Koo Yun-cheol, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, said on the 26th that discussions have begun on building a "new frame" to balance the National Pension Service's profitability and foreign exchange market stability.
Koo held a press briefing on the foreign exchange market at the Sejong Government Complex that day and said, "As the National Pension Service has expanded overseas investment, its impact on the foreign exchange market has grown."
Koo added, "The National Pension Service plays the role of the single largest player in the foreign exchange market," and said, "We will consider all possible policies for foreign exchange market stability."
Koo also said, "The National Pension Service is the third-largest pension fund in the world, exceeding 50% of Korea's gross domestic product (GDP), and its overseas assets are larger than the foreign exchange reserves."
Earlier, to respond to the high exchange rate, the government launched a "four-party consultative body" on the 24th that includes not only the Ministry of Economy and Finance (MOEF) and the Bank of Korea (BOK) but also the National Pension Service and the Ministry of Health and Welfare. It was reported that the group discussed ways to drive down the exchange rate by reducing the share of overseas assets held by the National Pension Service and by strategic currency hedging (hedge). Critics said that if such measures are actually deployed, the National Pension Service's profitability could decline.
In response, Koo said, "This is not about mobilizing the National Pension Service as a temporary fix for a rising exchange rate," and added, "We aim to prepare fundamental alternatives so pensions can be paid stably without damaging the National Pension Service's profitability."
When reporters asked, "Are you considering raising the currency hedge ratio for the National Pension Service or options other than currency hedging?" Koo said, "Resuming currency hedging by the National Pension Service is a matter for the Fund Management Committee to decide," but added, "As a member of the committee, the Ministry of Economy and Finance (MOEF) will participate in the discussions so that stability, liquidity, profitability, and public interest can be balanced and shared."
Koo went on to say, "We have begun discussions on building a 'new frame' to balance the National Pension Service's profitability and foreign exchange market stability," adding, "Through the four-party consultative body, we will discuss medium- to long-term institutional improvement measures that can be implemented within the system."
Koo also said, "The U.S. Treasury also appears to want stability in the foreign exchange market," adding, "It has not conveyed any particular views." Earlier, the U.S. Treasury reassigned Korea to the currency manipulation monitoring list and raised issues with the swap contract between the National Pension Service and the Bank of Korea (BOK).