President-elect Park Geun-hye on Wednesday pledged to intervene in the currency market aggressively in response to a weaker yen that hurt Korean exporters.
“(I am) aware that a stable foreign exchange rate is a very important issue. (The issue) will be dealt with preemptively and effectively to prevent our businesspeople sustaining damage,” Park said during a meeting with business leaders.
Park made her first remark on the raging global currency dispute during her meeting with the leaders of the Korea International Trade Association who called for stable exchange rates.
|President-elect Park Geun-hye, flanked by Korea Employers Federation chairman Lee Hee-beom (right) and honorary chairman Lee Soo-young (left), speaks at a meeting with business leaders in Seoul on Wednesday. (Ahn Hoon/The Korea Herald)|
Later in the day, she held a meeting with the Korea Employers Association.
The president-elect said that local firms’ difficulties caused by the sluggish global economy will be amplified this year by the rapid growth of companies in China and other emerging nations, and by the weak yen.
The president-elect’s spokesman Park Sun-kyoo later played down the significance of the comments saying that Park did not mean that her government will intervene.
“(Park’s) remarks about responding preemptively and effectively do not mean that the government will intervene actively,” Park Sun-kyoo told reporters.
“It is an expression of the fundamental position of (the president-elect) to pay the issue close attention and to work to stabilize the rates.”
The yen began weakening towards the end of last year, and aided by the Shinzo Abe government’s monetary policies, the yen has fallen by about 20 percent against the dollar since November.
The president-elect’s remarks came as Korea is considering a tax on bond or currency transactions to curb the market instability caused by an infusion of hot money.
“The foreign exchange rate should be determined in the market. But currency volatility tends to increase on speculative forces,” Bank of Korea Governor Kim Choong-soo said in a monthly meeting with local economic experts.
“Making speculative bets, riding on currency volatility, should be stemmed.”
The yen’s weakness coupled with the won’s recent rise is casting a shadow on the export-driven Korean economy and some of its largest conglomerates.
The Korea Automotive Research Institute estimates that a drop of 10 percent in the yen-won exchange rates would result in the automotive industry’s exports falling 12 percent.
Despite the apparent difficulties facing the Korean economy, Park set an ambitious goal for the country saying that her government would lay the foundation for increasing Korea’s trade volume to $2 trillion.
Korea’s annual trade volume surpassed the $1 trillion mark in 2011.
During the meetings, Park repeated that her government will seek growth through its “creative economy” model.
“In order to open the era of 2 trillion won (annual) international trade, all effort will be focused on rolling out effective support (measures),” she said, adding that Korea’s economic development paradigm has to be changed from following advanced nations to that of a “leading economy.”
“The creative-economy model was chosen for the new government as it was judged that (achieving growth) using the same method as before would be difficult,” she said.
“The plan is to find new growth engines, to find new markets and generate jobs through the creative economy that is based on science, technology and creativity.”
By Choi He-suk (firstname.lastname@example.org)