Koo Yoon-chul: “Long-term Interest Rates Rising... Support Measures for Small Business Owners, Low-Income Households, and Vulnerable Borrowers to Be Announced Soon”

Market Situation Review Meeting Held on August 21

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul stated on August 21, "Recently, major economies have seen an increase in long-term government bond yields, which has led to rising yields, particularly for ultra-long-term bonds, in our own bond market as well." He added, "We will closely monitor the situation to minimize the impact on the real economy, including the financing costs for businesses and the interest burden on households." The government is preparing measures to alleviate the debt burden for small business owners, low-income households, and vulnerable borrowers, which will be announced soon.

Koo Yoonchul, Deputy Prime Minister and Minister of Economy and Finance, delivers opening remarks at the "Market Situation Review Meeting" held at the Korea Federation of Banks Building in Jung-gu, Seoul, on August 21, 2026. Photo by Kang Jinhyung

On August 21, Deputy Prime Minister Koo held a joint "Market Situation Review Meeting" with relevant agencies and made these statements. The meeting was attended by Lee Eogwon, Chairman of the Financial Services Commission; Lee Chanjin, Governor of the Financial Supervisory Service; and Park Jongwoo, Deputy Governor of the Bank of Korea. The participants reviewed the recent rise in long-term interest rates in major economies and assessed its expected domestic impact. They diagnosed that the continued uncertainty in the Middle East, the increase in government bond issuances by various countries, and the expansion of corporate bond issuances by global artificial intelligence (AI) companies are all acting in combination to drive up yields, especially for ultra-long-term bonds.

The government will continue to closely monitor trends in the domestic bond market as well as the impact on the real economy. In particular, to prevent the rising interest rates from imposing excessive burdens on vulnerable borrowers, the government has decided to swiftly prepare and release support measures aimed at reducing the debt burden for small business owners, as well as the financial burden on low-income and vulnerable borrowers.

The won-dollar exchange rate, which had risen to the 1,550 won range in early July, has recently entered the 1,380 won range. Deputy Prime Minister Koo said, "With both upside and downside factors, such as geopolitical tensions in the Middle East and monetary policy decisions by major economies, coexisting, we will remain vigilant and respond to market volatility accordingly."

The significant decrease in net external financial assets in the second quarter compared to the previous quarter was attributed to improved corporate performance and the increased value of foreign-held stocks resulting from rising share prices in the same period. Deputy Prime Minister Koo emphasized, "Net external debt, which is directly related to our ability to make external payments, stood at $367.8 billion as of the end of the second quarter, up $2.3 billion from the previous quarter. Given the record current account surplus in the first half of the year, there is no doubt that the external soundness of our economy is stronger than ever."

Despite a continued increase in the absolute amount of household debt, the ratio of household debt to GDP has, in fact, decreased. However, since the household debt ratio still remains high compared to other major economies, the government will continue to exercise oversight, while providing targeted support to ensure that genuine borrowers do not face funding difficulties.

Regarding single-stock leveraged products, which have been cited as a factor amplifying stock market volatility, trading volume dropped to one-tenth of its previous level just three weeks after the implementation of supplementary measures. Deputy Prime Minister Koo said, "We are seeing reduced concentration of demand," and continued, "We will closely monitor market trends and ensure the smooth execution of both the previously announced supplementary measures for single-stock leverage products and broader efforts to strengthen the fundamentals of our capital markets."

The participants agreed that, given the persistent external uncertainties and the increased interconnectedness among macroeconomic, financial, foreign exchange, and asset markets, they will maintain vigilance and a tight monitoring and response system through the Market Situation Review Meeting.

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