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Inequality deepens for Korean households on wealth gap and AI rise SEOUL, June 11 (AJP) - South Korea's household inequality is becoming more complex as property-driven wealth gaps combine with renewed income polarization, the Bank of Korea said Thursday. Rising real estate prices have widened wealth gaps between homeowners and non-homeowners, regions and generations. The net wealth Gini coefficient rose to 0.625 in 2025 from 0.584 in 2017, with a higher reading indicating a more unequal distribution. The central bank identified rising property prices as the main driver of the widening wealth gap. Property ownership is concentrated among older households, making intergenerational wealth inequality more entrenched. The trend has weakened the wealth-building ladder for young people. A growing number of high-income young Koreans are unable to move into the upper wealth bracket because they do not own property, a phenomenon similar to the so-called HENRY group, or "High Earners, Not Rich Yet." Income inequality is also showing signs of widening again. The income Gini coefficient edged up to 0.325 in 2024 from 0.323 in 2023, after years of decline supported by redistribution policies. K-shaped growth, marked by strong IT manufacturing and sluggish growth in non-IT sectors, has widened wage gaps across industries. Artificial intelligence could add further pressure by replacing tasks performed by low-income workers and young people at the early stages of their careers. A BOK survey showed that lower-income groups were more likely to believe their jobs could be replaced by AI, while their actual use of AI was lower than that of higher-income groups. Employment data also showed signs of pressure on young people. Youth employment has fallen faster in industries with high exposure to AI since the launch of generative AI, while employment among people in their 50s has increased in those sectors. The BOK described the trend as "seniority-biased technical change." The combined wealth and income divide is lowering the economic standing of young households. The share of households in both the bottom net wealth and income quintiles that were headed by people in their 20s and 30s rose to 15.2 percent in 2025 from 7.9 percent in 2020. Household polarization could hurt productivity and domestic demand. A panel analysis of 120 countries cited by the BOK showed that a 1 percentage point rise in the wealth share of the top 10 percent lowers total factor productivity by 0.16 percent two years later. The concentration of household assets in real estate can reduce the efficiency of resource allocation by keeping capital tied up in unproductive assets rather than innovative companies and new technologies. Higher housing costs could also reduce discretionary spending by young and low-income households, which tend to have a higher propensity to consume. Broader social costs could increase if people believe wealth gaps cannot be overcome through work alone. High housing costs could also weigh on marriage and childbirth among young people. The BOK said traditional income-support policies are not enough to address the problem. It called for policies that encourage household assets to move away from real estate and into more productive sectors, while expanding wealth-building channels for young and non-homeowning households. The central bank also urged policymakers to redesign redistribution systems for the AI era, strengthen job training for workers exposed to technological displacement and broaden the tax base as labor income becomes more vulnerable to automation. June 11, 2026 13:40 -
FOMO stock bet fuels household loans in Korea in May SEOUL, June 11 (AJP) - Bank loans rose sharply in May as South Koreans frantically borrowed out of the fear of missing out (FOMO) on record stock bull and for housing on expectations for rate hikes, central bank data showed Thursday. Bank household loans increased by 6.9 trillion won ($4.52 billion) in May, widening from a 2.1 trillion won gain in April and exceeding the 5.2 trillion won increase recorded a year earlier, according to the Bank of Korea. The sharpest turnaround came from other loans, which include unsecured credit loans, credit lines and stock-backed loans. Other household loans rose by 3.7 trillion won in May after falling by 600 billion won in April, with the BOK citing large-scale stock investment by individuals and seasonal funding demand linked to Family Month. Mortgage lending also increased. Bank mortgage loans rose by 3.2 trillion won, compared with a 2.7 trillion won gain in April, supported by mid- to low-priced housing transactions in the Seoul metropolitan area and demand for interim payments on presold homes. The loan growth came as the stock market extended a steep rally. The KOSPI climbed on optimism over the semiconductor cycle and stronger corporate earnings, hitting a record high of 8,801 on June 2. The index later corrected, led by semiconductor shares, as expectations for U.S. Federal Reserve rate hikes strengthened. Still, as of June 10, the KOSPI remained 17.2 percent above its end-April level. Bond yields have been rising in line with the expectations of a rate hike as early as July on inflationary pressure. The three-year Treasury yield rose to 3.88 percent Wednesday from 3.60 percent at the end of April, while the 10-year yield climbed to 4.27 percent from 3.92 percent over the same period. The BOK said government bond yields were affected by inflation concerns at home and abroad and changing expectations for monetary policy. Corporate funding also showed signs of shifting toward bank loans. Bank lending to companies rose by 10.6 trillion won in May, following a 10.7 trillion won increase in April. Loans to large companies increased by 5.2 trillion won, while lending to small and medium-sized enterprises rose by 5.4 trillion won. The BOK said SME lending remained strong as banks continued to expand corporate credit under their productive finance push, while large companies sought working capital, including funds to redeem corporate bonds. Corporate bond issuance remained weak, with companies recording a net redemption of 1.1 trillion won in May as higher interest rates raised issuance costs and pushed firms toward alternative funding sources such as bank loans. Commercial paper and short-term bonds also shifted to a net redemption of 2.1 trillion won. Deposits at financial institutions rose sharply. Bank deposits increased by 48.8 trillion won in May after falling by 6.8 trillion won in April, helped by short-term funds placed by some large companies and banks' efforts to secure lending resources and manage regulatory ratios. Asset management firms also saw large inflows. Their deposits rose by 86.4 trillion won in May, led by stock funds, which increased by 58.8 trillion won on valuation gains from higher domestic and overseas share prices and continued new investment inflows. June 11, 2026 13:37 -
Korea's cash stimuli program helped merchants but stopped short of aiding economy: BOK SEOUL, June 10 (AJP) -The handouts of consumer coupons by the new Korean government last year aimed to jump-start lethargic consumption boosted revenue of around 2.8 trillion won ($1.8 billion) for small businesses last year, the Bank of Korea said Wednesday while acknowledging short-lived effect from cash benefits on broader economy. The central bank said in its latest study in Issue Note that about 30.9 percent of the 9.1 trillion won distributed through credit cards translated into additional sales at retail stores. Depending on the methodology used, the sales boost was estimated at between 1.4 trillion won and 3.6 trillion won, with the ratio of additional sales to fiscal input ranging from 16.1 percent to 39.8 percent. The consumer coupon program was included in the 2025 supplementary budget to stimulate household consumption and support small merchants. A total of 13.522 trillion won was distributed nationwide through credit cards, local gift certificates and prepaid cards, with credit cards accounting for about 70 percent of the total. The BOK analyzed credit card sales data from six card companies to estimate the impact on eligible merchants and conducted self-reported surveys of coupon recipients to assess the effect on household consumption. Local gift certificates and prepaid cards were excluded from the credit card sales analysis. Average monthly sales at eligible stores rose 2.91 percent more than at non-eligible stores, the BOK said. Under alternative estimation methods, the effect ranged from 1.46 percent to 3.76 percent. The impact was concentrated in the early stages of both the first and second rounds of payments and lasted only briefly. The BOK said the findings showed the coupon program was suited as a short-term policy response when stabilizing livelihood conditions was urgent. By region, the impact was stronger outside the Seoul metropolitan area in both the first round, which included differentiated regional support, and the second round, which did not. The overall effect was largest in non-capital regions, suggesting that coupons may generate a stronger consumption response in areas with weaker spending capacity. By sector, the effect was largest at general merchandise stores, followed by restaurants and leisure goods stores. The result indicates that the sales boost was concentrated in everyday consumption sectors, including food, clothing and optical goods. The effect on household consumption was more limited. The BOK estimated the marginal propensity to consume out of the coupons at 0.20, meaning households increased new spending by about 20,000 won for every 100,000 won received. Spending that would have taken place even without the coupons was excluded from the estimated consumption effect. The marginal propensity to consume tended to be higher among lower-income households. The BOK said the consumption effect could be increased if support targets were set more precisely and differentiated assistance was used together. By item, new consumption was more pronounced in durable goods, semi-durable goods and leisure, while the effect was smaller for necessities such as non-durable goods, education and medical services. The marginal propensity to consume was 0.21 in the first round, slightly higher than 0.18 in the second round. The BOK said the lower second-round effect may have reflected weaker policy visibility or a reduced sense of benefit, as the per-person payment fell to 100,000 won from 150,000 won to 550,000 won in the first round. Overall, the BOK estimated that the consumer coupon program lifted South Korea's gross domestic product growth in 2025 by about 0.12 percentage point. Depending on the methodology, the growth effect ranged from 0.07 percentage point to 0.15 percentage point. The central bank said the policy channel from higher disposable income to actual spending and merchant sales had functioned effectively. It also said income- and region-based differentiated support appeared to have helped boost spending among vulnerable groups and sales outside the capital region. Still, the BOK said similar programs in the future should be designed more precisely in terms of timing, differentiated support and eligible merchants to improve their economic effectiveness. It added that policy efforts are also needed to structurally improve the competitiveness and productivity of self-employed workers and small businesses. June 10, 2026 12:59 -
Korean Inc. scores second best in profitability, but zombie firms hit record high SEOUL, June 10 (AJP) -Korean Inc. scored their second-best in profitability last year largely thanks to staggering margins of chipmakers, while the broad polarization deepened with zombie population hitting their all-time high, central bank study showed Wednesday. According to the preliminary corporate management analysis for 2025 released by the Bank of Korea (BOK), the revenue growth rate for non-financial corporations subject to external audits stood at 2.5 percent last year. That was down 1.7 percentage points from 4.2 percent a year earlier. The headline profitability improved sharply. The operating profit margin rose from 5.4 percent in 2024 to 6.2 percent last year, marking the highest level since 2021, when it stood at 6.8 percent. The pre-tax net profit margin also climbed from 5.2 percent to 6.3 percent. The overall corporate balance sheet also strengthened. The debt-to-equity ratio fell from 103.4 percent to 98.3 percent, and borrowing dependency dropped from 28.4 percent to 27.3 percent. It marked the first time in five years that the average debt ratio fell below 100 percent, since 2020, when it recorded 97.3 percent. Top-line growth slowed across both manufacturing and non-manufacturing sectors. Revenue growth in manufacturing fell from 5.2 percent to 3.2 percent, while non-manufacturing growth dropped from 3.0 percent to 1.6 percent. Within manufacturing, petroleum refining and chemicals suffered notable slumps. Revenue growth for petroleum refining and coke swung from 1.0 percent to negative 7.4 percent, while chemicals fell from 4.0 percent to negative 2.4 percent. The BOK attributed the decline in refining to deteriorating supply-demand conditions and lower oil prices. Chemicals were hit by persistent global oversupply. In the non-manufacturing sector, the construction slump was stark. The construction revenue growth rate deepened its decline from negative 3.2 percent to negative 9.6 percent. The BOK said construction was dragged down by shrinking real estate demand and a prolonged slowdown in housing starts since 2023. By company size, growth weakened across the board. Large companies saw revenue growth slow from 4.4 percent to 2.8 percent, while small- and medium-sized enterprises (SMEs) cooled from 3.2 percent to 1.2 percent. The rebound in profitability was led largely by the semiconductor sector. The manufacturing operating profit margin rose from 5.5 percent to 6.9 percent, while the margin for electronic, visual and communications equipment jumped from 8.8 percent to 15.0 percent. The BOK said rising semiconductor prices and increased sales of high-value-added products for AI servers drove the improvement. However, the sector's revenue growth slowed from 21.6 percent to 15.1 percent, indicating a moderation in growth momentum. Utilities also helped lift non-manufacturing profitability. The operating profit margin for electricity and gas rose from 5.8 percent to 8.3 percent, helped by utility rate adjustments, lower power purchase costs and fiscal normalization efforts. The aggregate improvement did not translate into broader corporate health. Large companies' operating profit margin rose from 5.6 percent to 6.6 percent, while SME margins slipped from 4.8 percent to 4.6 percent. In manufacturing, margins at large firms climbed from 5.7 percent to 7.3 percent. Those at SME manufacturers edged down from 4.7 percent to 4.6 percent, suggesting that semiconductor gains did not spread widely to smaller businesses. A similar divergence was evident in debt-servicing capacity. The overall interest coverage ratio rose from 305.8 percent to 369.8 percent, supported by higher operating margins and lower financing burdens. However, the share of firms with an interest coverage ratio below 100 percent expanded from 38.5 percent to 39.9 percent. An interest coverage ratio below 100 percent means a company's operating profits are insufficient to cover its interest expenses. The BOK said the share was the highest since the current data series began in 2013. The strain was also visible in the distribution of corporate earnings. The proportion of loss-making companies grew from 26.2 percent to 28.2 percent. The share of firms with an interest coverage ratio of 500 percent or higher shrank from 33.1 percent to 32.6 percent. This indicates that strong performances by a handful of large tech firms lifted aggregate averages, even as financial strains on vulnerable businesses worsened amid sluggish domestic demand and elevated interest rates. Cash flows improved marginally as operating activities generated stronger inflows. The cash flow coverage ratio rose from 51.4 percent to 52.8 percent. The preliminary statistics are based on a survey of 34,456 non-financial corporations subject to external audits that filed audit reports as of the end of 2025, excluding certain companies and industries. June 10, 2026 12:53 -
U.S. Requests China to Resume Rare Earth Exports to Japan Amid Supply Concerns As Chinas restrictions on rare earth exports to Japan extend beyond the Japanese manufacturing sector to threaten U.S. medical and high-tech supply chains, the Trump administration has reportedly urged China to resume rare earth shipments to Japan. Japan is a key producer of advanced medical equipment, including MRI machines, and prolonged pressure from China could disrupt medical device procurement in the United States. The Nihon Keizai Shimbun (Nikkei) reported on June 10, citing multiple U.S. and Japanese diplomatic sources, that the Trump administration is pressing Chinese leaders to restore rare earth supplies to Japan. During a meeting last month between U.S. Treasury Secretary Scott Vessen and Chinese Vice Premier He Lifeng, the U.S. expressed concerns over Chinas export restrictions to Japan and called for measures to prevent negative impacts on global supply chains, particularly for high-tech equipment. The U.S. has intervened in Japans rare earth procurement issues because it recognizes that the problem extends beyond Japans manufacturing sector. Japan is a crucial hub for the global supply chain, producing advanced medical devices, semiconductor manufacturing equipment, and electric vehicle (EV) components. Since rare earth components are used in high-performance diagnostic equipment like MRI machines, prolonged production disruptions in Japan could lead to instability in medical device procurement in the U.S. China added seven rare earth elements, including dysprosium and terbium, to its export regulation list in April of last year and has intensified scrutiny on shipments to Japan this year. Nikkei previously reported on June 8 that exports of these seven elements to Japan fell by 88% in March and 82% in April compared to the same months last year. Notably, there have been no exports of dysprosium and terbium to Japan since January, which are essential raw materials for high-performance magnets used in EV motors. The U.S. and Japan addressed Chinas rare earth export restrictions during the G7 finance ministers and central bank governors meeting held from May 18 to 19. A senior U.S. official indicated to Nikkei that the issue will also be discussed at the G7 summit in Évian, France, from June 15 to 17, where responses will be considered. The U.S. and China have sought to ease tensions, agreeing during last months summit to aim for a constructive strategic stability relationship. However, concerns persist that U.S.-China engagement could lead to Japan being sidelined, while Japan finds itself relying on the Trump administrations diplomacy regarding China. The Japanese government is wary that prolonged rare earth procurement issues could increase Japanese companies dependence on China. In 2010, when China restricted rare earth exports to Japan over the Senkaku Islands dispute, Japanese magnet manufacturers increased local production in China, ultimately enhancing the technological capabilities and market influence of Chinese firms. A diplomatic source from Japan told Nikkei, The situation of Chinas pressure on Japan has not yet eased. We need to continue cooperating with the U.S. and demand the resumption of supplies from China. The U.S. has not disclosed Chinas response to its request for the resumption of rare earth supplies to Japan.* This article has been translated by AI. June 10, 2026 10:27 -
Joint Investigation Launched into Voting Paper Shortage in South Korea Joint investigation team formed to probe voting paper shortage during local elections6·3 지방선거 과정에서 발생한 투표용지 부족 사태를 수사할 검·경 합동수사본부가 서울중앙지검에 설치된다. The Supreme Prosecutors Office announced on June 9 that a joint investigation team comprising prosecutors and police will be established at the Seoul Central District Prosecutors Office to swiftly and thoroughly investigate issues that hindered citizens exercise of their voting rights during the June 3 local elections. The team will consist of 27 members, including 12 prosecutors and 15 police officers. Kim Tae-hoon, the Deputy Chief Prosecutor of the Seoul Central District Prosecutors Office, has been appointed as the head of the team. Kim is recognized for his expertise in public security, having previously served as the head of the Election Investigation Support Division at the Supreme Prosecutors Office and as the head of the Public Investigation Division 3 at the Seoul Central District Prosecutors Office. He also served as the spokesperson for the Ministry of Justice last year. Jensen Huang wraps up five-day visit to South Korea, highlighting AI developments젠슨 황 엔비디아 최고경영자(CEO)가 4박 5일간의 방한을 마치고 출국했다. 한국이 엔비디아의 차세대 인공지능(AI) 전략에서 단순 메모리 공급처를 넘어 AI 인프라와 피지컬 AI를 시험하는 전략 거점으로 부상할 수 있다는 관측이 나온다. Jensen Huang, CEO of NVIDIA, departed South Korea on June 9 after a five-day visit. Industry observers suggest that South Korea is poised to become a strategic hub for NVIDIAs next-generation artificial intelligence (AI) strategy, moving beyond merely being a memory supplier to testing AI infrastructure and physical AI. Huang left through the Gimpo Business Aviation Center in Gangseo-gu, Seoul, stating, It was really great to be here, and expressed hope to return to South Korea. During his stay, which began on June 5, he met with major domestic companies, including Samsung Electronics, SK, Hyundai Motor, LG, Doosan, and Naver. This marks Huangs longest stay in South Korea to date. Throughout his visit, he engaged in business meetings and public appearances, including gatherings featuring Korean barbecue and fried chicken, as well as a visit to a baseball stadium, enhancing his presence among local consumers and the general public. Given the significant impact of last years meeting with Samsungs Lee Jae-yong and Hyundais Chung Eui-sun, Huangs extended engagement reflects a desire to deepen connections in South Korea. Bank of Japan may raise interest rates to 1% for the first time in 31 years일본은행이 이달 금융정책결정회의에서 추가 금리 인상에 나설 공산이 커졌다. 중동 정세 불안에 따른 원유 가격 상승이 물가 전반으로 번질 가능성이 커졌다고 보고, 현재 0.75%인 정책금리를 1.0%로 끌어올리는 방안에 무게를 두고 있다. The Bank of Japan is increasingly likely to raise interest rates at its monetary policy meeting this month. With rising oil prices due to instability in the Middle East potentially affecting overall inflation, the central bank is considering raising its policy rate from the current 0.75% to 1.0%. If implemented, this would mark the first time Japans policy rate has reached the 1% level in approximately 31 years. The Nihon Keizai Shimbun reported on June 9 that the Bank of Japan plans to decide on a rate hike at its monetary policy meeting scheduled for June 15-16. The report indicates that Bank of Japan Governor Kazuo Ueda and other executives will submit a proposal for a rate increase, which is expected to be approved by a majority of the nine policy board members. The Asahi Shimbun also reported that the likelihood of a rate increase to 1.0% at the June meeting is high. Candidates for ruling partys floor leader emphasize need for party reform국민의힘 차기 원내대표 선거에 출마한 김도읍·정점식·성일종(기호순) 의원이 9일 공통적으로 당내 변화와 혁신 필요성에 공감하면서도 장동혁 지도부 교체와 한동훈 무소속 후보 입당에 대해서는 신중해야 한다는 입장을 보였다. On June 9, candidates for the next floor leader of the People Power Party, Kim Do-eup, Jeong Jeong-sik, and Seong Il-jong, expressed a shared understanding of the need for change and innovation within the party, while also advocating for caution regarding the replacement of party leader Jang Dong-hyuk and the admission of independent candidate Han Dong-hoon. The three candidates participated in a discussion held by first- and second-term lawmakers at the National Assembly, where they shared their thoughts on the evaluation of the June 3 local elections and the partys vision, as well as responding to questions from fellow lawmakers. During their remarks, Kim Do-eup and Seong Il-jong called for a change in the partys direction, while Jeong Jeong-sik, identified with the party establishment, emphasized the importance of unity within the party. Kim stated, I will make this party one that no longer hears the term pro-Yoon (supporting President Yoon Suk-yeol). Seong added, Now is not the time for factional battles between pro-Han (supporting Han Dong-hoon) and pro-Yoon. They need to disappear. Jeong remarked, Restoring the publics trust in us and uniting our fragmented strength is a historic task that the People Power Party and the floor leader must accomplish. The intense deliberation over whether to resign or stabilize the leadership should not lead to further division among us.* This article has been translated by AI. June 9, 2026 21:51 -
FSS to launch probe as won volatility deepens SEOUL, June 9 (AJP) - The Financial Supervisory Service (FSS) will launch a joint inspection with the Bank of Korea (BOK) to crack down on speculative currency trading and other market-disrupting activities, as they step up warnings to banks after the won briefly weakened past 1,560 per dollar earlier this week. The South Korean currency later pared losses following repeated verbal intervention by financial authorities, but officials remain on alert as expectations of further U.S. rate hikes and geopolitical uncertainty continue to fuel sharp swings in the foreign exchange market. The FSS held an FX stabilization meeting Tuesday with treasury executives from major commercial banks and foreign bank branches, following a broader interagency meeting on the foreign exchange market a day earlier. The regulator said it will work with the central bank to examine whether recent market volatility and won weakness have been used for speculative transactions or other activities that distort market prices. Foreign bank branches with large positions in non-deliverable forwards (NDFs) are expected to be among the first targets of the inspections. FSS' senior vice governor Kim Sung-uk urged banks to comply with foreign exchange trading rules and strengthen internal controls against market-disrupting behavior. The FSS also told banks to avoid aggressive marketing campaigns or excessive competition to attract dollar deposits at a time of heightened exchange-rate volatility. Banks were also asked to give clearer guidance to consumers on potential foreign exchange losses. The regulator specifically called for stronger cooperation to ensure offshore NDF trading does not add to volatility or one-way bets in the domestic foreign exchange market. The FSS will temporarily tighten oversight of major banks' foreign exchange positions by shortening the review cycle from monthly to weekly or even daily checks. At the same time, the regulator will extend by six months, through the end of this year, a grace period for supervisory measures tied to advanced foreign currency liquidity stress tests. Moon Ji-sung, deputy minister for international affairs at the Ministry of Economy and Finance, also reaffirmed that authorities will respond sternly to speculative trading that undermines market order. The FSS also plans to call in other major financial sectors, including securities firms and insurers, to review risk controls related to overseas investment marketing, dollar-denominated insurance products and foreign exchange volatility. June 9, 2026 18:02 -
Bank of Japan Poised to Raise Interest Rates to 1% for First Time in 31 Years The Bank of Japan is increasingly likely to implement an interest rate hike at its monetary policy meeting this month. Rising oil prices due to instability in the Middle East have raised concerns that inflation could spread more broadly. The central bank is considering raising the current policy interest rate from 0.75% to 1.0%. If approved, this would mark the first time Japans policy interest rate has reached the 1% level since 1995. On June 9, the Nikkei reported that the Bank of Japan plans to decide on the rate hike during its monetary policy meeting scheduled for June 15-16. Governor Kazuo Ueda and other officials are expected to present the proposal, which is anticipated to receive majority support from the nine-member policy board. The Asahi Shimbun also reported the likelihood of the central bank raising the policy rate to 1.0% during the June meeting. The Bank of Japans inclination toward raising rates stems from concerns that inflationary pressures may be greater than previously anticipated. The central bank believes that rising oil prices, driven by geopolitical tensions, could lead to increased energy costs and higher prices for consumers. The consumer price index (CPI), excluding temporary factors such as government subsidies for electricity and gas, rose 2.8% in April compared to the same month last year, up from a 2.5% increase in March. Additionally, the corporate goods price index rose 4.9% year-on-year in April, marking the highest increase since May 2023. In a speech on June 3, Governor Ueda remarked on the potential impact of Middle Eastern tensions on the economy and prices, stating, Overall, the risks of upward pressure on prices are greater, and the likelihood of these pressures appearing sooner is also higher. He indicated that if the risks of inflation outweigh those of economic slowdown, there would be a need for thorough discussions on the possibility of a rate hike. Ueda also suggested that the central bank could proceed with a rate increase despite the ongoing uncertain situation in the Middle East. Measures to Stabilize the Bond Market However, the Bank of Japan plans to implement measures to stabilize the government bond market while raising interest rates. Typically, an increase in rates leads to a decline in bond prices, prompting the central bank to take steps to prevent excessive drops in bond prices (and rising bond yields). According to the Nikkei, the Bank of Japan is coordinating to halt its current reduction of bond purchases after April 2027. This plan has garnered majority support from policy board members, and the central bank is in discussions with the government. Under the current plan, bond purchases will be reduced by 200 billion yen each quarter from January to March 2027, but it is being considered to maintain monthly bond purchases at 2.1 trillion yen starting in April of that year. This approach aims to raise interest rates to address inflation while simultaneously mitigating shocks to the bond market by pausing the reduction of bond purchases, thereby adjusting the pace of normalization. An increase in the policy rate generally raises short-term interest rates across the financial sector, while a reduction in bond purchases can exert upward pressure on long-term rates in the bond market. If both measures are aggressively pursued, bond yields could rise more rapidly, exacerbating market instability. Since 2013, the Bank of Japan has engaged in large-scale monetary easing, acquiring significant amounts of long-term government bonds. As a result, the central banks holdings in the bond market reached around 54% at one point in 2023. The Bank has been gradually reducing its bond purchases since August 2024 to restore market functionality, but recent inflation and fiscal expansion concerns have led to a surge in long-term yields, increasing instability in the bond market. In May, the yield on Japans 10-year government bonds briefly rose to around 2.8%, the highest level in nearly 29 and a half years. Nevertheless, halting the reduction of bond purchases does not mean the Bank of Japan is abandoning its path toward monetary policy normalization. As previously acquired bonds mature, the central banks bond holdings will continue to decrease. The Bank aims to respond to inflation through interest rate hikes while managing the pace of normalization to avoid exacerbating instability in the bond market. This upcoming meeting will serve as a significant test for the Bank of Japan as it navigates the challenges of a weak yen, rising prices, and instability in the bond market. The yen has recently fallen below the 160 yen per dollar mark for the first time in a month. While a rate hike could help alleviate pressure from a weaker yen and rising import prices, it also poses a burden by increasing mortgage rates for households and borrowing costs for businesses. Conversely, pausing the reduction of bond purchases may stabilize the bond market but could signal a delay in the normalization of monetary policy. Balancing inflation control with bond market stability is becoming increasingly challenging for the Bank of Japan. Additionally, if the Bank of Japan proceeds with a rate hike, tensions with the government of Sanae Takaichi, which is pursuing an expansionary fiscal policy, are likely to arise.* This article has been translated by AI. June 9, 2026 17:57 -
Korea's Q1 GDP strongest in more than 5 yrs, nominal growth 50-yr high *Updated with additional data, comments, and market response SEOUL, June 09 (AJP) - South Korea's economy turned out strongest three-month performance in more than five years in the quarter ended March with nominal growth at a 50-year high, according to the finalized first-quarter figure, but the bigger surprise came from income — up record 9.2 percent — as booming chip prices amplified the gains from the AI-driven semiconductor boom. Real gross domestic product expanded 1.8 percent from the previous quarter in the January-March period, according to the Bank of Korea on Tuesday. Real gross national income, a broader measure of purchasing power, jumped 9.2 percent over the same period, more than five times the pace of GDP growth and the strongest on record. The data further underlined how the global race to build artificial intelligence infrastructure is reshaping South Korea's economy, with soaring semiconductor prices boosting national income far faster than production itself. The economy grew 3.8 percent from a year earlier, up from a preliminary estimate of 3.6 percent released in April and marking the fastest annual expansion since the first quarter of 2021. The quarterly growth rate was the strongest since the third quarter of 2020, when the economy expanded 2.3 percent. The upward revision reflected newly available data for the final month of the quarter, which showed stronger facilities investment and private consumption than initially estimated. Facilities investment was revised upward by 1.8 percentage points from the advance estimate, while private consumption was raised by 0.1 percentage point. The gap between GDP and GNI reflected improved terms of trade and rising income earned abroad. Real net factor income from overseas climbed to 11.6 trillion won ($7.56 billion) in the first quarter from 8.2 trillion won in the previous quarter, while higher semiconductor export prices boosted the purchasing power of income generated from the same volume of exports. A key factor behind the surge was real gross domestic income (GDI), which measures the real purchasing power generated from domestic production. While GDP shows how much the economy produced, GDI shows how much real income that production created after changes in export and import prices. Real GDI rose 8.7 percent on quarter and 13.2 percent from a year earlier. "Real GDP shows the volume of goods and services produced by a country, while real GDI shows the real purchasing power of income," Kim Hwa-yong, director general of the BOK's national accounts department, said during a briefing. "Even if the same volume is exported, higher export prices and lower import prices increase the resources available for consumption and investment." Kim compared the economy to a semiconductor company. "GDP would show how many chips were produced, while GDI would reflect how much income was actually earned from selling them," he said. He added that higher export prices and lower raw material costs would push up real GDI. The strong data supported the Korean capital markets after suffering one of the worst Black Monday sessions. Yields on both the three-year and 10-year government bonds fell more than 4 basis points in morning trading, while the benchmark KOSPI rose more than 3 percent. The U.S. dollar, which had climbed above 1,550 won, retreated sharply to 1,516.70 won. Korea's broad economic performance in the first quarter was literally defined by semiconductors. The central bank said information and communications technology industries contributed a record 19.9 percent of overall economic growth during the quarter, fueled by surging demand for AI-related chips and related investment. Manufacturing output rose 3.9 percent from the previous quarter, led by computers, electronics and optical products. Production of computers, electronics and optical products jumped 12.5 percent, while ICT manufacturing surged 15.4 percent. In contrast, non-ICT manufacturing contracted 0.9 percent, highlighting the widening gap between semiconductor-related industries and the rest of the economy. The divergence points to an increasingly uneven recovery in which a handful of AI-linked industries are driving growth while broader manufacturing remains comparatively subdued. Exports rose 5.9 percent from the previous quarter, led by semiconductors and other IT products, while imports increased 3.9 percent on stronger purchases of machinery, equipment and automobiles. Facilities investment jumped 6.6 percent, reversing a decline in the previous quarter as companies stepped up spending on machinery and transportation equipment. Private consumption rose 0.6 percent as spending increased on both goods and services, including clothing and finance-related services. Construction investment increased 1.4 percent, snapping a prolonged downturn as both building construction and civil engineering projects improved. Construction output itself rose 2.2 percent from the previous quarter, the first meaningful rebound after a string of quarterly declines, although the sector remained 3.9 percent smaller than a year earlier. Government consumption fell 0.4 percent, mainly due to lower health insurance benefit payments. On the production side, services expanded a modest 0.6 percent, supported by wholesale and retail trade, accommodation and food services, and finance and insurance. Financial and insurance activities rose 2.4 percent, reflecting strength in financial investment institutions and related services, while transport and information and communications services contracted. The semiconductor boom also generated a sharp increase in corporate earnings. Nominal GDP expanded 10.5 percent from the previous quarter and 17.1 percent from a year earlier, while nominal GNI increased 11.0 percent quarter-on-quarter and 17.1 percent year-on-year. Employee compensation rose 4.0 percent from the previous quarter, but total operating surplus, a broad measure of corporate profits, surged 17.0 percent, indicating that much of the windfall accrued to companies rather than households. The GDP deflator climbed 12.9 percent from a year earlier. Kim cautioned against interpreting the surge in nominal GDP as a sign of runaway inflation. "The expansion in nominal GDP growth was not due to a surge in domestic prices, but was driven by higher export prices centered on semiconductors," Kim said. "It is different in nature from the periods in the 1970s and 1980s, when nominal growth rose because of cost-push inflation." The income surge also transformed the nation's saving and investment profile. Korea's gross saving rate rose to 41.7 percent in the first quarter from 36.0 percent in the previous quarter, while the gross domestic investment ratio fell to 25.3 percent from 28.2 percent. The household net saving rate, however, slipped to 8.8 percent from 9.1 percent, as high interest rates and a weaker won reduced room for savings. June 9, 2026 11:55 -
Korea's Q1 GDP strongest since Q3 2020 as chip sector drives one-fifth of growth SEOUL, June 09 (AJP) - South Korea's economy expanded at its fastest pace in more than four years in the first quarter, driven by a semiconductor-led investment and export boom that drove near one-fifth of the growth, central bank data showed Tuesday. Real gross domestic product (GDP) grew 1.8 percent from the previous quarter and 3.8 percent from a year earlier in the January-March period, according to the Bank of Korea's final estimate. The figures were revised up from preliminary growth rates of 1.7 percent quarter-on-quarter and 3.6 percent year-on-year released in April. The quarterly expansion was the strongest since the fourth quarter of 2021, when the economy also grew 1.8 percent, while the annual growth rate marked the fastest pace since the 4.1 percent recorded in the third quarter of 2020. The upward revision reflected newly available data for the final month of the quarter, which showed stronger facilities investment and private consumption than initially estimated. The data underscored the outsized role of Korea's semiconductor sector in the current expansion. Information technology industries contributed a record 19.9 percent of overall economic growth, fueled by booming demand for artificial intelligence-related chips and related investment. Manufacturing output rose 3.9 percent from the previous quarter, driven by computers, electronics and optical products. ICT manufacturing output surged 15.4 percent, while non-ICT manufacturing contracted 0.9 percent, highlighting the widening gap between semiconductor-related industries and the rest of the industrial sector. On the expenditure side, facilities investment jumped 6.6 percent from the previous quarter, reversing a decline in the preceding period as companies expanded spending on machinery and transportation equipment. Exports rose 5.9 percent, led by semiconductors and other IT products, while imports increased 3.9 percent on stronger purchases of machinery, equipment and automobiles. Private consumption grew 0.6 percent as spending on both goods and services increased. Construction investment rose 1.4 percent, snapping a string of quarterly declines, while government consumption fell 0.4 percent due largely to lower health insurance benefit payments. Real gross national income (GNI), a broader measure of national purchasing power, surged 9.2 percent from the previous quarter, far outpacing GDP growth and accelerating from a 1.8 percent increase in the fourth quarter, as a weak won and soaring chip prices improved South Korea's terms of trade while lifting income earned from exports and overseas investments Real net factor income from abroad rose to 11.6 trillion won ($7.56 billion) in the first quarter from 8.2 trillion won in the previous quarter. Nominal GDP expanded 10.5 percent from the previous quarter and 17.1 percent from a year earlier, while nominal GNI rose 11.0 percent on quarter. The GDP deflator climbed 12.9 percent from a year earlier, reflecting higher export prices and stronger corporate earnings. June 9, 2026 09:54 -
Lee Jong-eun, President of the Korean International Finance Association, Calls for Cautious Central Bank Communication Monetary policy is significantly influenced not only by its content but also by how central banks communicate. Recently, there has been a divergence of opinions regarding forward guidance, a method used by central banks to signal future interest rate paths and manage market expectations. Particularly, views on forward guidance, an unconventional monetary policy tool, are mixed. While it aims to reduce uncertainty in the market and enhance the effectiveness of monetary policy, critics argue that it can constrain the central banks flexibility and lead to excessive market expectations. Kevin Warsh, the new chair of the Federal Reserve, is also expected to scale back forward guidance. In South Korea, attention has turned to changes in central bank communication since Shin Hyun-sung took office as the governor of the Bank of Korea. Before his appointment, Shin stated, If there is genuine uncertainty about the underlying direction of the economy, it is appropriate not to provide guidance. In a foreign media interview last year, he remarked, The market gets fixated on headlines. Consequently, there is keen interest in how Shin will communicate with the market following his appointment. As perspectives on central bank communication vary, Lee Jong-eun, president of the Korean International Finance Association, commented, The ambiguous expressions used under Jerome Powells Fed have exacerbated market confusion. Honest communication that conveys uncertainty, as Shin does, is preferable and does not harm the real economy. Regarding forward guidance and dot plots, he expressed skepticism, stating, The dot plot has had many negative effects. Lee graduated from Seoul National University and earned a masters degree in economics from the London School of Economics and a Ph.D. from Queen Mary University of London. He has been a professor in the Department of Economics at Sejong University since 2000 and served as a policy advisor in the Economic Department of the OECD from 2008 to 2009. He has also collaborated with various domestic institutions, including the Ministry of Trade, Industry and Energy, the Ministry of Economy and Finance, the Bank of Korea, the Financial Supervisory Service, and the National Pension Service.* This article has been translated by AI. June 8, 2026 18:36 -
Won recovers after verbal intervention while bond sell-off deepens SEOUL, June 8 (AJP) - The South Korean won slightly recovered on Monday after a series of verbal warnings from financial authorities, which prompted traders to pull back from their dollar bets. There was also speculation that authorities may have directly intervened in the market. In Seoul, the won closed at 1,548.2 per dollar after opening at 1,555.2 and briefly rising to 1,560 before reversing sharply in morning trade. The turnaround was largely attributed to policy intervention. Yun Kyung-soo, director general of the international department at the Bank of Korea (BOK), and Lee Hyung-ryul, director general of the international finance bureau at the Ministry of Economy and Finance, issued a joint statement, warning that authorities will "never tolerate excessive volatility and one-way herd behavior decoupled from economic fundamentals and will respond strongly." The statement followed two emergency meetings held on last Thursday and Sunday by top economic and financial policymakers including Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol and BOK governor Shin Hyun-song. The Sunday meeting marked the first weekend market-monitoring meeting in about a year and a half since Dec. 8, 2024, when authorities met in the aftermath of disgraced ex-President Yoon Suk Yeol's botched martial law debacle. The unusually strong warning appeared to gain traction after earlier verbal interventions failed to calm the volatile currency market. Market participants also raised the possibility that authorities may have supplied dollar liquidity through smoothing operations, noting that the exchange rate had already started to retreat from its intraday high about an hour before the official statement was released. "Direct smoothing operations cannot be officially confirmed, but we are seeing tangible moves to cushion the won," an FX trader said on condition of anonymity. Despite the won's recovery, the bond market extended its selloff, as investors grew more convinced that persistent currency pressure could force BOK to keep a hawkish policy stance. The debt market came under heavier pressure as the benchmark three-year government bond yield rose 5.8 basis points to 3.940 percent, while the 10-year yield jumped 9.4 basis points to 4.348 percent, with both reaching their highest levels in about two years and seven months since November 2023. The bond selloff deepened as investors interpreted the authorities' defense of the won as a sign that currency weakness has become a more urgent policy concern. That added to expectations that the BOK will maintain a hawkish stance, or even raise rates, if exchange-rate volatility continues to threaten inflation and financial stability. Analysts said downward pressure on bond prices is likely to persist until the market sees a clearer policy response from the central bank. "Expectations that the BOK will raise the benchmark rate to around 3 percent, or possibly as high as 3.25 percent this year, are now being treated almost as a foregone conclusion," said Park Ju-noo, an analyst at Hana Securities. "Investors need to prepare for a scenario in which the three-year yield breaks above the 4 percent threshold." June 8, 2026 17:34 -
Fear of rate hikes drives corporate lending surge in Q1 SEOUL, June 8 (AJP) - Corporate loans in South Korea grew the most since the third quarter of 2022, as companies increased borrowing in the first three months of this year, according to data released by the Bank of Korea (BOK) on Monday. Outstanding industrial loans by deposit-taking institutions stood at 2,061.8 trillion won (US$1.33 trillion) at the end of March, up 35.6 trillion won from the previous quarter. The increase widened sharply from an 8.5 trillion won gain in the fourth quarter. The central bank cited seasonal factors, productive finance, and renewed credit-line borrowing all contributed to the increase, but the widespread rise suggested stronger demand for funds ahead of a potential interest rate hike by the BOK. By industry, loans to manufacturers rose 11.1 trillion won, compared with a 1.2 trillion won increase in the previous quarter. Loans to service companies increased by 24 trillion won, up from a 9.2 trillion won gain, while construction loans rose by 400 billion won, turning positive for the first time in seven quarters. In particular, working-capital loans showed the sharpest increase as they jumped by 26.2 trillion won in the first quarter, far above the previous quarter's 1.9 trillion won increase. Facility loans also rose by 9.4 trillion won. "The expansion in working-capital loans was driven partly by the re-extension of credit lines that companies had temporarily repaid at the end of last year to manage financial ratios," said Lee Hye-young, an BOK official. "Facility loans in both manufacturing and services also saw faster growth," she added. Lee also said increased corporate lending by financial institutions under the government's productive finance drive contributed to the rise. Since late last year, the government has promoted productive finance as a key policy goal, seeking to redirect capital away from real estate and household lending toward corporate investment and regional development. By lender type, loans by deposit banks increased by 25 trillion won, compared with a 9.6 trillion won gain in the previous quarter. Loans by non-bank deposit-taking institutions rose by 10.6 trillion won, reversing a 1.1 trillion won decline. Among deposit bank loans, lending to large companies increased by 12.7 trillion won, while loans to small and medium-sized enterprises rose by 11.6 trillion won. Within the service sector, loans to financial and insurance companies increased by 9.8 trillion won, while loans to wholesale and retail businesses rose by 4.9 trillion won. Faster loan growth could become a burden if it overlaps with monetary tightening. With companies already increasing debt, higher benchmark and market rates could quickly lift interest expenses. The pressure would be especially direct for working capital, or short-term funds used for wages, interest payments and raw material purchases. Construction and non-bank lending also remain risk points. Higher rates could add refinancing pressure on weaker developers and prompt non-bank lenders to tighten standards if bad-loan risks rise. The BOK said the latest loan increase remains manageable. "There have been much larger increases in the past, so in absolute terms, the current level does not appear excessively large," Lee said, asked whether it could raise credit risks. June 8, 2026 15:14 -
Foreign Investors Sell 57 Trillion Won in Samsung, SK Hynix Amid Month of Net Selling ◆Ajou Economic Key News ▷Foreign investors have sold 57 trillion won in Samsung Electronics and SK Hynix for a month straight - Foreign investors have aggressively sold off shares in Samsung Electronics and SK Hynix. - Over the past month, foreign investors have net sold approximately 69 trillion won in the domestic stock market, with the sell-off heavily concentrated in Samsung Electronics and SK Hynix. Meanwhile, individual and institutional investors have countered with significant net purchases, helping to defend the KOSPI index above the 8000 mark. - According to the Korea Exchange on June 7, from May 7 to June 5, foreign investors net sold 69.4 trillion won in the KOSPI market. During the same period, individuals net purchased 56.4 trillion won, and institutions net bought 12.1 trillion won, absorbing the foreign sell-off. - The foreign selling has been particularly focused on large-cap semiconductor stocks. Samsung Electronics topped the list with a net sell of 30.1 trillion won, while SK Hynix saw a net sell of 27.3 trillion won. Together, these two stocks accounted for the majority of the total foreign net selling. ◆Major Reports: Sudden Shift in Market Sentiment [SK Securities] - Following a significant drop in the domestic stock market on Friday, the KOSPI 200 futures saw an additional 8% decline due to surprising U.S. employment data, indicating a continued downward trend in the U.S. market with diminishing buying interest. - With limited catalysts to revive market sentiment over the weekend, a negative reaction at the start of the week is likely. - While it is generally observed that corrections in a bull market tend to hit the sectors that have risen the most, the narrative surrounding AI, which is currently driving the market, is evidently unfavorable. - This week, key variables include the upcoming SpaceX listing on June 12, the U.S. Consumer Price Index (CPI) report for May, and earnings announcements from Oracle and Adobe. - The market is particularly focused on whether Oracle and Adobe can replicate the beat and raise performance seen with Broadcom, whether the CPI report will show stability, and if the European Central Bank (ECB) will proceed with a 25 basis point rate hike as expected. ◆Major Announcements After Market Close (June 5) ▷Taeyoung Construction has secured a contract worth approximately 1.208 trillion won from Busan Urban Corporation for the construction of a multi-purpose administrative town in western Busan. ▷Shinsegae Engineering has won a contract worth about 10.1 billion won from Waybis for cleanroom and utility facility construction. ▷DL E&C has received a conditional purchase order worth approximately 499.9 billion won from Korea East-West Power for the installation of power blocks and ancillary facilities at a clean energy complex in Jeju. ▷Hansol Technics has decided to dispose of land and buildings at its Ochang plant in Chungbuk for a total of 64 billion won to improve management efficiency and financial structure. ◆Fund Trends (as of June 4, excluding ETFs) ▷Domestic equity funds: 1.025 trillion won ▷Foreign equity funds: -223 billion won ◆Key Schedule for Today (June 8) ▷Japan: GDP growth rate (Q1) ▷Germany: Factory orders (April) ▷Eurozone: Sentix Investor Confidence Index (June) ▷U.S.: Employment Trends Index (May)* This article has been translated by AI. June 8, 2026 07:45 -
May Currency Trends: Average Exchange Rate Hits 1490 Won Amid Middle East Conflict The won-dollar exchange rate has surged to its highest level since the financial crisis due to geopolitical risks stemming from the Middle East. As U.S.-Iran peace negotiations stall, international oil prices have skyrocketed, exacerbating the downward pressure on the won amid foreign capital outflows. According to the Bank of Koreas economic statistics system, the average exchange rate for the won against the U.S. dollar last month was recorded at 1491.26 won. The exchange rate fell to 1439.0 won during trading on June 6, buoyed by optimism surrounding U.S.-Iran peace talks. However, as negotiations prolonged and military tensions in the region escalated, the rate reversed course. On May 22, it peaked at 1519.5 won, reflecting a significant fluctuation of around 80 won within the month. The primary driver of the rising exchange rate is identified as geopolitical instability in the Middle East. Concerns over prolonged conflict and rising international oil prices are placing additional burdens on South Koreas economy, which is heavily reliant on energy imports, thereby increasing downward pressure on the won. This situation has been compounded by foreign investors selling off domestic stocks and increased demand for dollars. The upward trend in the exchange rate has continued into June. On June 6, during overnight trading, the rate reached 1561.5 won, marking the highest level since March 6, 2009, during the global financial crisis (with an intraday high of 1597.0 won). Consequently, the average exchange rate for the second quarter has also risen to its highest level since the financial crisis. From the beginning of the second quarter until June 5, the average exchange rate was recorded at 1490.98 won, the highest level in nearly 28 years since the first quarter of 1998 (1596.88 won). On an annual basis, the exchange rate is trending towards record highs. So far this year, the average exchange rate stands at 1477.06 won, significantly exceeding last years average of 1420.97 won. In fact, at airport currency exchange counters, the cash purchase rate for dollars has already surpassed 1600 won. As of June 6, Hana Banks airport branch reported a cash selling rate of 1624.0 won for dollars. Market analysts believe that the progress of U.S.-Iran peace negotiations will significantly influence the exchange rate this week. Additionally, the U.S. Consumer Price Index (CPI) for May and the European Central Banks (ECB) monetary policy meeting outcomes are also viewed as key variables. The U.S. CPI, set to be released on June 10, is expected to show an annual increase of around 4%. With international oil prices exceeding $90 per barrel, persistent inflationary pressures could diminish expectations for interest rate cuts by the Federal Reserve, leading to a stronger dollar and increased exchange rate pressures. Experts agree that for exchange rate stability, a resolution to the Middle East situation and a decline in international oil prices are prerequisites. While factors such as foreign capital flows and increased overseas investments are important, the direction of the exchange rate is likely to be heavily influenced by oil prices and geopolitical risks. Park Sang-hyun, a researcher at iM Securities, stated, If peace negotiations are concluded soon, international oil prices could drop to the mid-$70s to low $80s per barrel. A decline in oil prices would alleviate inflation concerns and increase downward pressure on interest rates, potentially leading to a weaker dollar. He added, If the Iranian risk is resolved, the exchange rate could quickly drop below 1450 won. While foreign stock sell-offs and supply-demand uncertainties remain, fundamental factors such as economic improvement could offset these concerns significantly.* This article has been translated by AI. June 7, 2026 18:24