Author: ARIRANG NEWS
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Also with eyes on the local economy... a state-run think tank says Korea may experience a long-term economic slump... similar to Japan′s slowdown in the 1990s. For more on the growing signs of deflation in Korea... Kim Ji-yeon reports. There′s fears Korea could be taking the same deflationary path as its neighbor Japan,... which experienced a 10-year economic slump. Lee Jae-joon, an economist at the Korea Development Institute, pointed to Korea′s falling prices and low inflation rates as the main reasons for drawing the comparison. The country′s consumer prices remained trapped in the one-percent range for a full two-years due to low demand,... recording well below the government′s target of 2-point-5 to 3-point-5 percent. It′s a dismal sign... as sluggish demand was attributed as the main reason for deflation in Japan′s case in the early 1990s... dragging down the country′s real estate prices and its GDP deflator,... which measures the prices of all domestically produced goods. Much like Japan, Korea′s GDP deflator increases are dipping low into the zero-percent range this year after it first started to decline in 2011. The researcher warns Seoul should be more vigilant and take pre-emptive measures to tackle the country′s low inflation rate... such as cutting its main benchmark interest rates. He adds it′s important Seoul takes into account the downward trend of real wages and expected inflation when making decisions on its monetary policies. In 1995, Tokyo lowered its policy interest rate by half-a-percent to turn the economy around from recession... but the effect was short-lived as the country′s real interest rate went up due to disflation. The Bank of Korea will announce a decision on December 11th on whether to further lower the current interest rate of 2 percent... following previous rate cuts in August and October. Kim Ji-yeon, Arirang News.