Lee Chang-yong, the Governor of the Bank of Korea, expressed that he cannot deny his "embarrassment" regarding the "unprecedented absence of an economic leader." Citing policy uncertainty as the biggest risk factor for the South Korean economy ahead of the presidential election, Governor Lee emphasized the need for continuity on major economic issues such as tariff negotiations with the United States.
◇South Korea's 'uncertainty' draws attention as the biggest issue... negotiations with the U.S. are in turmoil
On the 5th (local time), the Governor held a press conference for a group of Korean journalists at a hotel in Milan, Italy, stating, "The biggest topic related to Korea at this Asia Development Bank (ADB) annual meeting was uncertainty."
This stance from the Governor comes after the resignation of former Deputy Prime Minister and Minister of Economy and Finance Shinhyung on the 1st. He remarked, "The system for negotiating with the U.S. is shaken by negative impacts, and thus our country's investments will also be affected."
In fact, South Korea's economic diplomacy faced a virtual 'all-stop' situation following the resignation of the former Deputy Prime Minister. The U.S. raised the issue of foreign exchange in tariff negotiations, heightening the importance of meetings among finance ministers globally, but finance minister-level meetings were subsequently canceled.
Immediately, the upcoming finance ministers' meetings between South Korea and Japan and South Korea and India have been canceled. Instead, Choi Ji-young, Deputy Minister of the Ministry of Economy and Finance, attended the ministerial-level meetings of finance ministers and central bank governors of South Korea, Japan, China, and ASEAN+3 held in Milan on the 4th, as well as the 58th ADB annual meeting from the 4th to 7th.
The finance ministers' and central bank governors' meeting of ASEAN+3 consists of 10 Southeast Asian countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam – along with South Korea, Japan, and China.
The former Deputy Prime Minister was scheduled to meet with key finance ministers at these meetings. Since the Korean representative holds the position of Deputy Minister, the levels of the two countries did not match, resulting in the cancellation of ministerial-level meetings. Concerns have been raised that the 'hotline' with U.S. Treasury Secretary Steven Mnuchin leading tariff discussions has effectively been suspended.
The Governor also hinted that the management of South Korea's external credibility, which has established itself as a 'control tower' for economic issues after the military coup of December 3, has faced setbacks, as he and the former Deputy Prime Minister have been leading F4 meetings as a 'two-top' system. The former Deputy Prime Minister's departure has impacted their leadership.
He noted, "It is true that the morale of F4 meeting participants has significantly decreased due to a series of recent events," but emphasized, "Despite this situation, the remaining individuals have a responsibility to make every effort for the national interest."
◇Even with domestic uncertainty, it must be controlled... "Policy continuity must be guaranteed"
He also expressed that policy continuity must be guaranteed regardless of the political situation. In particular, he directly rebutted the Democratic Party of Korea's stance, which has opposed the acting government's tariff negotiations with the U.S., arguing, "The negotiation role should be passed to the new government."
The Governor stated, "The U.S. tariff exemption measure will end on July 9, and South Korea must work to achieve its wishes regarding reciprocal tariffs as well as tariffs on aluminum and automobiles before that," adding, "Negotiations should proceed regardless of the outcome of the June 3 election."
He further stated, "Equity-based housing finance (mortgage) systems, of which the public policy financing institution, Korea Housing Finance Corporation, participates as an equity investor, should be maintained even if a new Deputy Prime Minister is appointed, as they are policies established through government organization analyses."
Equity-based mortgages refer to the method where the Korea Housing Finance Corporation participates as an equity investor when individuals purchase homes, aimed at reducing the initial financial burden during home purchases to support young people and those without homes who lack financial resources.
The Governor stated, "Unlike other countries, South Korea faces significant domestic uncertainty as well as external uncertainty," adding, "While external uncertainties will not disappear easily, domestic uncertainties must be quelled as soon as possible."
Regarding the Monetary Policy Committee meeting scheduled for the 29th, just five days ahead of the presidential election, he said, "The committee members decided to make judgments based on data without considering the election." He noted, "There will be a rate cut. However, the key is to control the speed," adding, "We will assess how it impacts the economy and exchange rate."