April 21, 2024

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[THE INVESTOR] South Korea’s economic and financial authorities vowed on Sept. 4 to take stern measures to stabilize the market in response to uncertainties triggered by North Korea’s sixth nuclear test the previous day.

“(The North Korean nuclear issue) may have a more than short-term impact on the financial and foreign exchange markets, and could even negatively impact the real economy,” Deputy Prime Minister for Economic Affairs and Finance Minister Kim Dong-yeon said at a meeting of top economic officials held at the Korea Federation of Banks building.

 

Deputy Prime Minister for Economic Affairs and Finance Minister Kim Dong-yeon chairs a meeting of top economic officials on Sept. 4. Ministry of Strategy and Finance.

The meeting was convened to discuss the potential impact of and the countermeasures to Pyongyang’s test of a hydrogen bomb which can be loaded on an intercontinental ballistic missile.

Meetings on the macro economy and financial markets are usually chaired by a vice minister-level official, but in the wake of the North’s largest nuclear provocation, the deputy prime minister said he had decided to take charge of the occasion.

Attending the event were key financial decision-makers including the Bank of Korea Gov. Lee Ju-yeol, Financial Services Commission Chairman Choi Jong-ku and Korean Center for International Finance President Jung Gyu-don.

“As the nuclear test was carried out on Sept. 3, the direct influence on the market is not fully clear, but the international community’s response and the possibility of additional (North Korean) provocations may expand geopolitical risks,” Kim said.

As a contingency plan, the ministry kicked off a joint inspection team encompassing the FSC, KCIF and Financial Supervisory Service to strengthen an around-the-clock watch of the financial market in case of possible turbulence.

“Should we detect any irregularities, we will take immediate and stern actions to stabilize the market,” the top economic policymaker said.

The government also highlighted the nation’s credit standings, seeking to minimize the impact of peninsular affairs.

“We shall take all possible measures to keep up the international creditworthiness by swiftly offering precise information to foreign investors, foreign press and ratings agencies,” the minister said.

In response to government guidelines, the financial supervisor set out to double-check foreign currency reserves and the financial response capacities of local banks.

“We have to stay alert on the likelihood that financial market volatility may expand further,” said FSS chief Zhin Woong-seob, calling for an emergency meeting with bank executives in the afternoon to review their respective foreign currency liquidity ratio.

While the FSS exercised strict control over the market, the FSC took guard against excessive reactions to the North Korean threat.

“I take it as a positive sign that foreign investors are keeping up their net buying and the Japanese yen is relatively stable in the foreign exchange market,” said Choi, in answer to reporters’ questions during a press briefing on the government’s economic policies.

By Bae Hyun-jung/The Korea Herald (tellme@heraldcorp.com)