Time to get seriousIn alarming developments Monday, the Kosdaq plunged 7.5 percent while the Kospi fell 2.6 percent. The Korean won also dropped sharply. Repercussions from the Sino-U.S. trade war led to a 1.7 percent slip in the Nikkei index and a 1.6 percent decline in the Shanghai Composite Index. But the falls on our bourses were worse. The markets are anxious about Japan’s economic retaliations for the Korean Supreme Court’s rulings last year on wartime forced labor. The jitters over restrictions on exports of materials and parts supplies to Korea have dominated the stock market.
The measures the government has come up with to respond to Japan’s trade restrictions — such as a plan to raise the competitiveness of our parts and materials industry — were hardly convincing. The measures include an annual input of 1 trillion won ($822.4 million) into a government fund, but that is simply an extension of an earlier scheme to invest over 1 trillion won annually to stabilize materials and parts supplies for our mainstay industries.
The plan is also a replica of what the Ministry of Trade and Industry reported to President Moon Jae-in last year. At the time, the ministry pledged to put about 1 trillion won a year into localizing — and globalizing — our parts, materials and equipment. That’s no different from the government’s vision in June to invest 1 trillion won in developing such categories for a renaissance of our economy. Despite imminent danger from Japan’s export curbs, the government is only reiterating earlier promises.
In the afternoon yesterday, Moon himself sent a message to the people. In a meeting with his senior secretaries and advisors, he said Korea can quickly catch up with Japan’s economic superiority if a “peace economy” can be achieved through inter-Korean economic cooperation. The markets’ reactions were blowing off his message of peace with North Korea — especially amid its persistent missile provocations.
The repercussions have extended to the financial sector. During the 1997-98 Asian financial crisis, countless Korean companies and individuals suffered from massive debts after borrowing from Japanese companies. That probably will not be repeated this time, but the signs are not bright. The Korean won’s value plummeted by a whopping five percentage points in just two days after Tokyo’s decision to strip Korea of its preferential trade status. Yet our financial authorities have yet to disclose the amount of loans our companies borrowed from Japan.
Anxieties escalate uncertainty in the markets. The government must devise measures our economic players can trust — way beyond the materials, parts and equipment industries. Moon promised to remove all stifling regulations to revitalize the economy across the board. He should. At the same time, he must get rid of all the obstacles, including the universal implementation of a 52-hour workweek. Only when the government finishes the job can it turn this crisis into an opportunity for another leap forward.
JoongAng Ilbo, Aug. 6, Page 30