By Yoon Ja-young
A recent article by the Financial Times (FT) which recommended the United States designate Korea as a currency manipulator is stirring controversy here. The Korean government is preparing a rebuttal to the article that market watchers here say seems to have lost neutrality while siding with Japan where the daily's owner is headquartered.
In an article titled "Trump off-target over Asia currency manipulators," the newspaper said "Evidence suggests Taiwan and South Korea, not China and Japan, are the worst offenders."
The article references a recent remark by U.S. President Donald Trump, who criticized Tokyo and Beijing for devaluing their currencies.
"You look at what China's doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market and we sit there like a bunch of dummies," Trump said in a meeting with executives of pharmaceutical companies.
FT, however, said that it is not Japan or China but Korea, Taiwan and Singapore that are manipulating currencies. It even recommends the U.S. designate them as currency manipulators, saying it could have a "drastic effect on regional and global trade, particularly in industries they dominate such as semiconductors and displays."
A ranking official at the finance ministry said he didn't understand the motivation of the article which he called "factually erroneous."
"The article was written by a Financial Times reporter in Japan, following Trump's mentioning of the country," the official said. "The U.S. president, meanwhile, has yet to mention Korea as a currency manipulator."
He said the government is considering taking action. "It is because it isn't based on fact. The Korean government didn't buy dollars to depreciate currency. The article cited a high ratio of current account surplus to GDP, which is not due to the foreign exchange rate but other reasons."
The article pointed to Korea's current account surplus which is close to 8 percent of the GDP, along with Taiwan's 15 percent and Singapore's 19 percent, comparing them with China and Japan's 3 percent.
Economists, however, have pointed out that Korea's current account surplus is related with the aging of the population. Koreans are cutting consumption, leading to decreases of imports and the current account surplus. A fall in global oil prices is also behind the surplus, according to the official.
"Though the won-dollar rate has been fluctuating, the real effective foreign exchange rate hasn't changed at all last year. Since our relative competitive edge hasn't changed, it doesn't make sense to say we used the foreign exchange rate to achieve the current account surplus," the official said.
"We haven't decided yet, but it seems that we will need to remonstrate with the Financial Times about the article."
Prof. Shin Se-don at Sookmyung Women's University said Korea is far from a currency manipulator.
"Korea had a huge current account surplus during the past few years. If it aimed at manipulating the won-dollar rate, the central bank should have purchased a huge amount of dollars but that didn't happen. The dollars were left in the market and most of them are held by financial institutions or businesses."
He noted that Japan, meanwhile, had yen depreciate to around 125 yen per dollar following Abenomics. Japan has insisted its ultra-loose monetary policy aims at fighting deflation, not boosting exports.
"The United States didn't take issue with it because it consented to Abenomics. I think Washington's designation of currency manipulators is a kind of political action."
In 2015, Japan's top media company Nikkei acquired FT Group, FT's publisher.