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2017-03-29 16:55
By Park Hyong-ki



BOK Gov. Lee Ju-yeol
Did Bank of Korea (BOK) Governor Lee Ju-yeol blunder when he recently said Korea cannot exclude the possibility of the U.S. reclassifying it as a currency manipulator?

Or was he really showing concern about it?

His remarks were unexpected and took reporters by surprise at this time when Korea is anxiously awaiting the U.S. Treasury’s new foreign exchange report next month.

No one believes the BOK chief said those words by mistake or on purpose just to get a kick out of what the U.S. would do to Korea.

The governor stated there is not a high chance of it happening, but there is still the possibility after hearing the United States’ tougher stance on foreign exchange transparency at the G20 finance leaders’ meeting in Germany.

He was seriously concerned about it. Considering his intellectual capacity and experience in monetary affairs, Lee did not make a blunder.

Honesty may be the best policy, but he may have crossed the line by being too honest about his concerns.

His comment could further back up news and analyses including the recent S&P report, indicating that Korea is a currency manipulator. Korea ranked second after Taiwan in terms of level of suspicion over currency manipulation.

Korea does not have the economic leverage as much as China, Japan and Germany to fire back at the U.S. when the world’s largest economy accuses it of something. China, Japan and Germany brushed off U.S. criticism even though the Trump administration raised the ante against them. China warned of trade retaliation against the U.S.

Korea may not take a stance like them toward its long political and economic ally.

Lee said Korea would intervene in markets only to maintain stability. A small and open economy like Korea needs protection from external shocks. Without it, there could be havoc, as if Korea does not have enough problems at hand ― the THAAD dispute with China, possible FTA renegotiation with the U.S., aging population and industries at home, high youth unemployment, household debt, decreasing consumption, rising consumer prices, among others.

It remains to be seen whether the U.S. reports to the Congress that Korea is a manipulator, or that it decided to keep Korea on a watch list for a bit longer, or that Korea is off the hook for old times’ sake.

At this point, it is really hard to predict what Pandora’s box would unleash when the U.S. opens it next month with its foreign exchange policy report.

If the U.S. Treasury decides to maintain Korea on the watchlist, Lee’s honest concern may well end up becoming much ado about nothing.


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