The South Korean government will adjust the share of long-term Treasury bond issuance to address recent increases in financial and foreign exchange market volatility, and will release a won globalization roadmap this month. The government also diagnosed that the semiconductor-centered stock market structure is amplifying market volatility, stressing the need to foster non-IT industries such as bio, defense, and aerospace.
Koo Yun-cheol, deputy prime minister and minister of economy and finance, held a market situation review meeting at the Seoul Government Complex on Monday to discuss recent trends in the financial and foreign exchange markets and response measures. Bank of Korea Governor Shin Hyun-song, Financial Services Commission Vice Chairman Kwon Dae-young, and Financial Supervisory Service Senior Deputy Governor Lee Se-hoon attended the meeting.
Participants assessed that while the economic trend is favorable, with exports and the current account balance reaching record-high levels, volatility in domestic financial and foreign exchange markets remains high due to expectations of rising global policy rates and continued foreign capital outflows. Accordingly, they decided to manage macroeconomic policy by comprehensively considering growth, prices, financial market stability, and the livelihood economy, while continuing sector-specific market stabilization measures.
As a bond market stabilization measure, the government decided to adjust the share of long-term Treasury bond issuance in line with market conditions. Although Treasury bond yield volatility has eased somewhat recently, the government plans to flexibly manage the issuance structure by considering market supply and demand conditions, as future changes in domestic and overseas monetary policy could act as a variable.
Regarding the foreign exchange market, the government decided to strengthen its response system in line with the 24-hour foreign exchange market operation that began on the 6th of this month. The government plans to expand its 24-hour monitoring system to respond to nighttime market volatility, and to finalize and announce a "won globalization roadmap" this month to improve the convenience of won trading. The roadmap will include measures to enhance the won's convertibility and expand its use in current and capital transactions.
Regarding the stock market, the government analyzed that the recent correction was influenced by profit-taking by foreign and institutional investors, portfolio rebalancing, and the global artificial intelligence (AI) economic outlook. The government said it will continuously monitor risk factors that could trigger excessive volatility.
The meeting also reviewed economic trends by industry. Participants diagnosed that economic differentiation is emerging between the semiconductor-centered IT sector and the non-IT sector, and that the growing impact of fluctuations in the semiconductor industry on the overall stock market is acting as a factor amplifying financial market volatility. Accordingly, they agreed on the need to diversify the industrial base by enhancing the competitiveness of key industries such as semiconductors and AI, while actively fostering non-IT new growth industries such as bio, defense, and aerospace.
