Housing Bubble, Yen Carry Trade Threaten South Korean Economy

May 30, 2007 (LPAC)--The Housing bubble and a heavy reliance on over-seas borrowing, i.e., the yen carry trade can lead to an economic crisis in South Korea. This assessment of the South Korean economy was given by South Korea's Economics and Finance Minister Kwon O-kyo.

Yonhap also reported that Kwon O-kyo said that, "A sudden housing price plunge is one of major risks that could arise within South Korea. Kwon then expressed fears of the rapid rise of the South Korean won to the U.S. Dollar. Last year the won rose 9 percent against the dollar. Kwon attributes this to short term over-seas borrowing. This short term over-seas borrowing is the yen carry trade, of course. Kwon next said that "a sudden liquidation of yen carry trade is another risk factor for the Korean economy." In recent months, the South Korean government had been punting on the issue of the yen carry trade having a grave influence on the South Korean economy.