"Long-Term Trendline of Korean Economy Is Beginning to Shift"... Kim Yongbum’s 'Post-Japan Theory'

"South Korea May Become the First to Break Away from Japan’s Path"

"Already on a Growth Trajectory Never Taken Before"

AI-Driven Expansion in Production Capacity and Capital Market Reforms Are Rewriting the Rules of Growth

"What the State Must Supply to Companies First Is 'Time'... Bottlenecks Must Be Eliminated in a Timely Manner"

A diagnosis has emerged from the top of the Blue House's economic policy team suggesting that the South Korean economy may be able to break free from the trajectory of prolonged low growth, often seen as a predetermined future similar to Japan's experience. The analysis indicates that, beyond a temporary rebound from the artificial intelligence (AI) semiconductor boom, the long-term trendline of the economy itself has begun to change as expansion in production capacity and capital market reforms come together.

Policy Chief Yongbeom Kim is attending the K-Shipbuilding Future Vision Meeting hosted by President Jae-myung Lee at Hotel Hyundai By Lahan Ulsan on May 13, 2026. Photo by Yonhap News

Kim Yongbum, policy chief of the Blue House, wrote on Facebook on the 12th in a post titled "Bye-Bye, East Asia Stagnation Theory," saying, "The market is redrawing the long-term trendline of the South Korean economy," and added, "South Korea, which has followed Japan’s path more faithfully than any other country, may become the first to break away from it." Kim continued, "There are cycles and trends in the economy, but what actually changes economic history is not the cycle but the slope of the long-term trendline," and noted, "The moment when the very standard by which a nation’s future is viewed changes may come only once in 10 or 20 years."

As recently as early last year, the most familiar path to describe South Korea’s future was that of Japan: a country that entered the ranks of advanced economies with strong manufacturing and export competitiveness, but then entered a period of prolonged low growth due to a small domestic market, an aging population, and a weak capital market. Kim assessed that, in fact, South Korea experienced the deepest pessimism among the three East Asian nations from 2022 to 2024.

"The semiconductor downcycle suppressed exports, and the KOSPI fell out of sync with the U.S. stock market and remained sluggish for a long period," Kim said, adding, "The 'Peak Korea' theory also gained traction." He particularly recalled that after the Legoland incident, anxiety over real estate project financing (PF) spread, which was further compounded by political turmoil at the end of 2024. Kim described that period as a time when crises in the semiconductor cycle, finance, and politics all struck at once, saying, "The words used to describe the South Korean economy then were closer to decline than growth."

In his view, the turning point came in the middle of 2025. Kim explained, "The atmosphere changed in the second half of the year, and, coincidentally, that inflection point almost overlapped with the launch of the new administration," adding, "At the same time, the AI-triggered semiconductor supercycle began in earnest." He particularly emphasized, "The direction of policy and the industrial cycle started to align," and stressed, "What matters is not the annual growth rate in 2025 itself, but the fact that the trendline began to shift direction." He also pointed out that low birth rates and an aging population, household debt and metropolitan concentration, and dependence on semiconductors could still function as structural limitations, but added, "We may already be on a growth path we have never taken before—one we ourselves do not fully understand."

Strengthening the Role of the Capital Market Foreseen... "Growth Must Extend to the Entire Population"

Kim Yongbeom, policy chief of the Presidential Office, is giving the opening remarks at the Kwanhoon Forum held at the Press Center in Jung-gu, Seoul on June 24, 2026. Photo by Yonhap News

In addition, Kim pointed out that while expanding production capacity is what drives the engine of manufacturing, the role of the capital market will be crucial going forward. He stated, "No matter how powerful the engine of production is, if the transmission that delivers that power does not function properly, the economy as a whole cannot reach its maximum speed," adding, "What South Korea is trying to change right now is precisely that transmission." He continued, "It is not about moving away from being a manufacturing powerhouse, but about adding a new axis of growth—a strong capital market on top of strong manufacturing."

Until now, even though South Korea has some of the world’s leading manufacturing companies, corporate profits have not sufficiently translated into shareholder value and national wealth. Kim analyzed that household funds have flowed into real estate rather than innovative companies, resulting in a persistent "Korea discount" (undervaluation of the Korean stock market). He explained, "If we only increase manufacturing production capacity without improving the capital market’s transmission function, it will be difficult for an industrial boom to lead to growth for the entire population," adding, "The government’s recent revisions to the Commercial Act, reforms to the treasury share system, the National Growth Fund, and productive finance are mechanisms designed to connect these results with corporate value and national wealth."

He also cited Taiwan as an example that simultaneously presents both possibilities and warnings for South Korea. Kim said, "Despite lacking a reserve currency, a vast domestic market, or large-scale immigration, Taiwan has secured irreplaceable semiconductor nodes in the global AI supply chain and recorded growth far exceeding the advanced country average." However, he warned, "An overwhelming industrial lead does not necessarily mean prosperity for all citizens," and added, "Even if exports and corporate profits surge, if these gains do not sufficiently spread into consumption, assets, and non-IT industries, the economy could become polarized into a 'K-shaped' split."

"Semiconductor Production Capacity Is New National Power... The State Must Eliminate Bottlenecks in a Timely Manner"

President Lee Jae-myung is talking with Policy Chief Kim Yongbeom during an aerial inspection of the candidate site for the Southwest Industrial Complex on the 30th. June 30, 2026. Photo by Yonhap News

Through another Facebook post titled "Production Capacity Is the New National Power," posted on the 11th, Kim also argued that expanding fabs is both a growth investment and a defensive investment to maintain technological gaps. Kim emphasized, "Today’s supply shortages nurture tomorrow’s competitors," and said, "The necessary strategy now is not to suppress competitors with price competition after they have grown, but to ensure that supply gaps do not arise in the first place."

He stressed that the role of the state in this regard is "time." Kim noted, "While fiscal and tax support are important, the most crucial resource that only the state can supply in the era of AI-driven production capacity competition is time." He focused on the fact that while companies can build fabs, they cannot independently resolve issues relating to power grids, water supply, transmission networks, national industrial complexes, transportation infrastructure, and regulatory procedures. He emphasized, "The role of the state is not to invest on behalf of companies, but to eliminate bottlenecks that companies themselves cannot resolve, and to do so in a timely manner."

This content was produced with the assistance of AI translation services.