Seoul warns against loose policies
Top central bank executive says existing measures against capital inflows weak
ASouth Korean central bank policy board member delivered a sharp warning yesterday about a possible surge in capital inflows, adding to a chorus of complaints from Seoul over the ultra- loose monetary policies adopted by advanced economies.
“An atmosphere of protectionism is spreading and South Korea needs to take a much more serious view about this,” Ha Sung- keun, a member of the Bank of Korea’s seven- member monetary policy committee, told reporters. Ha said his remarks did not reflect the view of all the committee members.
The won extended early losses after the remarks, suffering its biggest daily fall against the US dollar in 16 months, as traders speculated the government was planning further measures to curb its strength and better control capital flows.
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 from a South Korean policymaker against unconventional easing methods in recent months, came just two days after the central bank’s governor Kim Choong- soo 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.
Ha also said 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 and potentially destabilising capital inflows, in line with policymakers’ repeated warnings about the volatility of the won since the third quarter of last year, which Korean officials fear will hurt exporters and jeopardise an expected economic recovery. But Hyundai Futures foreign- exchange analyst Lee Dae- ho said that the won’s decline in the past few days has pushed back the timing of any new regulatory measures on the foreign- exchange market.