The Bank of Korea emphasized that, amid significant uncertainty surrounding the housing market and household loans, it must maintain a consistent policy stance so as not to stimulate expectations of rising home prices.
In its work status report submitted to the National Assembly Strategy and Finance Committee for the annual audit on the 12th, the Bank of Korea stated that “in the short term, uncertainty surrounding the housing market and household loans is significant.” The central bank’s position is that since home prices and household debt issues have not subsided even after the government’s August 13 measures, loan volume regulations and other policies must be sustained.
The central bank assessed that while Seoul apartment prices have shown a downward trend in the three Gangnam districts since August, outlying areas have continued to post high rates of increase, and southern Gyeonggi Province has seen its pace of appreciation expand significantly. It also analyzed that household loans across the financial sector have maintained solid growth led by housing-related lending, driven by these housing market conditions.
The Bank of Korea also expressed concern about the impact of rising 10-year long-term government bond yields in major economies such as the U.S. and Japan on South Korea. It explained that as domestic and international long-term rates move in tandem, South Korea’s market interest rates face additional upward pressure, and the increase in funding costs for households and businesses could widen. As a result, it projected that South Korea’s financial market conditions could tighten going forward, with the possibility of increased volatility in key price variables.
It further noted that as global risk-averse sentiment strengthens, concerns over a slowdown in artificial intelligence (AI) investment combined with valuation burdens could increase stock price volatility.
Regarding the economic outlook, the central bank expected a favorable growth trajectory as the semiconductor upcycle continues and improving income conditions ripple through to consumption and overall domestic demand. However, it pointed out that difficulties for some relatively vulnerable small and medium-sized enterprises and micro-business owners could persist for the time being.
It also mentioned that since the degree of income improvement varies by sector, the risk of insolvency in vulnerable segments could increase during the process of rising interest rates.
On the semiconductor cycle, while expecting the expansion to continue for a considerable period, the Bank of Korea assessed that uncertainty over big tech investment scale remains high, and that over the medium to long term, supply capacity could expand faster than expected due to increased capital expenditure (CAPEX).
Regarding the foreign exchange market, it assessed that since July, the won has shown stronger appreciation than major currencies including the U.S. dollar, reversing the weakness seen in the first half of this year. It also evaluated that external borrowing conditions and foreign currency liquidity remain at favorable levels.
As variables that could increase foreign exchange market volatility going forward, it cited the prolonged Middle East situation, rising U.S. Treasury yields, and uncertainty over the monetary policy paths of major economies including the U.S. Federal Reserve.
The Bank of Korea also noted that regarding won-denominated stablecoins, comprehensive consideration must be given to their macroeconomic impact, including concerns over weakened monetary policy effectiveness, effects on financial stability, and the risk of circumventing capital and foreign exchange regulations.
The news and data on this website are for reference only and do not constitute investment advice or an offer to buy or sell. Information is sourced from exchanges and public sources, and may be delayed, interrupted, or updated. While we strive for accuracy, we do not guarantee timeliness, correctness, or completeness. Content may include external links for which we are not responsible. By using this site, you agree that we and our partners are not liable for any losses. Investment carries full responsibility; please carefully assess risks and consult professionals. If there are errors in the content, please contact us for correction.
About the Author
