S. Korea central bank boosts warnings on QE spillover

SEOUL: The South Korean central bank’s policy board ramped up its warnings against a possible surge in capital inflows as a result of the ultra-loose monetary policy led by the advanced economies.

“An atmosphere of protectionism is spreading and South Korea needs to take a much more serious view about this,” Ha Sungkeun, a member of the Bank of Korea’s seven-member monetary policy committee, told reporters on behalf of the committee.

Speaking at a scheduled luncheon with reporters, Ha was referring to the quantitative easing policy measures taken by the advanced economies, most recently by Japan.

The comments, which were the strongest rhetoric against unconventional easing methods so far in recent months, came just two days after the central bank’s governor Kim Choongsoo said Japan’s monetary easing had “created problems”.

“What they did created a couple of problems,” Kim said in an interview at the World Economic Forum in Davos on Saturday. “One is that the level (of the currency) is affected, and the pace of change is also a problem. They did it too hastily.”

Talk about a currency war has dominated discussions at the forum in Davos, with many central bankers and business executives questioning the wisdom of continuing an easy money policy.

Central bank board member Ha also said yesterday that the country’s existing measures on capital flows were not sufficient, although he said they were in better shape than before.

Ha stressed the need for caution over excessive capital inflows, in line with policymakers’ repeated warnings over the volatility of the Korean won since the third quarter of last year.

The won ended 7.6% up against the dollar last year as a result of capital inflows from advanced countries, which was the most since 2009. —