The Bank of Korea has cut its key interest rate from 1.75% to 1.5% which came as a bit of a surprise as a rate cut was widely expected at a later date.
The central bank has also revised its forecast of Korea's growth rate to 2.2% citing sluggish exports and Japan's trade curbs against the nation.
Today we go in-depth on the BOK's surprise rate cut as well as the expected impact of Japan's export restrictions against Korea, that is becoming a threat to the nation's economic growth.
For that Dr. Shin Sang-hyup, Professor of Pan-Pacific International Studies at Kyung Hee University joins me.
1. We've had market expectations that the BOK will freeze its interest rate at 1.75% for now, but to the surprise of many, there was also the rate cut. How do you analyze the main reasons behind the decision?
2. BOK's surprise rate cut and downward revision of growth rate reflect the Korean government's concerns over the impact of Japan's export curbs against the nation. How much of an impact would the measures have on Korea's growth rate?
3. Does the BOK's decision also imply that the Korean government sees Japan's export curbs as a long-term problem?
4. The U.S. Federal Reserve's FOMC meeting is also set for the end of this month and a rate cut is widely expected following Fed Chair Powell's remarks that hinted at a rate cut. Your forecast?
5. The U.S. Fed obviously has a big affect on the Bank Of Korea's rate decision. If the U.S. Fed lowers its key interest rate this month, would that induce further rate cuts by the BOK in the latter half of this year?
6. Japan has, unilaterally, I might add, set a deadline for Korea to respond to its request of forming a third-country arbitration panel which is today. Seoul remains adamant that it has no obligation to comply with the request at a date set unilaterally by Tokyo. The problem is, Japan has warned of further trade restrictions if Seoul doens't respond by tonight. What kind of additional measures do you expect?
7. According to Seoul's Finance Services Commission, the scale of Japanese capital in Korea surpasses 20 billion U.S. dollars. To this, some say that Korea should also brace for the impact of Japan's trade measure spilling over to financial markets. Your thoughts?
8. Amid Japan's export curbs, there's also a rising possibility of currency market fluctuation. What's your analysis on that and what kind of countermeasures are needed?
9. Korean firms are striving to find alternatives to Japan-made high-tech materials. Do you think the firms would be able to turn crisis into an opportunity by exploring new channels of sources?
10. If Korea adjusts to Tokyo's export restrictions and successfully find alternate sources, wouldn't it negatively affect Japanese firms?
11. Now to the U.S. stance on the matter. Washington's top official on East Asia policy, David Stilwell, who was in Seoul yesterday said the U.S. understands the seriousness of the matter and that it will do what it can to help Korea and Japan quickly resolve their trade dispute. The U.S. House of Representatives Foreign Affairs Committee has passed a resolution highlighting the importance of three-way Seoul-Washington-Tokyo cooperation. What role do you expect to see from the U.S. in this area?