By Park Hyong-ki
The government is not considering reducing the face value of the Korean won, Finance Minister Hong Nam-ki said Thursday.
"The administration has not considered currency redenomination," Hong told reporters, while visiting small- and medium-sized enterprises in Paju, Gyeonggi Province.
Instead, he said the ministry will focus on improving the economy through planned extra fiscal spending.
Also, Bank of Korea (BOK) Governor Lee Ju-yeol said after holding his monetary policy meeting that the central bank and administration were not looking to carry out currency redenomination at all.
The redenomination issue came up last month when the BOK chief said in his National Assembly briefing that the time was ripe for the country to examine the possibility.
One of the reasons was the face value of the Korean won against the global key currency the U.S. dollar does not reflect the "status" of the economy, he told lawmakers.
This means given that the economy has grown significantly, it should get rid of the zeroes following one in 1,000 won.
So, the exchange rate would be one won per $1. The value will remain the same when 1,000 won becomes one won.
This could lead to inflation as domestic demand could pick up following the redenomination. And this, in theory, would help improve the economy.
Those agreeing on redenomination, including lawmakers, argue that Korea is the only country among OECD members that has a currency in four digits against the U.S. dollar. Even Japan's currency exchange rate is set at 100 yen.
The BOK chief's change of mind comes as he said redenomination would create side effects as much as it would bring positive effects.
In conclusion, he added he remained cautious.
"It is more important to focus on revitalizing the economy than pursuing redenomination," he told reporters.
The idea of currency redenomination also came up under former governments to uncover currency traded secretly and illegally on black markets in an effort to increase tax revenue.
The government is not considering reducing the face value of the Korean won, Finance Minister Hong Nam-ki said Thursday.
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| gettyimagesbank |
Instead, he said the ministry will focus on improving the economy through planned extra fiscal spending.
Also, Bank of Korea (BOK) Governor Lee Ju-yeol said after holding his monetary policy meeting that the central bank and administration were not looking to carry out currency redenomination at all.
The redenomination issue came up last month when the BOK chief said in his National Assembly briefing that the time was ripe for the country to examine the possibility.
One of the reasons was the face value of the Korean won against the global key currency the U.S. dollar does not reflect the "status" of the economy, he told lawmakers.
This means given that the economy has grown significantly, it should get rid of the zeroes following one in 1,000 won.
So, the exchange rate would be one won per $1. The value will remain the same when 1,000 won becomes one won.
This could lead to inflation as domestic demand could pick up following the redenomination. And this, in theory, would help improve the economy.
Those agreeing on redenomination, including lawmakers, argue that Korea is the only country among OECD members that has a currency in four digits against the U.S. dollar. Even Japan's currency exchange rate is set at 100 yen.
The BOK chief's change of mind comes as he said redenomination would create side effects as much as it would bring positive effects.
In conclusion, he added he remained cautious.
"It is more important to focus on revitalizing the economy than pursuing redenomination," he told reporters.
The idea of currency redenomination also came up under former governments to uncover currency traded secretly and illegally on black markets in an effort to increase tax revenue.
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