Korea vows to take measures to stabilize financial markets

South Korea's finance minister and central bank governor pledged Wednesday to take measures to stabilize financial markets, if necessary, amid lingering tensions between North Korea and the United States.

"The government and the Bank of Korea plan to make aggressive efforts to stabilize financial markets by closely monitoring domestic and foreign financial markets," BOK Gov. Lee Ju-yeol said in a meeting with Finance Minister Kim Dong-yeon in Seoul.

Kim also said the government will take measures sternly to stabilize financial markets, if necessary.

Still, the two declined to elaborate on South Korea's possible countermeasures. Lee said it's not in a situation, in which measures should be taken to ease volatility in the financial markets.

South Korea -- a small open economy -- heavily depends on exports and foreign capital investment, a development could make Seoul vulnerable to external shocks.

Tensions have spiked on the Korean Peninsula as North Korea and the United States traded bellicose rhetoric after the UN further tightened sanctions on Pyongyang for its two tests of intercontinental ballistic missiles last month.

North Korea announced a plan to launch ballistic missiles toward the US Pacific territory of Guam. In response, US President Donald Trump said the US military is "locked and loaded" to deal with North Korea's provocations and North Korea would be met with "fire and fury" if it continued to threaten the US.

Last week, some investors sought safer assets in the South Korean financial market amid security concerns.

Still, tensions began to subside as North Korean leader Kim Jong-un indicated that he would hold off on the launch against Guam, saying Monday that he would watch Washington's behavior "a little more."

Kim and Lee renewed their stance that the government and the central bank will use a "policy mix" -- a combination of fiscal and monetary policies -- in harmony to promote consistent economic recovery and financial stability, according to the BOK.

The two also shared the view that the monetary policy is an issue that should be decided independently by the BOK, a thinly veiled criticism against a presidential economic aide, who has said the low key rate is to blame for rising household debt and real estate speculation.

In July, the BOK kept its policy rate at an all-time low of 1.25 percent, though it said that it may take a monetary tightening approach if the economy shows signs of a robust recovery, a comment widely seen as signaling a rate hike by the central bank over the long haul.

As of end-March, South Korea's overall household debt came to a record high of 1,360 trillion won ($1.2 trillion), up 11.1 percent from 1,224 trillion won a year earlier. (Yonhap)