On July 8, Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol convened a joint Market Situation Review Meeting[1] with relevant government agencies at the Government Complex Seoul to review recent developments in the financial and foreign exchange (FX) markets and discuss policy responses.

Participants assessed that the Korean economy continues to show solid momentum, supported by record-high exports and a record current account surplus. However, they noted that volatility in the domestic financial and FX markets remain elevated amid expectations of higher global policy interest rates and continued foreign capital outflows. While closely monitoring the possibility of renewed geopolitical tensions, they agreed to pursue a well-balanced macroeconomic policy mix, taking into account growth, inflation, financial market stability, and people’s livelihoods, and to continue efforts to maintain stability in individual market segments.

With regard to the stock market, it was assessed that volatility had increased somewhat amid a market correction, driven by profit-taking and portfolio rebalancing by foreign and institutional investors following the recent sharp rally, as well as evolving global AI market expectations. They agreed to closely monitor risk factors that could lead to excessive volatility in the stock market going forward.

Turning to the bond market, the assessment was that volatility in government bond yields has moderated since the beginning of July. However, close monitoring of the market will continue, as changes in domestic and global monetary policy stances remain key risk factors. Every effort will also be made to maintain market stability by adjusting the share of long-term government bond issuance in line with market supply and demand conditions.

In the FX market, it was noted that volatility has increased amid continued foreign equity sales driven by gains in the value of foreign investors’ equity holdings, as well as the strength of the U.S. dollar and the weakness of the Japanese yen. Participants shared the view that the launch of 24-hour FX trading on July 6 would significantly improve the convenience of won-denominated transactions. To respond to potential volatility during overnight trading hours, they decided to substantially strengthen the 24-hour monitoring framework. In addition, the roadmap for the internalization of the Korean won will be finalized and announced within July to enhance the won’s convertibility and promote its use in current and capital account transactions.

Furthermore, the meeting reviewed business conditions across major industries. Participants assessed that, amid diverging conditions between the non-IT sector and the semiconductor-led IT sector, the growing weight of semiconductors has become a source of increased financial market volatility, as movements in the semiconductor sector have an increasingly greater impact on the overall stock market. Looking ahead, they recognized the need not only to bolster the competitiveness of key industries such as semiconductors and AI, but also to actively identify and foster next-generation growth engines in non-IT sectors, including biotechnology, defense, and aerospace.