Bank of Korea Governor nominee Shin Hyun-song stated on Tuesday that "fiscal policy should be designed and operated in accordance with the 3T principles: Temporary, Targeted, and Tailored," as the Lee Jae-myung administration pursues an active fiscal stance, including two supplementary budgets since taking office. Analysts interpret this as emphasizing pinpoint support rather than universal assistance through fiscal measures.
Shin made the remarks in written responses to the National Assembly confirmation hearing, addressing multiple lawmakers' questions about the need to introduce fiscal rules.
"Given concerns about fiscal soundness in responding to weakening growth potential and low birthrates and aging population over the medium to long term, fiscal sustainability also needs to be considered in a balanced manner," he explained.
He also made clear his principle of temporary support regarding energy price responses. While acknowledging that oil price caps and fuel tax cuts following Middle East conflicts have contributed to curbing energy price increases and reducing consumer burdens, Shin noted that "if such policies continue for an extended period, side effects such as price distortion from excess energy demand and increased fiscal burden could occur."
Regarding foreign exchange reserve management, Shin signaled flexibility in investment strategy, including purchasing gold exchange-traded funds (ETFs). The BOK has not made additional gold purchases since acquiring 90 tons between 2011 and 2013.
"I will consider diversifying investment instruments to include not only physical gold but also gold ETFs," he said, emphasizing the need for asset allocation considering expanded geopolitical risks and changing correlations between assets. However, he also noted that "from March 2013 to March this year, advanced economy stock index returns including dividends were 281%, exceeding gold's 196% return," pointing out that equity returns outperformed gold.
Shin addressed the conflict of interest controversy over his foreign currency assets, stating that he has "disposed of a significant portion of foreign currency-denominated financial assets and plans to gradually reduce the proportion of foreign assets," adding that "all policy decisions will be based on the interests of the entire nation." This came in response to criticism that 55% of his family's assets being held overseas is inappropriate for a central bank governor.
Regarding his UK government bond holdings, he explained that "I purchased them to maintain a certain proportion of safe assets for financial portfolio management purposes, but I have already sold them." When asked why he chose UK bonds over Korean treasury bonds, he added that "there was no particular reason other than easier investment accessibility at the time."
