* March exports +0.4 pct y/y vs +1.2 pct in Reuters poll
* Imports fell 2.0 pct as domestic demand remains subdued
* March CPI +1.3 pct y/y, growth at 7-month low
* Exports hit by weaker yen, but gradual recovery seen
* Stimulus measures due, rate cut also likely
(Updates with details from property market stimulus package)
By Se Young Lee and Choonsik Yoo
SEJONG, South Korea, April 1 Hopes grew in South
Korea on Monday for a government stimulus package and an
interest rate cut, after weak export and import figures and soft
price data showed Asia's fourth-largest economy sliding further
Exports in March rose by just 0.4 percent from a year
earlier as the weaker yen hurt South Korean automobile
exporters in fierce competition with the Japanese, while imports
fell 2.0 percent as domestic demand stayed depressed.
Other data published on Monday, including a private-sector
survey of manufacturers and housing market figures, suggested
the economy might recover gradually, but the yen's sharp fall
and a turbulent euro zone clouded those prospects, highlighting
the need for quick policy action.
Since taking office in late February, South Korean President
Park Geun-hye has promised that her government would boost
"The export recovery was going to be gradual anyway, and
that's being set back further by Japan," Lee Chul-hee, chief
economist at Tong Yang Securities, said of the yen's decline.
"So at this point it would be more sensible to focus policy
on boosting domestic demand," Lee added.
The yen has slid nearly 20 percent against the U.S. dollar
since November, largely in response to the dramatic monetary
expansion campaign led by Prime Minister Shinzo Abe, known
widely as "Abenomics".
South Korea, the world's seventh-largest exporter and home
to some global suppliers of smartphones and cars, relies heavily
on overseas sales for economic growth but there is little it can
do to counter current weak demand for its exports.
Last week, Park's government emphasised in its first
comprehensive economic policy guidelines that it would not aim
for unrealistically high economic growth but instead focus
policies on cementing fundamentals for a sustainable recovery.
The government slashed its 2013 economic growth forecast to
2.3 percent from 3.0 percent set three months ago under Park's
predecessor, Lee Myung-bak, citing the delayed recovery in
global demand and a new threat from the depreciating yen.
It plans a supplementary budget bill, expected by analysts
to be worth at least 12 trillion won ($10.8 billion) although
not all of it would be for additional spending. It also plans to
take measures to reform housing market practices.
Later on Monday, the government announced a widely expected
policy package aimed at boosting property market transactions,
representing the first of a string of measures in the coming
weeks to boost domestic demand.
The plan centres around expanding support for first-time
home buyers or home purchases by lower-income earners and
providing financial help for the home owners suffering from
heavy debt related to their home ownership.
"We believe that a policy package of this magnitude will be
able to give a proper signal for market normalisation," Seo
Seung-hwan, Minister of Land, Infrastructure and Transport, told
a news conference.
Analysts and market participants widely expect the Bank of
Korea to align monetary policy to the government's
growth-boosting steps with an interest rate cut. It has held the
policy interest rate for the past five months after two
reductions last year and next reviews its policy on April 11.
Other data on Monday showed annual inflation unexpectedly
eased to a 7-month low of 1.3 percent in March from 1.4 percent
in February, led by declines in fresh food prices due to better
supplies, while weak consumer demand discouraged producers from
There were some bright spots among Monday's indicators, most
notably a survey by HSBC/Markit Economics showing the
manufacturing sector expanded by the most in a year in March and
export orders rose by the sharpest in two years.
Housing prices also halted a sequence of month-on-month
falls that had lasted for eight months, according to data from
the country's top mortgage lender, Kookmin Bank, although home
prices were 0.7 percent lower in March than a year before.
($1 = 1112.6000 Korean won)
(Editing by Eric Meijer & Kim Coghill)