Lee Chang-yong ‘Middle East decides on won’ BOJ governor ‘independent response to interest rate bonds’
While Bank of Korea Governor Lee Chang-yong emphasized ‘dependence on the U.S.’ in ‘Middle East’s won decision’, the Bank of Japan Governor confirmed the gap between Korea and Japan to the international market by revealing the right to make independent policy decisions by ‘possible to purchase bonds to raise interest rates due to inflation.’
Bank of Japan Governor Kazuo Ueda told the Peterson Institute for International Economics on Monday that the central bank is "very likely" to raise interest rates if core inflation continues to rise and will begin scaling back large-scale bond purchases at some point in the future.
Regarding Korea's measures in the foreign exchange market at the IMF and G20 Finance Ministers meeting, Bank of Korea Governor Lee Chang-yong said, "It depends on how geopolitical tensions in the Middle East develop. At this point, changes in expectations about U.S. monetary policy have already been reflected in prices." “I hope everyone is trying to relax and see if we can succeed,” he said.
Reuters said in an interview with Governor Lee, “Tensions in the Middle East appear to have stabilized after Iran downplayed Israel’s retaliatory drone attack, but geopolitical uncertainty still poses a risk to the dollar-won market and inflation,” adding, “We need to stabilize the decline in the value of the won.” He said that additional policy measures will depend on how the situation in the Middle East develops,” it was reported on the 19th.
Attending the same meeting as Governor Lee, Governor Ueda said, “Because core inflation remains at a ‘slightly lower’ level than the target of 2% and long-term expected inflation is still close to 1.5%, the central bank has no choice but to maintain an easy monetary policy for the time being. “The BOJ granted more flexibility to policy by ending various non-traditional monetary easing measures in March, and may change its short-term interest rate target depending on how data develops in the future,” he said, revealing the possibility of an interest rate hike.
Japanese Finance Minister Shunichi Suzuki said in a statement to the IMF Steering Committee on the 19th, “Market interest is growing about the timing and speed at which U.S. and European central banks will shift to less restrictive monetary policies,” adding, “There is uncertainty about these developments.” “It is important for exchange rates to move stably reflecting fundamentals, and excessive volatility is undesirable and we will take appropriate measures against excessive movements,” he said.
Regarding Governor Lee's remarks, Reuters said, "This is the latest sign of the growing frustration felt by policymakers in emerging markets as the dollar's strength hurts currencies across Asia." Verbal warnings from South Korean authorities that they were prepared to take 'stabilization' measures did little to prevent the won from falling to a 17-month low, and it was the first joint warning issued since the U.S. trilateral financial dialogue," it said.
Central bank governors and finance ministers from each country attended the International Monetary Fund (IMF) and World Bank (WB) Spring Meeting and the G20 Finance Ministers held in Washington, USA, and the three countries, the United States, Japan, and Korea, discussed the foreign exchange market at the first trilateral financial dialogue on the 17th. The agreement to "closely consult" acknowledged South Korea and Japan's concerns about the recent sharp decline in their currencies.
Japanese officials, under pressure to slow the yen's decline, spent considerable time in Washington this week explaining why they should intervene in foreign exchange markets, and Finance Minister Shunichi Suzuki said in a bilateral meeting with U.S. Treasury Secretary Janet Yellen that day that excessive Reuters reported that he explained that he was prepared to take appropriate action against the movement of the yen.
At the G7 Finance Ministers' Meeting, each country agreed to reaffirm Japan's proposal that excessive volatility and disorderly movements in the foreign exchange market are undesirable, and on the 18th, BOJ Governor Kazuo Ueda said that if it becomes difficult to ignore the weakening yen encouraging inflation, the central government The bank said it was prepared to raise interest rates.
Masato Kanda, Japan's top monetary diplomat who participated in drafting the G7 statement and the Korea-U.S.-Japan statement, said in a conference with Western reporters on the 18th, "Inflation in both Japan and Korea is very resilient to exchange rate fluctuations," and "both countries have dollar “I am more concerned about exchange rate volatility because I have a lot of income,” he said publicly.
Ueda said the BOJ would first closely examine wage data and the impact wage increases could have on service prices while keeping an eye on trends in inflation expectations when deciding when to raise interest rates.
“Sticky domestic inflation is one of the factors that has complicated the central bank’s decision on when to break away from tight monetary policy,” Governor Lee Chang-yong said at a World Bank meeting on the 17th. “I’d like to see more evidence that it’s going down as one,” he said.
"Somewhat worryingly, progress toward our inflation target has stalled somewhat since the beginning of the year," Pierre-Olivier Gourinchas, the IMF's chief economist, said in a separate statement following the release of the report. “Further trade restrictions on Chinese exports could also push up commodity inflation, as inflation remains stubbornly high.”
Deputy Prime Minister Choi Sang-mok (Minister of Strategy and Finance) said in a CNBC interview while attending the Washington meeting on the 19th, “In the foreign exchange market, the won and yen, especially the won, are showing excessive movements that deviate from economic fundamentals,” and “This is the first trilateral finance ministers’ meeting between Korea, the United States and Japan. “One of the most important agendas between the three countries is to work together to stabilize the financial markets,” he said.
Deputy Prime Minister Choi then asked, "What are the expected difficulties for the government in promoting economic policies after the general election, including the description of a lame duck?" He said, "The results of this election are similar to the number of seats for political parties before the election. This means that a similar situation as before will continue." . “The recent election is an election to elect members of the National Assembly, and Korea has adopted a presidential system, with three years remaining in the president’s term,” he said.