SEOUL, March 19 The Bank of Korea's
nominee-governor, Lee Ju-yeol, a former senior deputy governor
at the central bank, is expected to be appointed by President
Park Geun-hye after a parliamentary hearing on Wednesday.
Lee was questioned on a range of key issues, including South
Korea's household debt, inflation and future monetary policy at
the central bank. Once appointed, Lee will take office April 10.
Following are key remarks from Lee at the hearing,
translated by Reuters:
"Advanced economies seem to be shedding the shock of global
financial crises, whereas now emerging economies are losing
"Should the U.S. Federal Reserve decide to taper its
stimulus again this week, the effect on South Korean markets
will be limited. Markets have already priced this in."
"From an emerging economy's point of view, I hope the U.S.
takes into consideration other countries' situations when it
comes to stimulus tapering. I hope the U.S. looks at the effects
its policy has (on other countries). Meanwhile I believe they
are trimming their stimulus because they have confidence (in
"The Chinese economy has had many struggles from the past.
This is because it carries fundamental issues...but the Chinese
government has done well so far in handling them despite
concerns. The most recent issues raised there (will probably be
solved similiarly) although there may be risks under the
"A decline in the workforce and investments by companies has
dulled growth. South Koreans are concerned whether the economy
will turn into one similar to Japan's economy."
"The biggest problem South Korea's economy faces is that its
potential growth is falling."
"Other big issues that South Korea's economy has are the
polarisation of wealth in the economy and burgeoning household
"The South Korean economy can no longer run towards just
growth; I believe achievements must be distributed evenly --
that growth and distribution must come in harmony."
"Household debt not only pressures growth but it is
narrowing the extent of the central bank's monetary policy."
"Household debt in the low-income sector is likely better
resolved through government policy and job creation (than
"The central bank has many limits when it comes to household
debt. It is important that the rise of debt does not outpace the
increase of household incomes. In order for incomes to rise,
growth is essential and the central bank must strive for stable
"I think there was a problem with communication with markets
when the central bank lowered rates in May 2013."
"Looking back on the events in 2008, I believe there is
criticism for the Bank of Korea to be had. We raised rates then
as inflation was up to the 4 percent range and expected
inflation was very high. However, we did not know that (the
Lehman crisis) would occur...none of us knew that there would be
such a huge crisis."
"The central bank lost its trust from markets once market
participants felt the Bank of Korea was not acting on its
"I will strive to narrow the gap between the view of the
central bank and markets regarding current economic issues and
"Forward guidance is a policy that we may well refer to. We
are open to looking at utilising this policy, although our
situation is quite different from advanced economies where
forward guidance is currently being used."
CENTRAL BANK INDEPENDENCE:
"It's true that there is a need for cooperation in policy
(between the central bank and the government) in order to
heighten policy effectiveness and improve the economy's growth."
"It is an important goal (that the central bank) keep its
neutrality from (government bureaus) involved in financial
policies...When deciding on monetary policy I plan to keep the
balance between keeping stability in inflation, financial
stability and growth, as the law states."
"My participation in meetings with the Blue House
(presidential palace) will be decided based on the issues
discussed there...I will selectively choose to go to the
meetings based on how the issues are related to monetary policy
and government policies."
"If the central bank keeps changing the inflation target
band, problems with effectiveness could arise."
"Inflation now in the 1-percent range is quite low and out
of our target range from 2.5 to 3.5 percent, but this was
largely attributed to supply factors, which out of the central
"The central bank will keep the current target band because
on a mid-term basis, we expect (inflation will rise to that
"I believe it is serious that despite the fact that we have
an inflation target range, inflation has fallen far outside the
range that it has led to trust issues (with the public and
(Reporting by Christine Kim; Editing by Eric Meijer)