The president's economic perception that the high exchange rate is temporary and the jeonse housing crunch is natural Related article Kospi plunges as Broadcom shock-triggered 'Black Monday' erases more than $390B in value Weak won, high oil prices and rate hike concerns weigh on Korean businesses This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

Rather than appearing relaxed on the assumption that burdens to livelihoods will soon pass, the government should actively manage the risks and come up with closely tailored measures. On Monday, President Lee Jae Myung presented an economic vision of making Korea a "global powerhouse in industries with overwhelming technological gaps" at a press conference. He also said he would unveil large-scale investment projects that would help discover and foster next-generation growth engines beyond semiconductors while ensuring the benefits of growth are broadly shared. This is a desirable direction at a time when our economy's potential growth rate is steadily declining. At the same time, the government should no longer delay and instead must move proactively on regulatory innovation and labor market reform, which are obstructing innovation and growth. The problem is that the president's understanding of major economic issues — including the "three highs" of a strong dollar-won exchange rate, high inflation and high interest rates, as well as the jeonse (lump-sum deposit) housing shortage — gives the impression of being overly optimistic or fragmentary. President Lee said of the exchange rate situation, "It is true that it is high, but I believe it is temporary." He also said, "Rising stock prices have become the reason the exchange rate has risen." This is similar in context to recent remarks by presidential policy chief Kim Yong-beom, who described the three highs as "the cost of success." It is true that the recent surge in the valuation of Korean stocks, which has led foreign investors to sell shares day after day in order to rebalance their portfolios, has been the direct trigger for the recent rise in the exchange rate. But underlying the high exchange rate are also structural factors such as the prolonged gap in growth rates and interest rates between Korea and the United States, as well as increased overseas investment by companies. Moreover, concerns are growing that the shock from the three highs could intensify in earnest as expectations build for a U.S. benchmark rate hike. With the semiconductor rally immediately losing steam, the Kospi plunged 8.29 percent on Monday, collapsing below the 7,500 level in one stroke. The drop was unusually steep compared with the fall in the market in Japan at 3.85 percent and Taiwan at 3.48 percent. This reflects excessive concentration in semiconductors, along with a surge in debt-financed stock investing and leveraged investments by individuals that have heightened volatility. Yields on three-year and 10-year Korean Treasury bonds also rose to their highest levels of the year on Monday. Along with rising U.S. interest rates, President Lee's remarks are said to have had an impact as well. Regarding the use of excess tax revenue, President Lee said, "Having no government debt is not an absolute solution," which the market interpreted as meaning there was no intention to use the extra tax revenue to repay government bonds. The overall direction of real estate policy, centered on regulations and taxes, also appears unlikely to change much. Regarding the jeonse crisis in particular, which has become a major problem, he said, "Jeonse is a kind of private finance, and it is now disappearing," adding, "A process of normalization is necessary." That may prove true in the long run, but it is questionable whether he fully recognizes the plight of ordinary homeless people who are in distress as jeonse prices soar and jeonse listings sharply decline. The three highs and the jeonse crisis are livelihood issues that inflict particular pain on ordinary people. Rather than appearing relaxed on the assumption that burdens to livelihoods will soon pass, the government should actively manage the risks and come up with closely tailored measures.