Even the FT Admits It: The Bank of Korea Has Done Well
Beyond BRICs is a blog reporting on economics for the UK’s prestigious newspaper, The Financial Times. It too, has finally admitted what readers of the Seoul GYopo Guide have long known: the Bank of Korea (BOK) has yielded a steady hand in rocky waters. For more than a year, you could have read this blog, and understood that the powerful cross-currents made Korea very vulnerable to economic factors beyond its control. When coupled with structural challenges in the domestic economy, the Bank of Korea has faced, is facing, and will almost always face, a difficult set of challenges. If this song sounds familiar, then you would be right.

As Long As the JPY Stays Strong, Everything Will Be OK (Relatively Speaking)
The single most dominant factor affecting the Korean economy is not Europe, it is not the aging population, it is not inflation. It is the strong Japanese Yen. The ratio of the Japanese Yen compared to the Korean Won continues to linger near the financial crisis highs. As long as this is true, then the largest Korean chaebol will continue to create tremendous pressure on their Japanese competitors around the world. That will need to pay for the higher prices resulting from inflation and continuing high energy prices. Unfortunately, there is no quick fix. Korean citizens will need to become accustomed to the notion that real estate prices will not rise dramatically. The process of allocating household savings away from real estate (and private education) expenditures will not occur overnight. If you read this blog in totality, then it will be clear that there are no quick fixes to other problems either. College graduate underemployment, the size of the underground economy, over-reliance on chaebol, gender inequality, military conscription, the list is long, and it isn’t exhaustive. There is no quick fix to any one of these issues, much less the collection of them.

For Now, in BOK We Trust
Until these issues are tackled, we will need to trust that the BOK will continue to act wisely. For the past number of years, we have every reason to believe that this will be the case.