|Deputy Prime Minister Hong Nam-ki, right, shakes hands with Nobel Laureate professor Paul Krugman during the 2019 Knowledge Sharing Program (KSP) Dissemination Conference at the Conrad Hotel on Yeouido, Seoul, Monday. / Courtesy of Ministry of Economy and Finance|
By Jhoo Dong-chan
Nobel Prize-winning economist Paul Krugman has called on Seoul to take immediate and decisive action to forestall deflation in its economy.
Krugman, an economics professor at City University of New York, delivered a keynote address during the 2019 Knowledge Sharing Program (KSP) Dissemination Conference at the Conrad Hotel on Yeouido, Seoul, Monday. The KSP is a platform for development cooperation, aiming to share knowledge with partner countries and develop a solid foundation for the expansion of economic and political cooperation.
Krugman said the government should implement an expansionary fiscal policy to buffer against mounting global uncertainties.
"There are hints of a Japan-style slide into deflation, and you want to act boldly to prevent that from happening before it becomes embedded into the economy," he said during a press conference.
His remarks come amid growing concern that Korea will follow in the footsteps of Japan, which has suffered a decades-long deflation, after consumer prices fell for the first time in recent history amid an economic slowdown.
The noted economist added the recent minimum wage hike was helpful for the nation's economy, but its long-term effects are expected to be minimal.
He also said the ongoing trade dispute between the U.S. and China could lead into another global economic crisis, possibly a "tipping point" that could dismantle China's economy.
"Perhaps someday, perhaps now, a trade war could be a trigger for a broader crisis. I am not betting on it, but it's a real possibility," Krugman said. "The great lesson of 2008 is that you never know just what dangers are lurking there."
Krugman expressed his hopes for a speedy settlement of the ongoing Korea-Japan trade dispute.
"It does appear that Japan is behaving oddly," he said.
In July, Tokyo decided to curb its exports to Korean companies of three key materials necessary for producing semiconductors in apparent retaliation to last year's South Korean Supreme Court rulings ordering Japanese firms to compensate surviving South Korean victims of forced labor during Japan's 1910-45 colonial rule of the Korean Peninsula.