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Korea's top fiscal and monetary policymakers vow coordination

South Korea’s top fiscal and monetary policymakers vowed to coordinate in carrying out economic policies at a rare meeting Tuesday, highlighting that their views on the economy were near identical.

Just one day after taking office, new Finance Minister Kim Dong-yeon visited the Bank of Korea’s head office in Seoul to have a lunch meeting with BOK Gov. Lee Ju-yeol. It was the first time in four years that a finance minister had an exclusive meeting with the central bank’s governor.
BOK Gov. Lee Ju-yeol (left) and new Finance Minister Kim Dong-yeon (Yonhap)
BOK Gov. Lee Ju-yeol (left) and new Finance Minister Kim Dong-yeon (Yonhap)

“In our meeting, there was no difference in our views on the economy. I said the BOK will closely work with the government,” BOK Gov. Lee Ju-yeol told reporters after the closed-door meeting.

The BOK and the Finance Ministry said in a joint statement that the government and the bank will use a fiscal and monetary “policy mix” to create jobs, boost growth potential and manage risks.

Kim said he wanted to visit the BOK as soon as possible because “he regarded the bank as very important in the Korean economy and wanted to pay respects to the governor.”

Their meeting came a day after the BOK chief hinted at monetary tightening on the condition that economic recovery accelerates.

Some observers raised concerns that the BOK’s tightening stance might clash with the government’s efforts to seek an extra budget to boost growth.

But Lee told reporters that it was “wrong” to call it monetary tightening.

“It’s not tightening. What I meant (on Monday) was that the BOK would maintain an expansionary stance to support growth,” he said. The BOK’s base rate is at a record low of 1.25 percent now.

Kim said he told Lee about the government’s efforts to create jobs through an extra budget and shared that the two had the same views on the Korean economy.

Meanwhile, in an earlier meeting with economy-related ministers, Kim warned of real estate speculation.

“I’m closely monitoring the overheating of the real estate market in some parts of Seoul. I want to make it clear that I will not tolerate real estate speculation,” Kim said at the meeting with the economy-related ministers in Seoul.

“To root out illegal acts, I will ask related ministries to dispatch officials to check overheating regions this week.”

Immediately after the meeting, the Land Ministry announced it would work with the National Tax Service and local governments to see if there is any illegal transfer of home purchasing rights or illegal sales of bank accounts designated for apartment applications in overheated districts in Seoul such as Gangnam and Seocho.

The new Moon Jae-in government will soon come up with fresh measures to stabilize rising home prices in affluent southern Seoul. The financial authorities are reviewing whether to tighten mortgage lending rules by bringing the cap ratios of debt-to-income and loan-to-value back to 2014’s 50-60 percent level from the current 60 percent and 70 percent, respectively.

As for upcoming real estate policies, Kim said the government will selectively use measures only in overheated districts so that new regulations would not hurt the overall demand of the property market.

Asked by reporters whether new measures would include designating speculative zones, he only said “it was under discussion among related ministries.”

By Kim Yoon-mi (yoonmi@heraldcorp.com)
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