Exclusive: US, Korea Focusing on Structure of $350B Deal, Not Swap

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00:00We understand that the U.S. investment fund has been very difficult to agree on the details,

00:05and you've told Secretary Besant about the feasibility of having so much cash up front.

00:13Should we be expecting installments in payments then?

00:20Besant has understood that due to the current state of Korea's foreign exchange market,

00:25we cannot pay up front. He understands that.

00:28However, regarding how to proceed on this, with negotiations currently underway with the U.S.,

00:34I ask for your understanding that I cannot yet provide specific details on the plan.

00:40Bank of Korea Governor Lee Chang-yong said that the maximum amount that can be raised in dollars annually

00:46without market disruptions is $20 billion.

00:50Are we looking at around those figures right now?

00:52Yes. The Bank of Korea currently estimates that the maximum amount we can raise without significantly

01:00impacting the foreign exchange market is $20 billion.

01:04What does that mean for upfront payments, though? Does that mean front-loading some and then paying annually?

01:11Regarding that aspect, we are keeping various possibilities open for the foreign exchange market

01:19and are currently in negotiations with the United States.

01:23Because that's one of the options that you've talked to Secretary Besant and to Washington about?

01:27I cannot confirm that at this time.

01:34However, Secretary Besant fully understands the difficulties in Korea's FX market

01:39and is having internal discussions on how to respond to the situation.

01:45Because of the potential financial shocks to South Korea,

01:49there was a lot of talk about a potential currency swap agreement.

01:52Whether a currency swap is needed and to what extent will depend entirely on how the deal is structured.

02:06It may not be necessary at all, or it could be arranged on a smaller scale.

02:11Therefore, the currency swap itself is a necessary condition, not a sufficient one.

02:16So, depending on how this deal turns out,

02:19we plan to consult with the U.S. regarding the currency swap aspect as well.

02:26Even if we have a currency swap,

02:28it will be difficult to just blindly provide money to the U.S.

02:32without considering the commercial rationality or viability of the project being selected.

02:36I'm understanding then that this option is still alive.

02:39If that's the case when it comes to perhaps the structure,

02:42could it be something similar as to the Argentina style,

02:46going through the Treasury instead of directly from the Fed?

02:53Regarding the currency swap,

02:54we're not doing it because we lack short-term foreign reserves like Argentina.

02:59It's a situation where Korea needs foreign currency

03:02to make long-term investments as requested by the U.S.

03:06So the U.S. must provide the lacking foreign currency.

03:08Therefore, it doesn't align with the conventional short-term currency swap structure.

03:14So, regarding that aspect,

03:16if we were to engage in a currency swap arrangement with the U.S.,

03:20there are further points that require discussions.

03:23The South Korean won at $1,400 per dollar.

03:27Is that the new normal?

03:28Do you think that reflects fundamentals?

03:30We believe much of the recent depreciation reflects market concern

03:39that the tariff negotiations haven't been finalized.

03:42So, we are currently pursuing negotiations with the U.S.

03:46within a range that doesn't significantly impact Korea's foreign exchange market.

03:50Fortunately, U.S. Treasury Secretary Besant

03:53is fully aware of the situation in Korea's foreign exchange market.

03:56Therefore, once the issue is resolved, that uncertainty will likely fade.

04:01We have seen clearly the impact on South Korean automakers

04:04because the tariffs continue to be, of course, much higher than for Japan,

04:09for Europe, who already, the U.S. has lifted those levies.

04:13What can the government do at this point to support the sector?

04:16In the short term, the government is providing all possible policy support

04:24to automakers and auto parts companies,

04:27facing difficulties due to these higher tariffs compared to the EU and Japan.

04:32We believe that if these negotiations yield some breakthrough,

04:35those issues could also be resolved.

04:38In these ongoing trade negotiations,

04:40is the fact that South Korea would lose its advantage over, say, Japan before the trade deal,

04:48because Korea had a free trade agreement with the U.S.

04:52It had an advantage of around 2.5 percent.

04:56Is that being discussed at this point?

04:58I conveyed that point to President Trump and explained to Besant and Lutnik.

05:07I explained that, since Korea is an FTA partner,

05:11tariffs on Korea are already sufficiently low,

05:13but tariffs on other countries aren't sufficiently low, making it unfair.

05:19Even so, it seems the U.S. isn't very willing to understand that aspect.

05:24In any case, we plan to continue explaining and persuading them.

05:28Because of the exuberance around artificial intelligence,

05:32we are seeing South Korea's stock market on a tear.

05:36Are you concerned that this could be a market bubble?

05:42The current stock market reflects expectations for the Korean economy,

05:47such as enhancing shareholder value in the Korean capital market,

05:51expanding dividends, or resolving unfair practices,

05:54expectations for the modernization of the Korean stock market.

05:59On top of these expectations,

06:01we are actively supporting the core technology economy

06:03to ensure a robust Korean economy that can be a global investment destination.

06:08We are actually looking at one of the elements of the Korean stock market.

06:10That is this specific common product market market.

06:12There is a big range ofhetorical technologies,

06:14which is very much also due to the American stock market.

06:16It is a bit more efficient.

06:17If you are on the other side,

06:18the whole world's展開,

06:21because of the Korean stock market comes in between,

06:22the American stock market report-side market comes in between,

06:24which is a result of its price,

06:25which is not the ability to put into a reprogram technology,

06:26which is the Han Solo-based market.

06:28The second one is the example of the American stock market.

06:30We see it on the 25th market market,

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