Bank of Korea board member Moon Woo-sik sees no immediate need to alter benchmark interest rates and says it is “too early” for any central bank response to the yen’s slide against the South Korean won.
“There are good reasons why people tend to be more optimistic this year than last year,” Moon, 52, said in an interview in Seoul last week.
There is no “important reason to take monetary-policy actions quickly” unless the South Korean economy declines further, he said.
Photo: Bloomberg
Central bank policymakers meet on Thursday next week to set rates as Hyundai Motor Co and Samsung Electronics Co grapple with won gains and the likelihood of economic and fiscal policy shifts after the scheduled Feb. 25 inauguration of South Korean president-elect Park Geun-hye.
Moon said business confidence and investment may gain in South Korea as risks recede from Europe’s debt crisis and the so-called “fiscal cliff” of spending cuts and tax increases in the US.
Policymakers need to “wait and see” as South Korea’s economy shows signs of improving after already hitting bottom, Moon said. “I don’t think we’re in a very urgent situation.”
The South Korean won extended gains after Moon’s comments, rising 1.2 percent to 1,084.78 won per US dollar in Seoul, the biggest advance since December 2011, according to data compiled by Bloomberg.
It depreciated 3.9 percent in the last three weeks and touched 1,098.25 to the US dollar on Friday, the weakest level since Oct. 26 last year.
The won strengthened 1.5 percent to 11.71 won against the Japanese yen yesterday, the most since June last year, adding to gains in seven of the past eight weeks.
While a rate increase is unlikely in the “very near future,” it could become possible if the economy shows unexpected strength and inflation picks up, Moon said. South Korea is likely to “coordinate to some extent” when central banks globally exit from loose monetary policies, he added.
Moon’s view contrasts with Royal Bank of Scotland Group PLC last month forecasting an interest-rate reduction at the next meeting after the central bank pared its forecast for this year’s economic growth to 2.8 percent from an estimate of 3.2 percent in October last year. Analysts at HSBC Holdings PLC and Barclays Capital forecast no change.
Japanese Prime Minister Shinzo Abe’s campaign to expand monetary easing and revive his nation’s economy is driving down the yen, aiding exports of electronics and automobiles in competition with South Korea. The won has gained about 22 percent against the yen in six months.
“We have good reason to be worried about rapid depreciation of the yen,” Moon said.
At the same time, “it is too early” for the Bank of Korea to consider taking any action, he said, adding that policymakers will monitor currency volatility for any effects on economic and price stability.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his