The Korean won has become the weakest performing currency among major economies, driving import prices to their steepest monthly increase in 19 months amid mounting pressure from capital outflows and foreign investor selling.
Won Weakness Intensifies
The won depreciated 3.1% against the U.S. dollar in November, marking the largest decline among 13 major currencies for the second consecutive month. Following a 4.1% drop in October, the won underperformed the Japanese yen (-1.2%), Brazilian real (-1.8%), and Indian rupee (-1.4%).
The Bank of Korea attributed the sharp currency decline to residents' overseas investments and large-scale net selling of domestic equities by foreign investors. The won-dollar exchange rate has surged to the mid-1,470 won range.
As a result, the import price index rose 2.6% month-on-month in November to 141.82, marking five consecutive months of increases since July and the largest monthly gain since April 2023. Prices for beef (4.5%), natural gas (3.8%), and chocolate (5.6%) posted significant increases.
U.S. Shifts Toward Financial Deregulation
U.S. Treasury Secretary Scott Bessent has signaled a major policy shift at the Financial Stability Oversight Council (FSOC), moving from regulatory tightening to easing. "Economic growth is very important for financial stability," Bessent said.
The Trump administration earlier this month directed the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to rescind the "leveraged lending guidance" that had restricted banks from lending to lower-rated corporate borrowers. The European Union and United Kingdom are also joining the deregulation trend.
In contrast, Korea continues to burden its financial sector with state-directed finance and demands for "mutual prosperity" contributions, with costs to the banking industry reaching trillions of won. The government is also pursuing plans to place National Pension Service-nominated outside directors on financial holding company boards.
U.S. Launches 'Pax Silica' AI Alliance
The Trump administration has rallied allied nations including Korea to counter China's growing influence in the artificial intelligence industry. The U.S. State Department announced it will host the inaugural "Pax Silica" summit on January 12 with eight countries: Japan, Korea, Singapore, the Netherlands, the United Kingdom, Israel, the United Arab Emirates, and Australia.
Pax Silica aims to build a secure silicon supply chain encompassing critical minerals, energy, advanced manufacturing, semiconductors, AI infrastructure, and logistics. The State Department said participating nations confirmed their commitment to "protect sensitive technologies and critical infrastructure from improper access by countries of concern."
Rapidus Secures 2 Trillion Yen in Private Financing
Japanese advanced semiconductor company Rapidus has secured its first large-scale private financing since its establishment, along with more than 20 additional corporate shareholders.
Japan's three megabanks—Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho—submitted letters of intent to provide up to 2 trillion yen (approximately 19 trillion won, or $14 billion) in loans, contingent on government guarantees. Honda, Canon, Kyocera, Fujifilm Holdings, and approximately 20 other companies will join as new shareholders, expanding the shareholder base from 8 to approximately 30 companies.
The financing provides momentum for Rapidus's goal of mass-producing 2-nanometer chips by 2027. Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) is considering upgrading its second plant in Kumamoto Prefecture, Japan, from 6-40nm to 4nm advanced processes.