Korea JoongAng Daily - Daily News from Korea

This article is by Cho Young-shin and read by an artificial voice.

The year 2026 marks a critical juncture for Korea's content industry. Next year, Netflix will decide whether to renew, reduce or maintain its investment in Korean content for 2027 and beyond.

While Netflix currently operates in over 190 countries, it produces original content in only about 50 of them. This reflects the company's strategy of relying on a limited number of "strategic content supply countries," rather than requiring local content in every market.

Fortunately for Korea, it was designated early on as one of those key content hubs. After entering the Asian market in 2016, Netflix invested some 700 billion won ($477 million) in Korea through 2022, generating returns that exceeded expectations. Starting with "Kingdom" (2019-20), Korea's first Netflix original, and continuing with hits like "Extracurricular" (2020), "Sweet Home" (2020-24), "D.P." (2021-23) and "Squid Game" (2021-25), Korean content solidified Korea's role as Netflix's Asian base - and arguably positioned it as a global contender in content production.

Emboldened by that success, Netflix announced it would invest $2.5 billion in Korean content from 2023 to 2026 - around 800 billion to 900 billion won annually.

That's why 2026 matters: It is the final year of this investment cycle and the moment Netflix will decide what comes next. The company has three options - increase investment, decrease it or keep it steady.

Korea finds itself in a precarious position. Traditional broadcasters such as the three terrestrial networks (KBS, MBC and SBS), tvN and general cable channels have lost their programming clout. TV viewership is in decline, and advertising revenue is falling. As financial losses mount, broadcasters have cut their drama programming by more than half. Production companies say it is nearly impossible to recoup costs unless they secure an original or simultaneous release deal with Netflix.

There is still some hope. Local streamer Tving has partnered with HBO Max and Disney+ Japan to diversify distribution channels, and some production companies are expanding into North America and Japan. But these moves will take at least two to three years to warm the market. Realistically, none of them can yet match Netflix in terms of capital or global reach. At the same time, the Chinese market remains closed under the ongoing ban on Korean cultural exports.

With few alternatives, all eyes are once again on Netflix - the only major player still willing to increase investment amid soaring production costs and a collapsed domestic market.

Netflix shifts focus to other regions

Netflix's recent investment trends, however, point in a different direction. North America and Europe, especially Britain, remain untouchable pillars. With over $10 billion allocated annually for North America and more than $1.5 billion for Britain, these regions are nonnegotiable. In fact, investment in North America has grown, with a special focus on Spanish-speaking populations.

To target this demographic, Netflix has committed long-term investments in Spain and Mexico through 2028. Spain will receive 1 billion euros ($1.2 billion), and Mexico will receive $1 billion. The rationale is straightforward: both countries can cater not only to Latin America but also to the 20 percent of the U.S. population that identifies as Hispanic. In Mexico, Netflix can produce content at one-third the cost of equivalent U.S. productions.

Mexico's rise as a content hub is strategic - and this same pattern is emerging in Asia.

The rise of the 'micro-region'

This shift signals a fundamental change in Netflix's content strategy. Previously, Netflix built a three-tiered model: global content with universal appeal as the base layer, regional content for specific cultural zones and local content for high-subscriber markets.

Now, a new layer has emerged: the "micro-region." Until recently, Korean dramas were seen as the key to unlocking South...

This article is by Noh Yu-rim, Kang Ki-heon and read by an artificial voice.

Olive Young built its lead in Korea's beauty retail by doing something rare in cosmetics stores: It stopped pitching products.

In stores, employees greet shoppers and then hang back. They let customers test products, compare brands and linger without pressure. Staff members do not approach unless a shopper asks for help. The company calls it "half-response" service.

At the Sangam MBC branch in western Seoul on Nov. 20, an employee sorted inventory and greeted customers without looking up. Over the next 15 minutes, shoppers tried hand creams and compared shampoos. No one interrupted them. The pattern, customers and employees say, holds across the chain.

Olive Young began using this "half-response" approach in the early 2000s, from its earliest days. The core rule is not to approach customers unless they seek assistance. Unlike department stores that emphasize attentive service, the company said it found that young women often viewed aggressive in-store engagement as a burden. While beauty chains once competed by handing out samples outside, Olive Young positioned itself as a low-pressure place to browse - what it calls "discovery shopping."

"Discovery shopping became extremely popular, and our customers started calling Olive Young a 'beauty playground,'" said Lee Sun-jung, CEO of Olive Young.

Crisis and reinvention

Olive Young's massive market presence is proven by the numbers: 15 million membership users and 4 million monthly active users. Over 90 percent of Korean women in their 20s and 30s are members, making it a solid K-beauty platform.

But it hasn't always been like that. The retailer faced a crisis in 2010, when Amorepacific, Korea's top cosmetics firm, announced that it would pull out of Olive Young stores. Its brands like IOPE and Laneige were customer favorites. LG Household & Health Care, the second-largest player, also reduced its offerings. Emergency meetings were held daily.

"There weren't as many K-beauty brands back then, so we explored all kinds of ideas out of desperation," an Olive Young representative said.

Their breakthrough was direct overseas sourcing - bypassing distributors to bring foreign brands straight to Korea. Starting in 2011, they introduced dermocosmetics and brought in difficult-to-acquire foreign brands like Burt's Bees.

"If big-name brands pull out, we need to offer what others don't," said Lee Min-woo, head of Olive Young's global retail division. "Korean consumers were increasingly curious about foreign products. So we decided to boost our overseas lineup. That was the start of Olive Young's early competitiveness."

They also revamped their display strategies, organizing products by trend and category - inner beauty, color makeup, skincare - rather than by brand, doing something commonplace today, but deviating from the typical drugstore displays at the time that sorted products by brand, with big names getting prime spots while smaller labels were pushed aside.

To fill empty shelves, Olive Young also turned inward, actively seeking out and nurturing domestic small beauty brands lacking distribution channels. A prime example: Mediheal.

With top display placement and aggressive marketing, Mediheal soared. Since debuting in Olive Young in 2009, the facial mask giant has been No. 1 in cumulative mask pack sales for 14 consecutive years, with total sales reaching 3.1 billion units.

Empowered merchandisers drive success

Merchandisers, who supply products to stores, are another pillar of Olive Young's success. When major brands pulled out, the company dramatically expanded the merchandiser role, tasking them with finding indie brands and diversifying the product lineup.

The growth of cleansing brand Arencia was led by a fourth-year merchandiser who was struck by the unique texture of the "pack" cleanser. After top promotional placement and analyzing sales data and reviews, the merchandiser suggested launching tub...

This article is by Cho Jung-woo and read by an artificial voice.

GOHEUNG, South Jeolla - A 10-minute drive from Nokdong Port in Goheung County, South Jeolla, across the narrow span of the Sorok Bridge, leads to a remote island, where the beauty of its sea and pine trees conceals a long history of suffering.

Despite its status as a medical zone under the Ministry of Health and Welfare, Sorok Island - a former leprosy colony - today welcomes tour groups and families to the publicly accessible areas, from the Sorokdo National Museum to a central park filled with statues and traces of the island's past.

Tourists paused for photographs, read plaques and retraced the lives of those once forced to live here in isolation on a visit to the island on Nov. 6.

Just before a stop sign that warns tourists not to go beyond into the residential area, a brown sign marked with trees and small houses points the way to the island's historical sites. The name Sorokdo itself comes from the Korean word for a young deer, a reference to the island's shape when seen from afar.

One arrow points to a redbrick building that appears ordinary at first glance. Inside, however, the walls hold the memory of mandatory autopsies.

The building, with its wide white-framed windows, was used as an examination room, called the autopsy lab, during the 1910-45 Japanese colonial period, where the bodies of deceased leprosy patients were dissected. The large windows, according to Cho Myung-rae, a curator at the Sorokdo National Museum, were designed to allow sunlight to pour in during the procedures. The autopsies continued until the mid-1960s.

"This is one of the most prominent features of the building," Cho said.

Consent was not required. Autopsies were mandatory, regardless of a family's wishes, before bodies were cremated, at a time when cremation itself was rare in Korea.

Patients on Sorok Island came to say that they died three times: first when they were diagnosed with the disease, again on the autopsy table and a third time through cremation.

The ashes were eventually placed in Mannyeongdang, a charnel house on a hill in Sinsaeng-ri village, where the remains of 11,284 people are kept. Every Oct. 15, residents, staff members and religious leaders gather there for a joint memorial service, a ritual that has continued since the building's completion.

Next to the autopsy room stands another redbrick structure, heavier and more severe, resembling a small fortress. Built in 1935, it once served as a detention facility for patients who violated hospital rules.

The building follows an H-shaped plan: two parallel wings, one to the north and one to the south, joined by a narrow central corridor. From the outside, its high brick walls betray the true purpose of the complex. Inside, the rooms are dark and bare, with a small toilet and a narrow window.

"The hospital director at the time had judicial authority to detain patients for up to a month," Cho said.

After Korea's liberation in 1945, the detention facility remained in use. In 1973, it was remodeled into living quarters as the island struggled with a chronic housing shortage.

Today, the former prison and the autopsy lab are designated cultural heritage sites, preserved reminders of the coercive system that once governed the island.

Beyond the brick buildings lies Jungang Park, or Sorokdo Central Park, a landscaped space created in 1940 as a recreation garden for patients. The paths wind through carefully planted trees and sculpted rocks, opening onto a small pond and a site that once housed a brick kiln where patients were forced to work.

As hospital finances worsened after the outbreak of the Second Sino-Japanese War in 1937, bricks produced here were sold not only for Sorok Island's expansion but also for construction projects outside the island, and the labor grew increasingly harsh. By the 1960s, the kiln was dismantled, and a small park was built in its place, transforming a site once shaped by forced labor...

The author is a writer and senior fellow at the Institute for Social and Economic Research.

On Dec. 9, 1979, scientists at the World Health Organization confirmed that smallpox had been eradicated. Five months later, the World Health Assembly declared the world free of the disease. One of the deadliest infections in human history had been eliminated through a coordinated global effort.

Smallpox is also one of the oldest documented diseases. Records indicate an outbreak in China in 1122 BCE, and ancient Sanskrit texts in India describe a virus consistent with it. Traces of smallpox have even been detected on the mummified remains of Pharaoh Ramses V, who died in 1156 BCE.

Yet the invention of vaccination did not produce an immediate eradication. As late as 1967, smallpox still killed 2 million people worldwide. Administering vaccines to every population across different continents, political systems and health infrastructures proved far more challenging than the scientific breakthrough itself. Nearly two centuries after Edward Jenner's discovery, the disease was declared extinct in nature only in 1979.

No country administers routine smallpox vaccination today. Generations once taught to fear tiger attacks, the dreaded smallpox and even war as the three great dangers of childhood now regard smallpox as a distant historical threat. So remote has smallpox become that misinformation about vaccines, including conspiratorial claims about their safety, circulates among groups with little awareness of the eradication effort that made modern public health possible.

Smallpox was the first infectious disease eradicated by humans. Its disappearance marks an extraordinary scientific and logistical achievement, one that required sustained international cooperation and trust in medical science. As vaccine skepticism spreads, the success of the smallpox campaign offers a reminder that the protection modern societies enjoy is neither automatic nor guaranteed.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

The author is the deputy editor of Content Division Three and the head of Corporate Research at the JoongAng Ilbo.

For many Korean consumers, the past 10 days have felt like an insult. A former Coupang employee leaked the personal information of 33.7 million users over a five-month period. The company that treats purchase and behavioral data as a prized asset for recommending Rocket Delivery products had no idea that basic personal details - addresses, names, phone numbers - were slipping out unchecked.

Coupang's founder Kim Bom-suk, also known as Bom Kim, once said he wanted to create a service that made Koreans wonder how they had ever lived without it. In a narrow sense, he succeeded. Yet, the mood among consumers is sour. Even after a massive security breach, the company insisted it was a "disclosure," not a leak, and its founder did not offer a simple apology. That silence reflects a confidence born of dominance in daily life.

The same mindset was evident last year when Coupang was fined 160 billion won ($109 million) by the Fair Trade Commission for manipulating product reviews. The company responded by warning that if the commission prohibited the recommendation system for Rocket Delivery goods, it would no longer be able to maintain the service at current levels. The implication sounded like pressure rather than explanation.

Coupang has long framed this posture as "rationality." According to the Coupang research series from The JoongAng Plus, Coupang's executives use "correctness" as their primary decision criterion. But this is not correctness in relation to fairness or justice. It is a certain capitalist notion of correctness - seeking the most rational, most efficient outcome. Efficiency is not inherently problematic for a corporation, but Coupang's reluctance to accept responsibility or to apologize fuels public resentment.

Even so, the Korean market remains unusually favorable for an American-style tech company like Coupang. Cultural preferences for speed, combined with a compact geography that makes logistics highly efficient, create ideal conditions. Regulations restricting early-morning and weekend operations at large discount stores have remained unchanged for more than a decade. In a market where competition is blunted, a company has less reason to fear consumer dissatisfaction.

No country seems to value personal information as cheaply as Korea. Coupang almost certainly reviewed the precedents. Before this incident, the worst data breach occurred in 2014, when KB Kookmin Card, Lotte Card and NH Nonghyup Bank lost the names, resident registration numbers, home addresses and card numbers of 100 million customers.

Yet, the Supreme Court imposed fines of only 10 to 15 million won per company. In a class-action suit, judges ruled that consumers had suffered no financial damage and ordered companies to pay only 100,000 won per person as emotional compensation. The total came to around 26 billion won. In similar lawsuits that followed, compensation again hovered at 100,000 won per person. Losses caused by the sale of stolen data to illegal loan sharks fell squarely on consumers.

That case, too, was caused by human error. A subcontractor demanded customer data be transferred to a USB stick, and the companies handed over unencrypted original files without hesitation. Yet under Korean law, even this careless handling of resident registration numbers and names was permissible. Their legal value, after all, was estimated at only about 100,000 won per person.

In a market where corporate risk is this low, repeat offenses are nearly unavoidable. Lotte Card suffered another breach exactly 10 years later. Government and parliamentary inaction suggests that even larger incidents could lie ahead. When 44.5 billion won in cryptocurrency was stolen from the Upbit exchange in a 54-minute hack on Oct. 27, the law on virtual asset user protection offered no grounds for holding the exchange accountable. In a society forced to r...

The author is a political scientist.

Sovereignty is a fearsome concept. Even the law must fall silent before it. Sovereignty stands above legal authority, and those who hold power are often tempted by it. They want to equate their own will with that of the sovereign. When political leaders invoke sovereignty, caution is in order. Under Vladimir Putin, for example, the idea of "sovereign democracy" became an excuse for arbitrary rule.

One of the most common abuses of sovereignty is the use of referendums. Few tools more effectively remove the constraints of existing laws and institutions. The Park Chung Hee government used a national referendum to create the Yushin system, and when opposition from students and the political arena grew, it held another. In February 1975, a referendum on maintaining the Yushin Constitution produced 73 percent approval, after which dissent was punished as defiance of the sovereign itself.

Sovereignty is absolute. No authority can stand above it. It is exclusive, since outside intervention is considered interference. It is permanent, for even when governments change, sovereignty must hold for the state to endure. It must be singular; if two sovereignties exist, civil war follows. A people that relinquishes sovereignty becomes a colony. A person who abandons it lives as a stateless individual.

A political party and its members do not form a sovereign relationship. One may use metaphors such as "consumer sovereignty" or "party member sovereignty," but these are only figures of speech meant to emphasize rights, not actual forms of political authority. A dissatisfied member may leave a party at any time. A party is a matter of voluntary choice; a state is not. No one is born a party member, and no one is forced to become one.

Jean-Jacques Rousseau described sovereignty as a form of "compulsion that makes people free." To secure freedom from hunger, disease, war and disaster, citizens accept obligations such as taxation and national defense. The essence of sovereignty is coercive. Only through that coercive bond can the state provide secure liberty. The relationship between a party and its members does not resemble this at all. Leaving citizenship endangers one's life chances; leaving a party does not.

Jung Chung-rae, leader of the Democratic Party (DP), nevertheless invokes the strained phrase "party member sovereignty." He seeks to decide major party matters through referendums of party members and is eager to establish what he calls a "party member sovereignty bureau," a new organizational unit designed to institutionalize that power. The intention is clear: to maximize the influence of the fandom members who support him, and to send a warning to legislators who do not. The message is, "If you disobey, the members will deal with you."

Jung argues that the party's institutions do not match the enthusiasm of party members. This is unconvincing. The DP does not operate through participation. Participation shares an origin with "part" and "partnership," implying coordinated action among actors with distinct roles who respect one another and work together for a shared future. Saying "I am the sovereign, so things must be done my way" is not participation.

The party runs not on participation, but on mobilization. Who conducts campaign operations? Not ordinary party members. Campaigns rely on people mobilized for the task and the money required to hire them. A party truly driven by participatory energy would not need to hire paid workers who repeat slogans without making eye contact with voters. Nor do ordinary members lead local party activities. Local events are dominated by "core members."

Core members include local councilors, district representatives and those with business interests linked to the party. They respond to the district chair's mobilization demands out of fear of repercussions. They are responsible for reporting recruitment figures and promotional activities for the party. They are mo...

The government plans to integrate the high-speed KTX and Super Rapid Train (SRT) rail systems by the end of next year. Beginning in March, KTX trains will run to Suseo Station and SRT trains to Seoul Station as part of a cross-operation arrangement, with full integration of scheduling and operations to follow in the second half of the year. The Ministry of Land, Infrastructure and Transport announced the roadmap on Monday, saying the merger would expand public convenience by increasing the number of high-speed services. The integration of Korea Railroad Corporation (Korail), which operates the KTX, and SR, which operates the SRT, was a campaign pledge of President Lee Jae Myung and is part of a wider restructuring of public institutions. Both the railway union and Korail have also advocated integration, arguing that separated operations create more than 40 billion won ($27 million) in duplicated annual costs and inconvenience to passengers.

Seat shortages, especially on SRT routes, have been the biggest driver of the accelerated push. According to Korail, full integration of trainsets and schedules would allow operators to add roughly 16,000 seats per day through improved efficiency. Streamlining safety-management systems is another reason cited by those who support the merger.

Although the government expects greater convenience for passengers, there are serious concerns. When the SRT service began in 2016, it ended Korail's monopoly and introduced competition to the market. SRT fares averaged 10 percent lower than those of the KTX, and passengers gained alternatives during railway strikes. Korail has said it is considering a 10 percent discount on KTX fares after the merger, but no one knows what the fare policy will look like once it regains monopolistic control. Without additional trains and upgrades to bottleneck sections such as the Pyeongtaek-Osong and Gwangmyeong-Susaek stretches, the plan to expand service frequency and secure more seats may face structural limits. Some also argue that because Korail already oversees traffic control, track maintenance and rolling-stock repair for both services, the merger will not meaningfully improve safety.

Land Minister Kim Yun-duk said the government will pursue the merger as a way to strengthen the competitiveness of Korea's rail industry. But integration aimed at achieving economies of scale must not devolve into inefficiency, bloated management or deteriorating service quality due to reinforced monopoly power. The government needs a thorough public discussion and a careful approach. A rushed merger carried out simply for the sake of integration could strengthen the railway union's influence rather than improve public service, leaving passengers to bear the cost.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

This article is by Choi Min-ji and read by an artificial voice.

Cultural exchanges between Korea and Japan have regained momentum after the "No Japan" movement in 2019 and the Covid-19 pandemic, broadening the presence of Japanese content in film, music and live performance.

The "No Japan" movement refers to a consumer boycott in Korea that began in 2019 after Japan tightened export controls on key materials used in Korean semiconductor production. Koreans responded by avoiding Japanese products, travel and brands in protest of the measures and ongoing historical disputes between the two countries.

Experts say global streaming service platforms and "a softening of anti-Japan sentiment have opened the door to new cultural interaction."

The rise of Japanese content is most visible in film, especially anime.

"Demon Slayer: Kimetsu no Yaiba Infinity Castle," released in Korea in August, drew 5.66 million viewers as of Nov. 30, making it the most-watched film in Korea this year. It marks the first time an anime film has topped the annual box office in Korea.

Other titles also performed well, including "Chainsaw Man - The Movie: Reze Arc" with 3.3 million viewers, "Attack on Titan the Movie: The Last Attack" with 950,000 and "Detective Conan: One-Eyed Flashback" with 750,000.

"A generation that grew up with Japanese comics after the Kim Dae-jung administration opened cultural exchange between Korea and Japan has now become adults," cultural critic Kim Bong-seok said. "Anime, once seen as something only devoted fans followed, is now entering the mainstream."

Over in music, J-pop fandom continues to grow. Wonderlivet, a three-day J-pop festival held at Kintex in Goyang, Gyeonggi from Nov. 14, drew 40,000 attendees, up roughly 60 percent from last year's 25,000. The second edition of the festival featured 30 Japanese artists, including Bump of Chicken and Spyair.

Major artists also continue to hold shows in Korea. Concerts by Kaze Fujii at Gocheok Sky Dome in western Seoul in December last year and Kenshi Yonezu at Inspire Arena in Incheon in March both sold out. Gen Hoshino, who performed in Korea for the first time in September, also sold out his upcoming concert in February.

Japanese works are gaining momentum on stage as well. The theatrical adaptation of Studio Ghibli's "Spirited Away" (2001) sold all 30,000 tickets in its initial release before its Jan. 7 opening next year.

"Interval," based on a play titled "The Conference of the Gasps" by leading Japanese playwright and director Tomohiro Maekawa, will open in February with actor Kim Seon-ho in the cast.

Experts say the rapid expansion of global content platforms plays a major role.

"Korean and Japanese content now sit side by side on services like Netflix," said Jo Gyu-heon, a professor of Korean-Japanese cultural content at Sangmyung University. "It has become much easier to watch Japanese films and dramas, which has lowered the entry barrier. Among global content, Japanese works with cultural similarities to Korea tend to draw more attention."

Algorithm-based viewing environments, which recommend shows and music based on individual preferences, also contribute to the rise of J-content.

A viewer who watches "Chainsaw Man - The Movie: Reze Arc," for instance, may be recommended a song from the film's original soundtrack, "Iris Out," which leads them to discover Yonezu.

"Short-form platforms such as TikTok and YouTube Shorts expose audiences to J-pop and anime soundtracks, while global streaming services expand fandoms through personalized recommendations," said a staff member at Takiel, a company that has promoted Japanese artists in Korea.

Some analysts say anti-Japan sentiment has eased compared to the past.

"Since the No Japan movement, more young people have begun to reject the idea that politics and culture should be treated as the same," Professor Jo said.

Cultural exchange between the two countries is expected to grow further.

"Cultural influence now flows in both ...

The author is an architect and a former president of the Korea National University of Arts.

In the rural village of Mechernich near Cologne, a modest farming couple, the Scheidtweilers, lived a life they described as happy and good. Out of gratitude, they hoped to build a small chapel dedicated to their patron saint, Bruder Klaus. They wrote to Swiss architect Peter Zumthor, saying they had almost no budget but would offer their land, time and labor. By chance, Zumthor's mother had long admired the saint, and the architect agreed to take on the project.

The structure stands like a solitary monolith in the middle of a vast wheat field. Covering about 50 square meters and rising 12 meters high, the chapel is compact, with an interior small enough that even four people feel crowded inside. It has no heating system, no lighting and no water facilities. Despite its simplicity, the chapel took five years to design and two years to build before its completion in 2007. Zumthor declined any design fee, repeatedly visited the construction site and adjusted plans as he worked alongside local builders.

The core of the structure came from 112 tall pine logs arranged as a conical interior mold, nicknamed the wigwam after the conical dwellings of Native American communities. Workers erected a second mold outside, then filled the space between with rammed concrete. The mixture, made from earth, gravel and lime, was compacted in 50-centimeter layers once a month by local farmers. After two years, the process produced 24 stratified layers of textured walls.

When the concrete set, the pine logs inside were burned out, leaving a scorched interior marked by more than 100 vertical grooves. The smoke and char etched a rugged surface that defines the space.

Bruder Klaus, a fifteenth century Swiss hermit priest, spent 20 years in seclusion. In his visions he described darkness like that of the womb and light like that of birth. Zumthor translated these images into architecture. An oculus shaped like a womb pierces the roof, exposing the interior to sun, wind and rain. Melted lead spread across the uneven floor forms shallow pools when it rains. A single bench, a candle holder and a small bust of the saint complete the sparse interior.

The chapel is austere but rich in sensory presence. Light and shadow, the smell of charred wood and the roughness of the walls create a space grounded in phenomenological experience.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

The author is a professor of economics at Sookmyung Women's University and head of the Reset Korea economy subcommittee

For more than two months, the won-dollar exchange rate has hovered in the 1,400-won range and is now pushing toward the threshold of 1,500 won. Korea has rarely encountered such levels outside the foreign exchange crisis of 1997 and the global financial crisis of 2008. Yet the anxiety today is different. Those past episodes were "black swan" shocks, while the current situation resembles a chronic condition born of weakening domestic fundamentals and a structurally strong U.S. economy.

Amid concern that the high exchange rate may become entrenched, the Ministry of Economy and Finance, the Bank of Korea, the Ministry of Health and Welfare and the National Pension Service (NPS) recently announced a new framework aimed at improving pension returns while stabilizing the foreign exchange market. Finance Minister and Deputy Prime Minister Koo Yun-cheol stressed that the government was not preparing to mobilize the pension fund to defend the won. But markets see the plan as a signal that national retirement assets could be used as a tool for currency intervention.

The urgency of the government's position is understandable. The NPS holds about 1,322 trillion won ($900 billion) in assets, with approximately $530 billion of that invested overseas. That figure exceeds Korea's foreign exchange reserves of roughly $420 billion. Because the fund converts large amounts of won into dollars every year to finance overseas investments, officials have long viewed it as a structural factor pushing the exchange rate higher. For policymakers, the temptation to use this "second reserve" to relieve market pressure is strong.

But the NPS is not a piggy bank the government can tap when needed. Its purpose is to grow assets and secure stable retirement income for millions of Koreans. Raising the fund's foreign exchange hedge ratio may provide more dollars to the market in the short term, but it comes with substantial opportunity costs. If the strong dollar trend continues, increasing hedging now means selling more dollars and forfeiting future currency gains. Hedging also incurs additional costs. Sacrificing the investment returns of 22 million subscribers for macroeconomic stabilization is a decision that invites criticism.

The rise in the exchange rate also cannot be blamed solely on the NPS. Korean retail investors have purchased a net $30.1 billion in U.S. stocks this year. Since the pandemic, Korea's money supply has grown twice as fast as that of the United States. Korea's policy rate is 1.5 percentage points higher than the United States. Under the tariff agreement with Washington, Korea will send $20 billion in cash to the United States each year for a decade. The spread of "Trump trade" positioning has further amplified dollar demand. Global macroeconomic shifts, not just domestic portfolio flows, are driving the market.

Using the NPS to counter these forces is merely symptomatic treatment. Selling dollars in the forward market to hedge, or borrowing dollars from the Bank of Korea through a swap for new investments, may temporarily increase dollar supply. But such steps are painkillers, not cures. They cannot reverse a trend driven by weaker fundamentals. Worse, if the moves are interpreted as political interference, the fund's independence could be compromised. Over time, this would erode investment returns and undermine foreign investor confidence.

In the short term, cooperation between the NPS and the Bank of Korea should focus on smoothing excessive volatility through flexible swap lines. Mechanical increases in hedge ratios or administrative intervention in asset allocation should be avoided. Decisions on investment strategy must remain with the fund's independent management committee.

In the long term, Korea must become a more attractive investment destination. That requires improving the performance and stability of...