MNI POLICY: More BOK Cuts May Be Needed To Offset Weak Econ

     TOKYO (MNI) - Despite interest rates being cut to historic lows, the Korean

economy is unlikely to pick up anytime soon and more central bank stimulus

measures will be necessary, MNI understands.

     South Korea's heavily export-based economy continues to suffer on the back

of trade disputes and a slowing global economy with sluggish demand for

IT-related goods. The Bank of Korea responded by cutting rates to a record low

1.25% on October 16, the second cut in recent months.

     The Korean won has weakened against other Asian currencies, but as yet, it

hasn't helped boost exports as international demand for South Korea's hi-tech

goods remains sluggish.

     Data released this week by Korea's Customs Service showed exports for the

first 20 days of October were running 20% below the levels a year ago.

     --UPSIDE POTENTIAL

     There are signs that the downward adjustment in IT-related demand that has

hit Asian manufacturers has reached bottom, but there are no signs of an

imminent pick up, a source familiar with the Korean economy told MNI.

     There is also a worry that domestic demand could also slow from current

levels, as slower exports weigh on corporate profitability.

     According to the source, wage hikes that flow from higher profits could be

squeezed and weigh on household spending, which in turn could trigger a

worsening of labour and income conditions.

     Alongside central bank policy, the Korean government should consider

implementing policies to help boost exports and help prevent a worsening in

labour market conditions, the source noted.

     The Bank of Korea's seven-member Monetary Policy Board next meets on Nov

29. Bank of Korea Governor Lee Ju-yeol has reportedly hinted at further easing,

saying after the latest rate cut that there was "more room (to cut) if needed",

although many bank economists don't see the next cut coming until the first half

of 2020.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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