Base Rate Hike After 3 Years 6 Months.

• Rises from 2.5% to 2.75%.
• Shin Hyun-song (Bank of Korea Governor) said, “We will respond until we are convinced that inflation is stably converging.”
• Household debt stood at 1,866 trillion won as of end-March. 55% is variable-rate loans.
• ‘Debt-driven investments’—borrowed funds for stock trading—reached 39 trillion won as of end-May.
• Seok Byung-hoon (Ewha Womans University Professor) noted, “With many variable-rate borrowers and further base rate hikes anticipated, market rates will likely rise, and the interest burden on vulnerable groups could grow significantly.”
• Related Link.
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“Not a Bicycle, but a Giant Oil Tanker.”.

• “Since it doesn’t move in a day or two, we will implement policy with time, considering its impact on the economy,” was the explanation.
• Shin Hyun-song said, “Monetary Policy Committee members broadly agreed that demand-side pressures should not be overlooked in this exceptional situation.”
• How much higher will it go? Kim Seong-su (Hanwha Investment & Securities Researcher) forecasted, “One more hike in October, reaching 3% by year-end, and a January 2023 increase to a final rate of 3.25%.” Ahn Ye-ha (Kiwoom Securities Researcher) noted, “We must keep the possibility of hikes up to 3.5% next year open.”
• Related Link.
• Related Link.

Pushing the Accelerator and Brake at the Same Time.

• JoongAng Ilbo criticized in an editorial, “The combination of historically expansive fiscal policy and aggressive rate hikes—while the Bank of Korea tightens, the government’s conflicting policy of pumping money will only deepen market confusion.”
• Donga Ilbo emphasized in an editorial, “The central bank steps on the brake to control inflation, while fiscal authorities may appear to press the accelerator—populist support and subsidy spending that could inflame prices must be drastically reduced.”
• The Hankyoreh stressed, “This is the time to meticulously review financial safety net measures.”
• Shin Hyun-song (Bank of Korea Governor) explained, “If fiscal policy raises potential growth by enhancing productivity, it could align with monetary policy. The answer may vary depending on the form, scale, and speed of spending.”
• Related Link.

What Matters Now.

Household Loan Rates May Exceed 8%.

• Total household interest costs rose 6.6%, but for the lowest-income quartile, they surged 40.2%.
• Delinquency rates for vulnerable self-employed borrowers reached 12.7%.
• Top rates for 12-month fixed deposits at the five major banks range from 2.60% to 3.30%.
• Interest rates for 6-month unsecured loans at the same banks are 4.19–5.78% annually.
• JoongAng Ilbo warned in an editorial, “The share of companies with interest coverage ratios below 1 has hit a record 39.9%,” adding, “Defaults will first deepen among the economy’s weakest links: low-income, low-credit borrowers and small-scale self-employed workers.”

Samsung Electronics + Nix Leverage Deposits Jump to 30 Million Won.

• Minimum trading units will rise from 1 share to 20 shares, with deposits increasing from 10 million won to 30 million won.
• Investor education will be extended from 2 hours to 3 hours.
• Critics call it “like urinating on a frostbitten foot” and “too little, too late.” Some warn that buying in 20-share blocks could amplify volatility.
• JoongAng Ilbo criticized in an editorial, “Attempting to cover failed improvisational policies with another quick fix will only deepen market instability.”

Negative Compounding Effects.

• Leveraged ETFs are amplifying volatility.
• Leveraged ETFs track stock prices on a 24-hour basis rather than cumulative returns, so repeated ups and downs erode principal through negative compounding.
• Bloomberg warned, “South Korea’s leveraged ETFs risk amplifying volatility, exporting it to U.S. markets, and creating a 24-hour feedback loop where New York sell-offs dictate Seoul’s mood.”
• Related Link.

KOSPI Rollercoaster Plummets Again.

• Samsung Electronics and SK Hynix collapsed again, down 8.8% and 11.5% respectively, closing at 255,000 won and 1.842 million won.
• Sell (Mon)–Sell (Tue)–Buy (Wed)–Sell (Thu). Circuit breakers triggered for four consecutive days.
• Semiconductor peak-out fears emerge. Micron Technology and Intel shares remain sluggish.
• While rate hikes play a role, they are known factors and unlikely the direct cause.
• U.S. markets remain weak. S&P 500, Dow, and Nasdaq fell -0.51%, -0.20%, and -1.47% respectively.
• Related Link.

Deep Dive.

“Coupang Penalty Not Targeted.”.

• “It was done according to law and policy.” These were the words of Lee Jae-myung (President) during a privacy commission briefing.
• Coupang was fined 6.246 trillion won last month. The U.S. House Judiciary Committee also released a report claiming the South Korean government had discriminatorily attacked American companies.
• Song Kyung-hee (Privacy Commission Chair) stated, “We are considering increasing fines by 30% if incidents of concealing or destroying personal data breaches are later detected.”
• Coupang also issued a statement: “Lobbying the U.S. government and political circles is an activity guaranteed by the U.S. Constitution and the right of responsible citizens in American society.”
• Related Link.

Expanding Modern and Contemporary History in Textbooks.

• “The 150 years of unassessed history within 5,000 years of Korean history carry significant weight,” the National Education Committee concluded. The decision passed with 13 in favor, 4 against, and 2 abstentions.
• Middle school textbooks will increase modern and contemporary history content from 20% to over 30%.
• High schools already stand at 65%.
• Strong opposition came from Kim Kyung-hoi (National Education Committee Standing Member) and others: “We must not set a precedent where history education wavers with every change in administration.”
• Lee Jong-gwan (Youngseong Middle School teacher) noted, “The Baejae High incident was not a problem of historical knowledge but one of hate and mockery,” adding, “Separate educational programs directly addressing hate issues are needed in schools.”
• Related Link.
• Related Link.

“Some Agency Heads Still Don’t Know Their Job.”.

• During a work report, Lee Jae-myung (President) sharply criticized, “This is unacceptable.”
• “A public official’s hour is worth 52 million hours,” he said, adding, “I wonder if they truly grasp the gravity of that responsibility.”
• Kim Kyung-hwan (Housing Finance Corporation President) failed to answer a question about the total amount of compensation paid at jeonse market rates.
• Lee Jae-myung pressed, “Is it thousands, tens of thousands, hundreds of millions, billions, tens of billions, hundreds of billions, or trillions? There must be cumulative figures and recovery amounts—please provide them later.”
• Related Link.

Will Social Media Bans for Under-14s Be Enacted?

• This emerged during a work report to the Media and Communications Commission. Kim Jong-cheol (Commission Chair) said, “We are gradually reviewing measures to restrict service sign-ups for those under 14 and limit features that induce over-engagement for adolescents aged 14–19.”
• Lee Jae-myung (President) stated, “Securing public consensus is more important than arbitrary government decisions.”
• According to an EU Commission report, European teenagers spend 4–6 hours daily on digital devices, and 60% of children have experienced emotional or psychosocial issues online.
• Related Link.

Another Take.

“Prosecutorial Reform Failure Could Jeopardize General Election.”.

• Jeong Cheong-rae (former Democratic Party leader) said, “Prosecutorial reform is not just the Democratic Party’s banner but a symbol for the entire democratic and progressive camp.” The argument is that “supplementary investigative authority must be completely abolished, and other methods should resolve various issues.”
• Some lawmakers argued for exceptional allowances for supplementary investigations, prompting him to remark, “What has happened to the Democratic Party?”
• Kim Min-seok (former prime minister) also said, “It would be better to settle this before August.” Even Song Young-gil (former Democratic Party leader) and the three party leadership candidates all agree that supplementary investigative authority should be abolished. Only Go Min-jung (Democratic Party lawmaker) maintains that it should be retained.
• A Democratic Party lawmaker interviewed by Kyunghyang Shinmun said, “If we abolish supplementary investigations and incidents like the ‘collusive case’ occur, the Democratic Party will bear all the blame—how can we handle the backlash?”
• Woo Sang-ho (Gangwon Province governor) said, “If another case like the Jang Yun-ki incident happens, the Democratic Party will suffer each time.”
• Hong Ki-won’s (Democratic Party lawmaker) proposed Criminal Procedure Act amendment became a target for hardline party members. He reportedly receives hundreds of messages daily labeled “Prosecution Reform 11 Traitors.”
• Lee Seong-yoon (Democratic Party lawmaker) wrote on Facebook, “The prosecution’s fixation on supplementary investigative authority stems from an organizational preservation instinct to maintain existing manpower and budgets.”
• Kim Yong-min (Democratic Party lawmaker) emphasized, “We must take bold action against a prosecution system that cannot be reformed.”
• Related Link.
• Related Link.
• Related Link.
• Related Link.

“The Over-Politicization of the Supplementary Investigative Authority Debate.”.

• In an editorial, JoongAng Ilbo emphasized, “Prosecutors’ supplementary investigative authority is a minimal safeguard to correct police misconduct or unjust investigative practices.”
• The Hankyoreh, which has strongly demanded the abolition of supplementary investigative authority, noted, “Debate fiercely, but do not attempt to suppress minority opinions with numbers or force.”
• In its editorial, Kyunghyang Shinmun warned, “What must be guarded against now is the over-politicization of the supplementary investigative authority issue,” adding, “Prosecutorial reform must not become kindling for intra-party strife again.”
• Related Link.
• Related Link.
• Related Link.

Isolated Yoo Si-min.

• Yoo Si-min (author) unleashed a scathing critique, calling it “an inevitable path to failure.” The following day, Kang Yu-jeong (Blue House spokesperson) stated, “We do not take separate positions or respond to specific individuals’ remarks,” while emphasizing, “The Blue House and President Lee Jae-myung have never wavered from the core value of prosecutorial reform: separating investigation and prosecution.”
• Kim Min-seok (former Prime Minister) told SBS, “This seems to go beyond the realm of ordinary critique,” adding, “Yoo Si-min once claimed President Kim Dae-jung would fail—but that didn’t happen.”
• Speculation arises that Jeong Cheong-rae (former Democratic Party leader)’s “no comment” implies tacit agreement.
• Kim Nam-jun (Democratic Party lawmaker) criticized, “This is less a bitter pill for reform than venom that multiplies its enemies,” adding, “Do not distort the president’s words to make him an adversary.”
• Park Ji-won (Democratic Party lawmaker) accused, “Yoo Si-min destabilized and harassed the Kim Dae-jung administration for five years,” noting, “In the second year of this presidency, he floated resignation theories and even a ‘mental instability’ narrative.”
• Park Hong-keun (Minister of Planning and Budget) posted on Facebook, “It’s hard to believe this is a comrade’s language,” adding, “It reads less as concern and more as a wish for failure.”
• Related Link.
• Related Link.
• Related Link.

Chosun Ilbo’s Divisive Framing.

• “Isn’t this a declaration of war by the pro-Roh and pro-Moon factions to prevent the pro-Myung faction from seizing the party leadership and 2028 general election nomination rights?”
• It is a frame that splits the Democratic Party, amplifies criticism of the government, and fuels political distrust.
• A Chosun Ilbo source close to the president said, “Can you use the word ‘inevitable failure’ against a government only a year old?” and expressed strong displeasure, adding, “No matter the sabotage, the president’s efforts to rebuild and reclaim power will continue.”
• The Hankyoreh predicted, “Because Yoo Si-min’s remarks were so aggressive, Lee Jae-myung’s supporters may rally behind Kim Min-seok (former Prime Minister) or Song Young-gil, who are competing against Jeong Cheong-rae.”
• Related Link.
• Related Link.

How the People Power Party Picks and Chooses to Use Yoo Si-min.

• The enemy of my enemy is my friend. Within the People Power Party, the sentiment is that Yoo Si-min’s criticism of Lee Jae-myung is not unwelcome.
• Jeong Jeom-sik (People Power Party floor leader) stated, “I hope the president keeps in mind that the more he silently watches his hardline supporters and maintains an ambiguous stance, the more he will follow the path of inevitable failure, as Yoo Si-min said.”
• Related Link.

“Even Ships Made in Korea Will Be Bought.”.

• “We must learn again. We used to build a ship a day, but now we’ve fallen behind in this field.”
• Donald Trump (U.S. President) said, “We’re working with companies in Korea and elsewhere” and added, “We plan to buy ships made outside the U.S. as well.”
• Originally, the U.S. could not build naval vessels overseas under the Burns-Taft Act, but speculation arises that this might be allowed through a presidential executive order.

The Fix.

Basic Pension Tied to Median Income Benchmark.

• It is currently paid to the bottom 70% by income. Households with monthly income up to 247,000 won are eligible for the basic pension.
• The median income benchmark is 256,000 won. It refers to the income of the household exactly in the middle when all households are ranked by income.
• Lee Jae-myung (Gyeonggi Governor) said, “Cutting what is already being received would be problematic,” and proposed, “Why not leave current payments as is and apply a ‘progressive increase’—where future raises are larger for lower-income groups—moving forward?”
• Related Link.

Pensions and Housing for Retiring Doctors.

• 20% of licensed doctors are over 65.
• Retired doctors receive pensions, but working reduces them. Lim Kyeong-su (Gobujeong Public Health Center director) noted, “The Senior Doctor Support Center provides 1.1 million won in monthly government subsidies for a five-day workweek, but this drops to 400,000 won for a four-day week,” and emphasized, “Flexible work systems like part-time or two-person shifts are necessary.”
• Lee Jin-han (The Dong-A Ilbo medical affairs reporter) proposed, “A bold exception to ‘100% pension retention’ should be introduced for senior doctors working in medically underserved areas.”
• “Instead of high salaries, guaranteeing housing or townhouse-style living spaces where they can live stably and comfortably in local areas could be a far more attractive option for senior doctors prioritizing quality of life after retirement,” the article suggests.
• Related Link.

ICYMI.

Lee Jae-myung Follows Kim Bo-mi X.

• Kim Bo-mi (former Gangjin County Council chairperson), who is running for Democratic Party leader, made headlines with her campaign announcement.
• “We’re told to graduate, build ‘specs,’ and still can’t find jobs. Even if we hustle from dawn, all that’s left in our accounts are loan interest and credit card bills,” she said. “Stop labeling us as ‘Ilbe,’ ‘conservatives,’ or ‘far-right’—it’s the ruling Democratic Party’s duty to care for young people’s lives.”
• “Democratization movements deserve respect, but they don’t grant a 40–50-year monopoly on politics. In a nation aiming to be a top-three AI power, should the generation that wielded Molotov cocktails and rocks still be the core?”
• “The Democratic Party is a ‘five-nothing party’—no fairness, no democracy, no generational shift, no youth, no future. Young people are leaving because there’s neither fairness nor democracy within the party.”

Baemin Is Uber’s Grandchild.

• Delivery Hero acquired Woowa Brothers (Baemin) in 2019, and Uber acquired Delivery Hero. Delivery Hero is valued at $14.8 billion.
• Uber now offers combined mobility and delivery services in 58 countries, up from 34.
• In South Korea, Baemin and Coupang Eats dominate the market. Baemin’s credit card payment volume is 5.7 trillion won, while Coupang Eats’ is 4.3 trillion won.

Worth Reading.

Dogma and Delusions of Grandeur.

• Jeong Cheong-rae once said, “Even if we give them a spoonful of supplementary investigative power, they might forge a sword from that spoon and turn it against the administration.”
• Kim Jae-jung (Kyunghyang Shinmun social editor) noted, “Reality is far more complex than the slogan ‘completely stripping prosecutors of investigative power’ suggests,” and pointed out, “Questions arise: How should cases be handled when prosecutors cannot determine whether to indict based solely on records submitted by investigative agencies? How about cases where the statute of limitations is imminent, leaving no time for prosecutors to request supplementary investigations from police and await results? What about cases where sloppy investigations, fabrication, or cover-ups by investigative agencies are suspected?”
• “We must ask the Democratic Party: What is the purpose of the prosecution reform you pursue? Is it to establish justice by ensuring criminals receive appropriate punishment and protecting victims? Or is it to vent grudges by dismantling the prosecution? We urge you to reflect seriously if you do not wish to drive the nation into further chaos.”
• Related Link.

Double Leverage, Why It’s Not on Nasdaq.

• Korea is a nation of “day traders.” As of 2024, South Korea’s stock turnover rate is 200.8%, ranking third globally behind China (296.7%) and Turkey (253.1%).
• According to the Capital Market Institute, individual Korean investors buy and sell stocks 16 times annually.
• Park Su-ryeon (JoongAng Ilbo head of corporate research) asked rhetorically, “With the addition of leveraged ETF products that require buying and selling within a day to generate profit, can the market even survive?”
• The best choice in Squid Game is not to participate.
• “Did Kim Yong-beom (Blue House Policy Secretary) truly not know why it exists on Nasdaq but not in Korea? The government, which pledged to resolve the ‘Korea discount,’ now faces criticism for adding another undervaluation factor.”
• Related Link.