00:00Are you hoping to see more measures from the government to rein in the property sector
00:05before cutting rates further?
00:07I think from a Bank of Korea's perspective, we don't believe that monetary policy alone
00:14can control the housing prices.
00:16But on the other hand, we are mindful that ample liquidity wouldn't throw the fire to
00:24the real estate market.
00:27We need to coordinate, there are a lot of government policy that has to be coordinated, not in
00:32the short-term, but in longer-term perspectives.
00:34And I think government is considering new supply policies together with many other policies.
00:41So we'll see how it's going to affect.
00:43I don't think that it's going to have a very short-term impact on the price itself.
00:50But at least I hope to see the slowdown of the rapid increase of housing prices in metropolitan
00:57areas.
00:58So rate cuts are still on the table.
01:00Some say, why?
01:02Because when you take a look at GDP, it's coming, well, higher than expected, and trade looks
01:08pretty resilient.
01:09Yes.
01:10But if you look at our growth focus at this moment, in six months ago, we forecast that
01:15this year's growth rate is 0.9%, well below our potential GDP growth rate, and 1.6% for
01:22next year.
01:23We will have a new forecast released in two weeks later.
01:27And we'll see how much it's going to be, I mean, there's upside potential, so how much
01:31it's going to be revised.
01:32And after that, we probably have to decide how we're going to adjust our monetary policy.
01:37But at this moment, given the negative output gaps here, our official position is that we
01:44will maintain the easing monetary cycle.
01:48But the magnitude and timing of the cut, or even the change of direction, will depend on
01:53the new data that we'll see.
01:55You talk about how growth is below potential.
01:58What is potential?
01:59Where do you see, where do you hope growth will be?
02:02At this moment, because of the rapid ageing, our potential GDP growth rate is probably in
02:08between 1.8% and 2%.
02:10Let's take a look at the bond market, because it seems to be sending a different signal,
02:15right?
02:16Yields have been surging to levels, perhaps that suggest that rate cuts are no longer needed,
02:22perhaps even a rate hike, maybe in the making.
02:26Is the bond market, are the bond traders misguided in thinking that?
02:30I think there is some section of the bond market traders who believe that's so.
02:34But I think at this moment, our bond market yield reacts not only to the domestic factors, but
02:40also global factors, such as the possibility of the U.S. fair decision, and also the dollar
02:49strength.
02:50For example, like six months ago, many market participants believed that the dollar will
02:55be more weakened.
02:56It looks like there is some revision of that view, too.
02:59So I think that that's the difficulties, where our bond market is now reacting not only domestic
03:05factors, but also international factors.
03:07So we have to consider both.
03:08Are you concerned?
03:09Is there a need, perhaps, for the BOK to implement measures to rein in the yields that are surging
03:15at this point in time?
03:16Yes, definitely, because that will affect our monetary transmission mechanism.
03:24You know that we have cut our interest rate 100 BP from last October, and we were easing
03:29cycle.
03:30But from last August, the rise of the housing prices in the metropolitan area was way above
03:37our expectation.
03:39That dominates our concerns.
03:41Now, with the new government policies and the new, especially after the trade deal and
03:46the investment package was agreed with the U.S., we have to now see how much the upside
03:51contain moves in our economic activities, too.
03:55So probably in two weeks later, when we see our new economic forecast, we have to revisit these
04:01issues again.
04:02The trade deal, any thoughts on it?
04:04Was it a successful trade deal, you think, beneficial to Korea?
04:10I would say that it was a good development that both leaders has agreed on the trade and investment
04:16packages, which reduced, helped to reduce the bunch of uncertainties regarding the tariff.
04:25After the summit, our, you know, working level officials are refining the MOU and the fact sheets.
04:36From Korea's perspective, in order to implement this deal, we need a parliamentary approval
04:42and also the enactment of the new law.
04:46So we have to see.
04:48But I think at this moment, what is important at this moment is we both United States and
04:53Korea has to find the project which is commercially viable and also win and win for both countries.
05:00In my opinion, it will be really nice to see that some joint ventures which combine the
05:07strengths of the United States, which is strength in basic science, with the strengths of Korea,
05:12which is strength in application and manufacturing technology.
05:17One of the key focus has been the $350 billion investment fund in the US.
05:23That has been the reason cited for the weakness in the one.
05:27Negotiations have concluded, yet the one is still among the weakest currencies in Asia in the last three months.
05:33Why do you think that it's so?
05:34I think there are too many factors in the last two to three months which affect our exchange rate.
05:42One is, let's say, the AI stock prices, volatility in AI stock prices, related stock price in the United States,
05:52which affect our stock price too.
05:55And the shutdown of the US economy, which makes many data unavailable and there is uncertainty about the US Fed policy and the dollar strength.
06:07And the new Japan administration and what kind of macro policy they will do, which affect the weakness of yen and maybe the future directions.
06:16And then also, as we discussed at the agreement in the APEX Summit in Gyeongju in Korea, that includes the US-China trade relationship and also US-Korea trade and investment packages.
06:30So there are so many factors at this moment.
06:33And then I think I need to see the fog too clear before we see the new direction.
06:40But as you mentioned, I think our market, in my personal opinion, is excessively sensitive to those uncertainties.
06:47So given the fog that you mentioned, that depreciation in the one, is that too excessive or is that actually reflecting the fundamentals of the Korean economy?
06:56It's very hard to judge at this moment because there are so many fundamentals moving around and especially the factors that I mentioned.
07:07So I need to see how this uncertainty will go in the future direction.
07:12So, but on the other hand, I say that this is not a, I have less concern on financial stability wise because these days the Korean exchange rate move was mostly dominated by the domestic investment abroad.
07:27So in that sense, our foreign currency debt level is actually stable, is not big.
07:36And all other indicators suggest the strength and the soundness of our market.
07:41So I'm not worried about financial stability wise, but in that sense, but on the other hand, because of the large movement of the resident portfolio, there is volatility in the exchange rate itself.
07:53And it can be excessive or we have to see it.
07:57Yeah.
07:58So as it stands right now, no reason for the BOK to intervene to support the level of the current rod.
08:04Nice try, but I won't comment on it.
08:06There's no fair value of the current currency at this point in time?
08:09We see the volatility and when we see the excessive movement, we are willing to intervene.
08:16Some say the excessive movement is actually seen in the stock market because we in excess of 70%.
08:22Is there reason to be concerned about the surge in the stock market in Korea?
08:27No.
08:28If you look at our price burning and all the PBR as in price per ratio, even with the heightened increase of stock prices, see our PR is 1.1, well below the other countries level.
08:45So overall, I think I don't think that our stock is overvalued that much compared with other other countries.
08:53But having said that definitely the recent increase of our stock prices led by the high tech, especially semiconductor industries.
09:02Definitely there is a good news that semiconductor is doing much better than what we have expected.
09:08But on the other hand, our stock prices in semiconductor won't be free from the stock prices of technology stocks in the United States.
09:16So volatility will continue.
09:18Are there hidden risks?
09:19Because as we talk about how the markets are driven mainly by the AI theme, if we see an unraveling, that could be a lot of pain, especially for domestic retail investors in Korea.
09:31Actually, there was a hot topic when I was in BIS last week and how much the stock price generally, especially in this magnitude 7 or the high technology stock price has overstretched.
09:44So it's going to be very hard.
09:45So it's going to be very hard.
09:46You know, there is a lot of discussions.
09:48It will be very hard to know which view is correct.
09:51But I'm a little bit, relatively speaking, I'm a little bit optimistic and less concerned.
09:58If you look at the in Korea, in the AI sector, for example, Korea is very strong in hardware as well as software.
10:05So there is a lot of discussion who's going to be a winner in the AI competition.
10:10But whether this is OpenAI or Google, you know, all these things.
10:15But whoever the winner, it won't change the demand for the hardware, which is semiconductors.
Be the first to comment