Joo sanguine on the Fed

Korea’s deputy finance minister Joo Hyung-hwan said a U.S. rate hike would not have a significant impact on Korea’s finance market.

At a meeting with government officials on macroeconomic affairs at the Export-Import Bank of Korea in Yeouido, western Seoul, held hours after the U.S. Fed’s announcement it would keep its base rate unchanged, Joo said a U.S. rate hike is obviously just around the corner.

“With an imminent U.S. interest rate hike and the possibility of a crisis in Greece [if it defaults on its debt], which could both change conditions on international financial markets, there would be little significant impact on our economy, as those impacts would be mixed factors in both positive and negative ways,” he said.

“If the U.S. Fed raises the rate, it would likely trigger an exit of foreign capital [from Korea to the United States], but a recovery in the U.S. economy would be helpful for restoring our real economy, such as exports,” he said. “Also, the worries on Greece could strengthen demand for safe assets, such as the Japanese yen, and that could strengthen the Japanese yen against the Korean won.”

Joo said the Korean government will continue an “expansionary monetary policy” and try to minimize the impact of Middle East respiratory syndrome (MERS), in order to boost the country’s sagging domestic consumption.

The minister implied the Korean government might be considering a supplementary budget, saying, “If necessary, we will take additional measures to boost the economy.”

At the end of June, the Ministry of Strategy and Finance will announce its plan for policy-making for economic affairs for the second half, including its latest forecast for economic growth this year.

In the upcoming announcement, Finance Minister Choi Kyung-hwan is expected to address the issue of a possible supplementary budget.

So far, Choi has been reluctant to utter the term “supplementary budget.” However, on Tuesday, he said at a meeting with assembly members that he would “express the judgment on a supplementary budget in the announcement for policy-making for the second half.”

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]