By Na Jeong-ju
Staff Reporter
The country's top economic policymaker is renewing his criticism of the central bank, raising speculation that the government is trying to tame it to have a stronger say in the course of setting up monetary policies.
Observers worry the scathing remarks by Strategy and Finance Minister Kang Man-soo against the Bank of Korea (BOK) will cause unrest on the market and hurt the credibility of the government.
At a meeting with journalists, Tuesday, Kang said the BOK has too much power on the currency market.
``In the United States and many other nations, the finance ministry has the authority over currency-related policies,'' Kang said. ``The central bank tends to prefer a stronger won (for its interest rate policies), but the government can deal with the market more comprehensively.''
The comments are viewed as an indication that the ministry will take steps to intervene in BOK's currency-related policies. The ministry delegated the authority over currency to the BOK in 2004 after a National Assembly audit showed it incurred 2 trillion won ($2.1 billion) in losses from currency transactions.
Kang also said the BOK has more power than any other central banks in advanced economies.
BOK officials reacted nervously.
``All advanced nations try to ensure independence of the central bank and respect its decisions,'' a BOK official said. ``Policy coordination between the government and the central bank is necessary, but that doesn't mean it can intervene in monetary decisions.''
Kang has had uneasy relations with the BOK. He often clashed with the bank, openly demanding it refrain from raising the key interest rate to keep borrowing costs low and boost economic recovery.
The Korea Development Institute, a state-run think tank, sided with the BOK, Wednesday, saying the government should not intervene in monetary and currency policies.
``In many macroeconomic areas, the role of the government has diminished. Many governments in the world are now taking a hands off approach to the market,'' the institute said in a report.
Observers say the government's growth-oriented policy is likely to affect the BOK's monetary policies, pushing it to adopt a dovish stance.
The bank has maintained a hawkish monetary stance amid rising inflation risks, despite calls from some government officials to lower interest rates to spur economic recovery.
The BOK usually places top priority on curbing inflation with the belief that stabilizing consumer prices is vital for higher economic growth in the long term. On the other hand, the government tends to focus on achieving short-term growth goals.