April 20, 2024

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Financial Services Commission Chairman Choi Jong-ku on July 18 undermined any possible retaliation by Japan in the financial sector.

“I know there are some concerns that Japan’s trade retaliation might expand to the financial sector, but I don’t think the chances are high, Choi said.

Even if Japan’s financial institutions withdraw money from South Korea, the impact would be limited, he added, citing domestic lenders’ sound credit ratings.

“Everyone knows that Japan’s export restrictions have nothing to do with the fundamentals of the Korean economy, so should Japan withdraw money from here, it won’t trigger any chain reaction from other countries,” he noted.

“Nevertheless, the government is preparing carefully to cope with all possibilities, while keeping a close eye on developments,” Choi told reporters. 

FSC Chairman Choi Jong-ku (FSC)

Amid the escalating trade row between Seoul and Tokyo, which began when the world’s third-largest economy on July 1 announced tough export curbs on essential chemicals to Korea’s tech sector, some market watchers have been mentioning a possible outflow of Japanese funds from the country.

The total loans by local branches of Japanese lenders amount to 24.7 trillion won ($20.95 billion) as of end-May, according to data from the Financial Supervisory Service. Japanese funds account for 2.3 percent, or 12.47 trillion won, in the domestic stock market and 1.3 percent, or 1.6 trillion won, in the bond markets.

Meanwhile, the chairman, who has been leading the financial authority for two years, announced that he has submitted his intention to resign.

“I had great cooperation with the Fair Trade Commission when Kim Sang-jo was leading the organization,” he said.

Kim was named the new chief policy secretary of President Moon Jae-in on June 21.

“I believe it is important that the FSC and FTC maintain a close partnership and new heads should be appointed for both organizations,” Choi added.

By Park Ga-young (gypark@heraldcorp.com)