South Korea's finance minister vowed Sunday to continue thorough monitoring of financial markets to deal with the U.S. Federal Reserve's possible stimulus tapering.
Finance Minister Hyun Oh-seok said that South Korea should not let its guard down against a possible U.S. move to scale back its monthly bond purchasing program.
"We have to prepare for" the inevitable easing, Hyun said in an interview with Yonhap News Agency, referring to an exit from the quantitative easing measures that have been in place to stimulate the world's largest economy.
His comment came just days after the Federal Reserve decided to keep its current bond-purchasing program in place due to less optimistic views of the U.S. economy and employment.
Still, Hyun said the Fed's decision should be accepted as a "strong signal" that the U.S. will implement an exit strategy from quantitative easing, though he did not predict on a time frame.
The Fed has been buying US$85 billion in bonds every month in a bid to inject liquidity and stimulate its overall economy. In June, Fed Chairman Ben Bernanke said that he will start rolling back the bond-purchasing program within this year.
Vice Finance Minister Choo Kyung-ho said Sunday that uncertainties over the timing and scale of the stimulus tapering could persist until either the end of this year or early next year. Choo made the comment in a meeting with officials of the Bank of Korea and the Financial Supervisory Service, the country's financial regulator, on how to deal with the Federal Reserve's latest decision.
Hyun also said the current account surplus should be maintained at an appropriate level and household debt and short-term foreign debt needs to be managed.
The country's short-term external debt totaled US$119.6 billion as of the end of June, down $2.6 billion from three months earlier, according to the Bank of Korea. It marked the lowest level since the fourth quarter of 2006 when short-term foreign debts hit $113.7 billion.
Hyun said external factors, including the possible U.S. stimulus tapering, will not have a big impact on South Korea's economy in the second half, citing South Korea's well preparedness for the stimulus tapering and export growth.
Exports, which account for around 50 percent of South Korea's gross domestic product, gained 1.5 percent on-quarter in the second quarter after growing 3 percent on-quarter in the previous quarter, according to data compiled by the Bank of Korea.
He also said South Korea should join the U.S.-led trade talks, though he did not give a specific time frame.
In July, U.S. Secretary of Commerce Penny Pritzker said the U.S. hopes to conclude the Trans-Pacific Partnership talks within this year.
The pact is being negotiated by 12 nations: the U.S., Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.