Ministry of Finance and Economy

▶   Diversifying FX Channels for Japanese Investors and Supporting Smoother Investment in KTBs   On Tuesday, February 24, a pilot third-party FX transaction—comprising one spot and one forward transaction—was executed with a Japan-based RFI* (MUFG Bank, Ltd.) acting as the FX bank, and was successfully completed, with fund settlement finalized on Thursday, February 26.   * Registered Foreign Institution (RFI): A foreign financial institution located overseas that is registered with the Korean foreign exchange authorities after meeting the requirements prescribed under the Foreign Exchange Transactions Act to directly participate in Korea’s FX market.   Third-party FX refers to a transaction structure in which an investor executes a foreign exchange transaction with an FX bank of its choice, such as a Registered Foreign Institution (RFI), while settlement is carried out through the investor's custodian bank (see reference). In particular, if third-party FX transactions through Japan-based RFIs become more active, Japanese investors will be able to compare the prices offered by their global custodian banks, with those offered by Japan-based banks with strong local accessibility, and choose the most advantageous option.   To enhance the convenience of FX transactions for foreign investors, the Korean government has pursued institutional improvements, including permitting third-party FX transactions (July 2023). As a result, numerous third-party FX transactions have taken place in major financial centers such as London, New York, Hong Kong, and Australia. In Japan, however, the implementation of third-party FX transactions had been somewhat delayed.   On February 24, an asset management company in Japan successfully conducted a pilot third-party FX transaction. While continuing to use the existing settlement transmission channel via a master trust bank* (Custody Bank of Japan, Ltd.) and a global custodian, the company separately executed the KRW conversion through a local Japan-based RFI (MUFG Bank Ltd.) and directly remitted the converted funds to its domestic custodian bank in Korea (see reference).   * A specialized Japanese trust bank that comprehensively performs FX, custody, settlement, accounting, and reporting functions on behalf of asset managers and pension funds.   In addition, the transaction comprised one spot trade (Spot: the client selling JPY and purchasing KRW) and one forward trade (Forward: the client selling KRW and purchasing JPY), thereby confirming that forward transactions can also be supported under the third-party FX framework. This pilot third-party FX transaction is particularly significant as it marks an important step toward broadening the range of FX channels available to Japanese investors. If the third-party FX becomes further activated, they are expected to facilitate Japanese investors' participation in Korean Treausury Bonds, ahead of Korea's upcoming inclusion in the World Government Bond Index (WGBI) this April, as Japanese investors constitute a significant share of global WGBI-tracking funds.   Going forward, the government will continue to actively support third-party FX transactions conducted by Japan-based RFI-registered banks* and will further improve transaction conditions in cooperation with master trust banks and global custodians, thereby promoting greater utilization of third-party FX transactions among Japanese investors.   * Third-party FX transactions by banks such as HSBC Tokyo and State Street Tokyo are also forthcoming. Please refer to the attached files.   

The Ministry of Finance and Economy plans to issue Korea Treasury Bonds worth approximately 19,000 billion won in March 2026 through competitive bidding.   Auction Schedule, March 2026 (Unit: KRW billion) Name Auction Notice Auction Date Settlement Date Issue Date Type Volume 2Y KTB 03000-2803 (26-1) February 26 March 3 March 4 March 10, 2026  F1 3,200 3Y KTB 02750-2812 (25-10) March 4 March 9 March 10 December 10, 2025 F 3,300 5Y KTB 03375-3103 (26-3) March 18 March 23 March 24 March 10, 2026 F 3,100 10Y KTB 03250-3512 (25-11) March 11 March 16 March 17 December 10, 2025 F 3,000 20Y KTB 02750-4509 (25-9) March 19 March 24 March 25 September 10, 2025 F 600 30Y KTB 03500-5603 (26-2) February 26 March 4 March 5 March 10, 2026 F 5,000 50Y KTB 02750-7409 (24-11) March 10 March 13 March 16 September 10, 2024 F 800 Conversion Offer Conventional March 12 March 17 March 19 March 10, 2026 F 400 Inflation-linked March 3 March 6 March 10 December 10, 2025 F 100   FXB 00000-2703 (26-03) March 17 March 20 March 23 March 10, 2026 N/A 1,250 1.       Fungible issue   * Under a fungible issue system, new KTBs issued within a specified period (six-month period for 2Y, 3Y, 5Y, 10Y and 30Y KTB, one-year period for 20Y KTB, and two-year period for KTBi and 50Y KTB) are regarded as the same KTB issue.     1) Non-competitive bids option I   For retail investors, KTBs worth 3,640 billion won (no more than 20% of the offered amount in the auction excluding 50Y KTBs) will be allocated first at the highest accepted bid rate.   2) Non-competitive bids option II   A non-competitive purchasing option II is granted to primary dealers (PD) whereby PDs can make additional purchases of 5-30%* of the accepted bid amount within three business days after the auction.   * Up to 20%p of the option is granted to the top-performing PDs, 15%p to the 2nd best-performing PDs, 10%p to the 3rd best-performing PDs, and 5%p to the rest, according to their market-making performances for the last six months. MOEF will grant additional 5-10%p to best performing PDs in the monthly evaluation.   3) Non-competitive bids option III   KTB STRIPS* are supplied on the third business day after the auctions, 284 billion won for 3Y, 5Y, and 10Y KTBs, 330 billion won for 30Y KTBs, and 146 billion won for 20Y KTBs. PDs that have obtained the right to purchase these KTB STRIPS can make purchases of up to 25 billion won.   ＊Non-competitive option Ⅵ Details have yet to be decided. If non-competitive option Ⅵ needs to be implemented, the Ministry will make an announcement on March 19 with a detailed plan.   4) Conversion offer   Date KTBs to be issued KTBs and KTBis to be purchased Amount March 17 10:40-11:00 am 30Y KTB 03500-5603 (26-2) (Maturing on March 10, 2056)   KTB 03250-3306 (23-5) KTB 03500-3406 (24-5) KTB 02625-3509 (15-6)  KTB 03250-4209 (22-11) KTB 03000-4212 (12-5) KTB 03875-4309 (23-9) KTB 02750-4412 (14-7)   * Further details will be provided on March 12 through the BOK website.   KRW 400 billion March 6 10:40-11:00 am 10Y KTB 03250-3512 (25-11) (Maturing on December 10, 2035)   KTBi 01750-2806 (18-5) KTBi 01125-3006 (20-5) KTBi 01625-3206 (22-6)   * Further details will be provided on March 3 through the BOK website.   KRW 100 billion   * Further details will be provided on February 6 through the BOK website.    

On February 25, Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol chaired the Ministerial Meeting on Economic Affairs and Ministerial Meeting on Strengthening Industrial Competitiveness at the Government Complex-Seoul to discuss the “Progress of the Deasan No.1 Business Restructuring Project and the Support Package,” the “Measures to Rationalize the Advance Payment System[1],” and the “Measures to Improve Water Quality in the Nakdong River.”     Key messages from DPM Koo’s remarks are as follows:   [Progress of the Deasan No.1 Business Restructuring Project and the Support Package]   The business restructuring plan for the “Daesan No. 1 Project,” which involves the merger of HD Hyundai Chemical and Lotte Chemical in the Daesan Petrochemical Complex, has been approved.   The companies will undertake self-help efforts to improve their financial structure, including a capital increase of KRW 1.2 trillion, and plan to invest approximately KRW 335 billion in transitioning to higher value-added products. Furthermore, the government and creditor banks will firmly support the Daesan No.1 Project with a comprehensive support package of more than KRW 2.1 trillion to ensure its smooth implementation.   Financial support of KRW 2 trillion will be provided, including new funding for the transition to higher value-added products and the conversion of perpetual bonds, along with tax incentives of up to a 100% reduction in acquisition tax and up to a 50% reduction in the co-prosperity investment promotion tax.   In the event of corporate splits or mergers, special provisions will be applied, including the succession of licenses and permits and the simplification of relevant procedures.   [Measures to Rationalize the Advance Payment System]   The government will rationalize the advance payment system to support the smooth execution of contracts while enhancing fiscal accountability.   Upon the initial advance payment, payment will be permitted within the mandatory payment range of 30 to 50%, and, where contract performance is duly confirmed, the advance payment will be allowed up to 70%.   However, if the contracting authority deems it necessary – for example, for the purchase of raw materials from overseas – the initial advance payment may also be permitted up to 70%.   Starting April 1, the government will mandate the submission of a detailed spending plan and activate dedicated accounts for each contract to facilitate the proper monitoring of advance payments.   In addition, the relevant regulations will be promptly revised to allow for contract termination in cases where advance payments are repeatedly used for purposes inconsistent with their intended use.   [Measures to Improve Water Quality in the Nakdong River]   The government will improve the water quality of the Nakdong River, which has suffered severe pollution from algal blooms and industrial wastewater, to Grade I by 2030 (currently Grade II).   The conversion of livestock manure, a primary cause of algal blooms, into renewable fuel will be accelerated, while excessive fertilizer application will be curbed to minimize inflows into rivers.   Advanced water treatment technologies will be introduced to treat industrial wastewater and to facilitate the through removal of even trace contaminants not currently subject to statutory regulation. [1] An advance payment is an upfront payment of funds required at the early stage of contract performance, such as for material costs, made at the request of the contractor and at the discretion of the contracting authority to prevent delays in project execution. Please refer to the attached files.