Korea JoongAng Daily - Daily News from Korea

The author, a former president of Seoul National University, is the chairman of the Korea Institute for Shared Growth.

Despite increased volatility, the stock market has posted a sharp rise compared to last year. The Kospi broke through the 5,000 mark, escaping a longstanding trading range and raising expectations for asset gains among investors. Rising stock prices also help companies raise funds, making the development welcome. Yet Kospi 5,000 is not only a cause for celebration. It also calls for caution.

Korea's stock market began in 1956 with the launch of the Korea Stock Exchange. At the time, only 12 companies were listed, with a total market capitalization of 15 billion won ($9.8 million). Today, more than 2,600 firms are listed, and market capitalization exceeds 2,500 trillion won. Although simple comparisons are difficult, market capitalization has grown far faster than nominal GDP over the past 70 years. Even so, many have long argued that Korean equities remain undervalued and that the market should expand further.

Why has the Kospi reached 5,000 now? Some point to strong presidential interest and increased purchases by public funds such as pension funds. Yet two structural factors appear more decisive. The first is the expansion of AI investment. As global technology companies pour resources into AI infrastructure, demand for high-performance semiconductors and memory has risen sharply. The competitiveness of Samsung Electronics and SK hynix in this market has drawn attention and helped lead the rally. The second factor is the expectation of improved corporate governance. Revisions to commercial law and capital market regulations have raised hopes of resolving the longstanding "Korea discount," boosting investor sentiment.

For years, Korean companies have been undervalued due to low dividends, a management focus on internal reserves and decision-making structures centered on controlling shareholders. Treasury shares, intended as a tool to enhance shareholder value, have often been used to defend management control. To address this, amendments to the Commercial Act in July and August 2025 expanded directors' fiduciary duties to include all shareholders, mandated cumulative voting for large listed firms and broadened the separate election of audit committee members.

A third amendment in February introduced a rule requiring companies, in principle, to retire treasury shares they acquire. The aim is to curb their use as a control device and to improve shareholder value and capital efficiency. These reforms mark a significant institutional shift toward greater transparency and trust in the capital market.

There are, however, notable risks. Given the cyclical nature of the semiconductor industry, the overall market remains unstable. External shocks, including geopolitical tensions such as U.S. military action involving Iran, could also unsettle markets.

More fundamentally, even as the stock market heats up, the real economy continues to struggle with low growth and widening inequality. Since 2023, annual growth has remained below 2 percent. The gap in business sentiment between large corporations and small- and medium-sized enterprises, as measured by the business survey index, has continued to widen.

When finance grows excessively relative to the real economy, "financialization" occurs, transforming industrial capitalism into financial capitalism. Rising credit trading and leveraged investment in recent markets suggest that asset price increases may be feeding speculative behavior. As economist James Tobin warned, financial markets can take on a "casino-like" character. The late economist Cho Soon similarly cautioned that such trends could lead to an economy driven by speculative gains.

The consequences begin at the individual level and spread into structural problems. When financial returns exceed those from industrial investment, capital shifts toward speculation rather than production. This resembles a farmer ...

The government on Tuesday approved and submitted to the National Assembly a supplementary budget totaling 26.2 trillion won ($17.2 billion), the second extra budget under the Lee Jae Myung administration, aimed at mitigating the economic shock from the Middle East war.

The plan allocates 4.8 trillion won to provide relief to the tune of 100,000 to 600,000 won per person to households in the bottom 70 percent of income earners, covering 32.56 million people, to combat rising oil prices. It also earmarks 5.1 trillion won to ease fuel and transportation costs, including 4.2 trillion won to compensate for losses from a cap on oil prices. Additional spending includes 2.8 trillion won for stabilizing livelihoods and 2.6 trillion won to minimize industrial damage and strengthen supply chains. The ruling and opposition parties plan to pass the bill at a plenary session on April 10.

Given the strain on households from the so-called triple burden of high oil prices, a weak currency and inflation, there is some justification for the ruling party's push to move quickly on what it calls a "war budget." Supplementary budgets can be effective when deployed at the right time and in the right place. However, an excessive focus on speed risks undermining their effectiveness.

The size of the package exceeds earlier estimates by 5 trillion to 10 trillion won. The scope of cash-based support has also expanded. With 70 percent of the population eligible for relief payments, critics argue that the program approaches a near-universal cash distribution. If politically motivated or poorly designed projects are included without sufficient scrutiny, the result could be wasteful spending and accusations that the budget is intended to influence voters ahead of the June local elections.

The potential side effects of such a large budget must also be considered. The government has emphasized that the spending will rely on higher-than-expected tax revenue rather than additional bond issuance. Even so, the supplementary budget would increase this year's total budget by 11.8 percent compared with last year. Using excess revenue for immediate spending, rather than saving it or repaying deficit-financing bonds, could reduce fiscal flexibility.

If additional spending becomes necessary in the future, the government may have little choice but to take on more debt. Cash-based support could also add upward pressure on prices and contribute to rising interest rates. Government bond yields have already climbed, pushing the upper range of mortgage rates above 7 percent. If this trend continues, the financial burden on households, small business owners and the self-employed is likely to grow.

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 Woo Ji-won and read by an artificial voice.

BTS may have sparked thousands of visits to Korea, but the country's layered offerings — from medical tourism to culinary experiences — are what ultimately sustain its tourism industry, according to a Trip.com executive.

"Korea as a destination is gaining a lot of attention, especially over the last few weeks due to BTS's performance," said Boon Sian Chai, the managing director and vice president of international markets at Trip.com Group, in an interview with the Korea JoongAng Daily in central Seoul last Thursday.

To celebrate its return after nearly four years, BTS held a free show at Gwanghwamun Square in central Seoul on March 21, a day after releasing its fifth studio album "Arirang." In response, accommodation bookings on Trip.com surged 52 percent on year from March 19 to 22, and those within 5 kilometers (3.1 miles) of Gwanghwamun Square jumped 64 percent.

However, Chai emphasized that BTS is only part of a broader wave that is driving interest in Korea's tourism.

"It's not just BTS. It's Blackpink. It's Seventeen. It's also 'Culinary Class Wars' (2024-), 'Squid Game' (2021-25) and so on," he said. "Korea as a culture and as a country is garnering a lot of attention."

Thanks to this growing interest, Korea has emerged as one of Trip.com's top five global destinations.

According to a Trip.com report released in January, Korea ranked among the top three most preferred destinations worldwide, alongside Japan and Thailand. To accommodate the increased rate of inbound travel driven by K-content and major K-pop acts, Trip.com has expanded its package deals to include not only flights and hotels but also tickets to concerts and cultural activities.

Still, Korean pop culture alone is not enough to sustain tourism, though it may serve as an entry point. What keeps visitors engaged is Korea's broader range of offerings, Chai said.

"One is medical tourism," he said. "Many countries offer medical tourism, but Korea stands out in terms of quality, control and standards."

"On top of that, there is a rich mix of history, culture and food," Chai continued, highlighting "very localized" Korean dishes such as dak hanmari (whole-chicken soup) and budae jjigae (spicy sausage stew).

Despite the popularity, Korea's tourism industry remains heavily concentrated in Seoul and Busan — in contrast to Japan, where travelers are more widely dispersed across regions.

But Chai said that signs of change are steadily emerging.

Accommodation bookings in Daejeon surged 188 percent on year between March 19 and 22, and Busan recorded an 85 percent increase over that same period.

Daejeon is turning into a popular stop for travelers, largely thanks to its iconic bakery Seongsimdang, which is only available in the city. Busan, meanwhile, remains a bustling coastal destination known for its beaches, temples and lively markets. BTS is also set to hold concerts in Busan in June as part of its world tour.

Cities such as Goyang and Sokcho have also seen rapid rises in popularity. Based on Trip.com's accommodation booking data from last year, Goyang and Sokcho recorded a 133 percent and 90 percent on-year increase, respectively.

Of course, there is still room for improvement, according to Chai.

One issue Chai pointed out was a longstanding problem of navigation difficulties, but he expressed optimism over the Korean government's recent move to allow the export of high-precision map data, a change expected to improve Google Maps' functionality in the country.

"For many years, foreign travelers struggled with navigation in Korea because Google Maps was not fully integrated," he said. "I think access to Google Maps is going to [...] help travelers to navigate around Korea."

Chai also highlighted underutilized infrastructure, such as Cheongju International Airport in North Chungcheong, which has multiple international routes but lacks visibility.

"There are actually many flights from international...

This article is by Sarah Chea and read by an artificial voice.

Korea is moving to release 20 million barrels of Middle Eastern crude from its strategic reserves for distribution to local refiners under a swap arrangement that is expected to help sustain supply through the end of June.

Follow-up measures on urea supply, which were initially planned for Tuesday, were abruptly postponed, citing concerns that a rapid succession of interventions could inflame consumer anxiety and, in turn, exacerbate market dislocations.

Under the swap program, the government will lend its crude reserves to domestic refiners, who will return the crude later. It's designed to bridge the temporal gap created by shipping delays, as refiners scramble to secure replacement cargoes from Africa, the Americas and Central Asia, a process that can take several weeks from purchase to delivery.

All four of the country's major refiners — SK Energy, HD Hyundai Oilbank, GS Caltex and S-Oil — have signaled their intention to participate, with roughly 20 million barrels expected to be exchanged under the scheme.

Refining facilities are typically optimized for Middle East crude, meaning that alternative supplies cannot be fed into the system immediately if blending ratios are not met. By swapping in government-held Middle Eastern reserves, officials aim to relieve these so-called blending constraints and preserve processing efficiency.

"Even if refiners find alternative suppliers and they are procured now, they would not arrive until May, leaving an interim gap in supply," said Yang Ki-wook, director-general of the Office of Industry, Trade and Resource Security at the Ministry of Trade, Industry and Resources on Tuesday during a press briefing at the Sejong government complex.

"Flexible deployment of strategic reserves would bridge that lag as refiners move to secure alternative volumes," Yang said, adding that the deployment would prevent disruptions to crude supply "at least through June."

The program will be implemented temporarily over April and May, with the option of one-month extensions subject to approval by the industry minister.

The Korean government is pushing hard to source crude from other countries, including the United States, Brazil, Colombia, Algeria, Gabon and Kazakhstan, as well as Asia-Pacific suppliers such as Australia and Papua New Guinea.

Yang also explained that the government's decision to hold off on additional measures regarding urea was driven by concerns that, given the market's heightened sensitivity to urea, "consumers tend to react more sharply, and wholesalers may resort to stockpiling."

Urea solution, widely used to reduce emissions from diesel vehicles, remains a critical input in both the transport and agricultural sectors. Korea relies on the Middle East for 43.7 percent of its fertilizer-grade urea, with 38.4 percent of that volume transiting the Strait of Hormuz, according to the Ministry of Agriculture, Food and Rural Affairs.

Korea's combined public and private inventories of automotive urea solution are sufficient to last more than 2.8 months, Yang said, with an additional 6,000 tons of urea scheduled for import by April.

The government has already banned hoarding and sales refusals of urea starting last Friday, which means importers, producers and distributors who stockpile volumes beyond typical levels for more than seven days or deliberately withhold sales will face penalties.

Violations may trigger corrective orders, up to three years in prison or fines of up to 100 million won ($65,000).

The directive is intended to pre-empt a repeat of the 2021 supply shock, when China's export restrictions triggered a nationwide shortage of urea solution.

Around 99 percent of gas stations in Korea, or 4,242 out of 4,267 monitored gas stations, currently have urea solution in stock, with their average retail price standing at 1,504.8 won per liter ($3.71 per gallon), a level below typical norms, according to data from Opinet, ...

This article is by Kim Ji-ye and read by an artificial voice.

Actors Woo Do-hwan and Lee Sang-yi reunite in Netflix's action series "Bloodhounds" (2023–) season two, throwing punches once again. And this time with a deeper bond that goes beyond bromance, in what is being called a levelled-up "bro-melodrama."

"The friendship between the two has grown much deeper," said Woo during the show's press conference held in Jung District, central Seoul, on Tuesday. "People often call it a 'bromance,' but we like to think of it as a 'bro-melodrama,' a new kind of genre we're carving out."

"Our characters have both experienced losing someone precious, which makes them want to protect each other even more and hope that no one gets hurt."

Lee echoed Woo's sentiment, while director Kim Ju-hwan described their dynamic as "one of the best bromances I've worked on so far." Kim is known for projects centered on male partnerships, including the films "The Divine Fury" (2019) and "Midnight Runners" (2017).

Directed by Kim, the second season of "Bloodhounds" returns with duo fighters Gun-woo and Woo-jin, picking up three years after they took down a loan shark operation. Now training under Woo-jin as his coach, Gun-woo continues to pursue his dream of becoming a boxing champion. However, when he becomes a target of Baek-jeong, an operator of an illegal international boxing league, the duo once again join forces to protect their dream and the people they care about against the underground world.

Actors Woo and Lee reprise their roles as Gun-woo and Woo-jin, respectively. They are joined by singer-actor Jung Ji-hoon, better known as 2000s pop star Rain, who plays new antagonist Baek-jeong.

Known for its boxing-driven action, the series faced the challenge of elevating its already well-received realism. For Kim, the answer was "to face it head-on."

"One of the reasons 'Bloodhounds' received so much love was its realistic portrayal of boxing," Kim said. "This time, the challenge was how to make that realism go even further and much of that responsibility fell on the actors."

"So, we decided to face it head-on. Instead of holding back, we trained even harder and dove deeper into boxing to make the action feel more raw and authentic. We really wanted to showcase a kind of K-action that only our actors can pull off."

To fully embody the action, the actors said that they endlessly trained and rehearsed, reaching a level Lee referred to as like performing a "couple's dance."

The second season also introduces a new villain on screen, Baek-jeong. Director Kim noted that Jung was the only actor who could match the character's aura, physicality and charisma.

Taking on his first villain role, Jung admitted he "felt a lot of pressure," though it was a challenge he had long wanted to take on.

Jung described Baek-jeong as a "cold-blooded" character, whom main purpose is to make Gun-woo and Woo-jin miserable as possible. To portray someone shaped by such a life, he immersed himself deeply in the role, even bringing the character home at times, which didn't end well.

"I thought that if it looks staged, it won't work," Jung said. "I wanted to showcase someone who has been like that for their whole life, and it even slipped into at home once and I got in trouble for it. I basically lived as that character for almost a year."

Action series "Bloodhounds" season two will be released on Friday on Netflix.

This article is by Noh Yu-rim and read by an artificial voice.

Korea's fried chicken franchises are caught in a bind: Poultry prices are surging due to avian influenza outbreaks and rising feed costs, but raising menu prices remains difficult under the government's push to rein in inflation.

Major poultry producers, including Maniker, Harim and Allpum, a chicken subsidiary of the Harim Group, have raised supply prices by 5 to 10 percent for franchise chains, large retailers and distributors, according to industry sources on Sunday.

Harim attributed the increase to prolonged avian influenza outbreaks and rising feed costs linked to a weaker won.

"Bird flu has continued longer than last winter, leading to a larger-scale culling of breeder chickens, and feed prices have also risen due to the weaker won," the company said.

The impact has been particularly severe this year. From November of last year through early this month, about 440,000 breeder chickens were culled, up 3.5 times from 120,000 a year earlier. The figure accounts for roughly 5 percent of the total breeder chicken population, which stood at 8.2 million birds as of last November.

Retail and wholesale chicken prices have risen accordingly. According to livestock distribution platform Dabom, retail chicken prices reached 6,534 won per kilogram ($1.95 per pound) as of Saturday, the highest level in two years and nine months since June 2023.

The weekly average price also climbed to 6,612 won per kilogram, up about 5 percent from the previous week. Wholesale prices rose 10.2 percent to 4,240 won per kilogram between March 1 and 27, compared to 3,846 won in February.

The industry, which relies heavily on domestically sourced chicken, is now grappling with both supply shortages and rising costs. While some companies use imported chicken for boneless menu items, bone-in chicken — a core product — is largely made with domestic poultry.

Franchise brands such as BHC, Goobne Chicken and Cheogajip use domestic chicken for all menu items, leaving them more exposed to price pressures.

Earlier and more severe avian influenza outbreaks are likely to weigh on demand, according to Korea Rural Economic Institute researcher Lim Hyo-bin.

"Last year, bird flu began in September, about a month earlier than usual," Lim said. "Rising chicken prices are expected to act as a constraint on consumption this year, leading to a decline in demand."

Despite mounting cost pressures, companies are hesitant to raise prices immediately.

"Profitability is likely to deteriorate as the outbreak continues, and we are closely communicating with franchise owners to manage supply conditions," a representative of a chicken franchise said.

"Although there are many factors pushing up costs, including packaging materials, raising prices is burdensome given the government's emphasis on price stability," another industry source said. "We will delay price hikes as long as possible and recover losses later when supply stabilizes."

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 principal researcher at the Korea Astronomy and Space Science Institute.

"There is a high probability of a new planet near this coordinate."

This line comes from an 1846 letter written by French astronomer and mathematician Urbain Le Verrier. Upon reading it, German astronomer Johann Galle located Neptune, dealing a blow to Britain's scientific pride at a time when three countries were fiercely competing to discover new planets. British astronomer and mathematician John Couch Adams had reached the same conclusion months earlier, yet failed to secure the discovery. Bureaucratic inertia cost him the prize.

Seventy-three years later, wartime Britain approved an expedition led by Arthur Eddington, who was subject to conscription, to observe a solar eclipse in Africa. The mission confirmed the general theory of relativity proposed by German scientist Albert Einstein. Even in the midst of war, Britain preserved its scientific standing by validating the work of an enemy nation's physicist.

In April 2008, Kang Young-woon, then the president of the Korean Astronomical Society, shared a striking anecdote. "I attended the centennial celebration of the Astronomical Society of Japan," he said. During the event, participants began discussing the founding years of their respective societies. The Royal Astronomical Society in Britain was established in 1820, followed by Germany and Canada, with France, the United States, Japan and Italy joining later. "That's when we realized — it was essentially the Group of 7 [G7]," he recalled.

The G7, which now leads the global order, had already recognized the strategic value of astronomy one to two centuries ago. As King Charles II once noted, accurate navigation allowed these nations to establish rules governing global sea routes and supply lines. They went on to standardize time and effectively create an analog form of GPS, enabling faster and safer maritime travel for both naval and commercial fleets.

Telescopes, once used to observe the stars, evolved into instruments for detecting enemy ships, while orbital mechanics gave rise to ballistics. These advances ultimately paved the way for the era of space navigation. Companies such as Nikon and Canon, which once manufactured naval targeting optics, later contributed to building the 8.2-meter Subaru Telescope and its Hyper Suprime-Cam.

The Korean Astronomical Society was founded on the vernal equinox in 1965. Astronomers today use more than 300 quasars — luminous objects located some 8 billion light-years away — as reference points, and even military GPS systems rely on such calibrations. It is a somber spring, as the achievements of astronomy continue to find their way into warfare.

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 Minister of National Defense.

The rollout of the first mass-produced KF-21 fighter jet, Boramae, on Wednesday at Korea Aerospace Industries in Sacheon, South Gyeongsang, marked a milestone in Korea's pursuit of self-reliant defense. The unveiling of the aircraft, developed through years of sustained national effort, generated both pride and reflection. While the achievement is significant, it also underscores that Korea has yet to complete its transition toward full strategic autonomy.

The KF-21 program traces back to March 2001, when then-President Kim Dae-jung first presented its blueprint. Since 2015, approximately 64,500 personnel, including researchers, engineers and industry workers, have participated in the development process. Before the rollout of the first production model, six prototypes conducted 955 ground tests and 1,601 flight tests. The aircraft is scheduled to undergo further performance verification before being deployed to the Air Force in September.

For decades, Korea has functioned within what may be described as a "tactical state," operating largely within a given international order rather than shaping it. Although the country has risen in global standing, ranking fifth in conventional military power and entering what is often referred to as the Kospi 6000 era, its level of strategic autonomy has not fully matched its economic and military status.

The long service of the F-4 Phantom and F-5 fighter jets illustrates this limitation. These aircraft protected Korea's airspace for more than half a century, supported by the dedication of domestic maintenance crews. However, as systems dependent on foreign design and supply, they faced inherent constraints in adapting to rapidly changing operational environments.

Recent conflicts, including those in the Middle East and the war between Russia and Ukraine, demonstrate that modern warfare has evolved into a complex, multi-domain battlespace integrating cyber and electromagnetic operations. In this context, the notion that those who design weapons ultimately shape the battlefield has become increasingly evident. Control over weapons development is closely linked to control over strategic planning.

The KF-21 stands at a turning point in this transformation. It is not merely a high-performance multirole fighter but also an advanced platform equipped with technologies such as an active electronically scanned array radar. More importantly, it provides Korea with the capability to design and manage key aspects of the aerial battlespace, marking a shift toward greater strategic initiative.

Historical experience shows that technological leadership plays a decisive role in determining national power. Countries that led the Industrial Revolution continue to occupy dominant positions in the global system. In the security domain, leading nations maintain strict controls on critical technologies through frameworks such as the International Traffic in Arms Regulations and the Missile Technology Control Regime, limiting access for others.

Among these technologies, advanced aircraft engines remain one of the most challenging barriers. Often referred to as the crown jewel of aerospace engineering, they are independently produced by only a few countries, including the United States, Britain, France, Russia and China. The KF-21 still relies on foreign-made engines, highlighting a significant vulnerability. Achieving domestic capability in this area is essential for Korea's transition to a fully fledged strategic state.

The path forward is not easy. While Korea is beginning to cultivate its own capabilities, advanced countries have already established mature technological ecosystems. Nevertheless, the success of the KF-21 program has helped dispel much of the earlier skepticism. The project demonstrated that sustained investment and coordination can overcome initial doubts and deliver tangible results.

Confidence is now growing across the defense sector. The f...

The author is an editorial writer at the JoongAng Ilbo.

The misery index, calculated by adding inflation and unemployment rates, has long been used to gauge the strain on households. When prices rise and jobs are scarce, hardship intensifies. Recently, however, a new metric has emerged: the so-called Trump Pain Point Index. At first glance, it appears similar in concept, suggesting an attempt to quantify the economic pain experienced by households under U.S. President Donald Trump's policies. In reality, it seeks to measure something else — the level of pressure felt by Trump himself — as markets struggle to interpret his often unpredictable policy decisions.

The index, designed by U.S. research firm BCP Research, combines several variables: inverse returns of the S&P 500, yields on 10-year U.S. Treasurys, the 30-year mortgage rate, gasoline futures prices and one-year consumer price index swaps that reflect inflation expectations. It also incorporates changes in the president's approval rating over the past month. In essence, the index assumes that Trump faces greater pressure when stock prices and approval ratings fall while interest rates, inflation and energy prices rise.

Whether Trump actually feels such pressure remains uncertain. Ahead of the 2024 U.S. presidential election, 233 mental health professionals published an open letter in The New York Times warning that Trump posed a danger due to what they described as severe and untreatable "malignant narcissism." Trump himself has at times made remarks suggesting unpredictability, including saying that he could strike Iran "just for fun." Yet he remains a political figure acutely aware of electoral consequences. A defeat in the November midterm elections would risk an early lame-duck presidency if Republicans were to suffer heavy losses.

This is where market participants see a pattern. When the Trump Pain Point Index rises sharply beyond a certain threshold, analysts say, Trump tends to reverse course — a dynamic sometimes described as "TACO," or "Trump Always Chickens Out." Policy shifts often follow moments of heightened pressure. Deutsche Bank last year developed a similar "pressure index," combining stock performance, interest rates, inflation and approval ratings. Both measures are currently near record highs, suggesting that unexpected policy announcements could emerge at any time.

The existence of such indices reflects a deeper issue: Markets can no longer rely solely on Trump's statements to assess policy direction. This points to an erosion of what economists call credibility capital, a key attribute of effective leadership. A recent report by NH Investment & Securities argued that credible leaders can influence expectations and behavior through declarations alone. Threats prompt action and promises move markets. But once credibility is depleted, it is difficult to restore. Like tolerance to a drug, stronger stimuli are required to achieve the same effect, and when trust is lost, even policy measures fail to deliver results.

The report suggested that the diminishing impact of Trump's repeated rhetoric on tariff negotiations and the war involving Iran illustrates this erosion of credibility. Markets appear increasingly less responsive to his statements, reinforcing the need for alternative indicators to gauge policy direction.

Meanwhile, the conflict between the United States and Iran has entered its second month. The long-feared scenario of Iran disrupting the Strait of Hormuz has begun to demonstrate its potential to shock the global economy. The latest cover story of The Economist was titled "Advantage Iran," reflecting concerns that Tehran, with little left to lose and hardline factions gaining influence, may pursue aggressive strategies that complicate U.S. decision-making. Washington now faces a difficult choice between escalation with uncertain prospects and negotiations that could be seen as a concession.

Even if the conflict were to end immediately,...

The government confirmed its 2027 budget guidelines on Monday, signaling that it will maintain an expansionary fiscal stance. With this year's total spending projected to reach 754 trillion won ($496.55 billion) after supplementary budgets are included, next year's budget could approach 800 trillion won if a 5 percent increase is sustained. Given the economic uncertainty stemming from the Middle East conflict, some degree of fiscal expansion appears necessary. The concern lies in the pace of spending and the risks that may follow.

Warning signs are already visible. Korea's total national debt reached 6.5 quadrillion won last year, rising by 280 trillion won in a single year. While household and corporate debt grew at rates in the 3 percent range, government debt surged by 9.8 percent. This means the government accounted for about 40 percent of the overall increase. As fiscal policy expands beyond being a tool for economic stabilization, concerns are growing that it could become structurally entrenched.

The side effects are emerging. Large-scale fiscal spending and increased issuance of government bonds have contributed to upward pressure on interest rates, which has quickly passed on to households. With the combined impact of fiscal expansion and geopolitical tensions, mortgage rates have exceeded 7 percent in the upper range. Currency volatility is also likely to intensify as fiscal spending continues to expand.

The government has pledged structural adjustments, including a 15 percent reduction in discretionary spending and a 10 percent cut in mandatory expenditures. However, if the savings are redirected into new spending, the intended tightening effect may be undermined. Such an approach risks creating a cycle in which debt increases without meaningful fiscal discipline.

Revenue uncertainty presents an additional challenge. While corporate tax revenues may benefit from a semiconductor recovery this year, prolonged geopolitical instability could weaken the revenue base in the latter half of the year. Korea's economic growth has already slowed to around 1 percent, trailing major economies such as the United States, China and Japan. If fiscal stability is shaken under these conditions, broader economic risks could intensify.

Ultimately, the effectiveness of expansionary fiscal policy depends on how resources are used. Even if spending increases, funds should be directed toward strengthening growth drivers and improving productivity, including investments in AI and structural transformation. If fiscal resources are instead used for one-off cash handouts or politically driven expenditures, the result will be higher debt without lasting economic benefits.

In times of uncertainty, caution is essential. Rapid fiscal expansion can create hidden risks that undermine long-term stability. Government spending must therefore be justified by measurable outcomes rather than short-term political gain.

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.