, up 4.1 basis points. 2026-05-11 17:01:12
  • Financial authorities to crack down on misuse of state-supported loans
    Financial authorities to crack down on misuse of state-supported loans SEOUL, May 11 (AJP) - Financial authorities will step up efforts to prevent some businesses from profiting by lending government-funded money to their subcontractors at excessively high interest rates. The Financial Services Commission (FSC) and the Fair Trade Commission (FTC) said on Monday that they will strengthen monitoring and review processes to crack down on improper business practices and other irregularities. They added that companies found engaging in these practices will be banned from receiving such funds. The move comes after Myeongnyundang, which runs restaurant chain Myeongnyun Jinsa Galbi, allegedly diverted state-supported low-interest funds by lending them to its franchisees at much higher interest rates. According to a joint investigation by the FSC and FTC, Myeongnyundang obtained funds at annual interest rates of 3 to 6 perent from institutions including the state-run Korea Development Bank (KDB), the Industrial Bank of Korea (IBK), and the Korea Credit Guarantee Fund (KODIT). It then lent about 900 billion won (US$613.92 million) to 14 affiliated lenders linked to its major shareholders. These lenders were found to have charged franchisees and prospective small business owners of Myeongnyun Jinsa Galbi annual interest rates of 12 to 18 percent on loans used for expenses such as interior renovations. Authorities also found that some businesses had deliberately split their operations into smaller entities to keep their assets below 10 billion won to avoid regulatory oversight. They also discovered that some franchisees were required to repay loan principal and interest through payments for meat supplies. The FTC has already launched formal procedures against Myeongnyundang for allegedly violating franchise regulations along with a corrective order. Investigators found the restaurant chain pressured franchisees to use certain contractors for interior work and equipment, while omitting or falsely stating key financial details in its documents. It also urged financial institutions including the KDB, IBK, and KODIT to tighten their monitoring and screening of loans made to franchisees and other borrowers. "Desperate small-business owners should never be exploited for someone else's gain," said FSC chairman Lee Eog-weon on social media, vowing to crack down on predatory lending practices targeting franchisees. 2026-05-11 15:16:11