Bank of Korea Governor Shin Hyun-song said the won has room to strengthen further and that additional appreciation would be desirable, arguing that a firmer currency could raise household purchasing power and support domestic consumption.
Shin said the central bank would maintain a tight policy stance until it was confident that inflation was converging toward its 2% target. Both headline and core inflation are expected to remain above that level for some time, he said.
The governor said the won had been particularly weak in the first half of the year but had strengthened after policy became tighter. In his assessment, a lower exchange rate increases household purchasing power and can shift the economic balance toward domestic sectors rather than large exporters. He also described the exchange rate as a measure of confidence in the currency and the broader economy, saying a return to more familiar levels could support financial stability.
Shin said Korea’s AI boom was outweighing the economic damage from the Middle East war, although both stronger AI-related demand and higher costs linked to the conflict were adding to inflationary pressure. He cited estimates that major global technology companies could invest more than $1 trillion annually in AI infrastructure by 2030 and said higher productivity and growth could eventually increase demand for investment and financing, potentially lifting the neutral interest rate.
He also said AI-related infrastructure investment and rising exports were generating fiscal benefits, with tax revenue estimated to increase 40% next year from this year. At the same time, he warned that gains were concentrating among major information-technology companies and widening regional and industry gaps. The lowest-income 20% of Korean households spend 32% of their income on food and energy, he said, making price stability especially important for them.