NABO Economic Trends & Issues (No. 73)
I. Economic Trends
The Korean economy has recently been experiencing a slowdown due to consumption adjustments and investment contraction, with the exception of strong exports. Consumer prices increased by a higher rate than the previous month, but core inflation is maintaining a low increase rate, while the treasury bond (3-year-maturity) interest rate decreased due to the economic slowdown and increased external uncertainty.
Ⅱ. Analysis of the Impact of US Interest Rates on Commodity Prices
Since the financial crisis, commodity-related financial transactions (non-commercial transactions) and investments have increased, leading to a stronger influence of finance on the commodity market. Since 2016, when the US FRB began full-fledged key interest rate hikes, commodity prices have exhibited an overall increasing trend. An analysis of the impact of US interest rates on commodity prices suggested that there is a meaningfully positive(+) relation between interest rates and commodity prices. There was also a meaningfully positive(+) correlation in terms of statistics among leading global economic indicators, speculative transactions and global commodity prices. Since the price volatility of international commodity prices is likely to increase when considering factors such as the US FRB’s interest rate increases and global liquidity, measures to mitigate negative impacts need to be explored.
Ⅲ. Trends and Characteristics of Japanese Construction Investment
Construction investment in Japan had remained at 80 trillion yen as the government expanded investments in the public sector to stimulate the economy after the bubble burst until such investment dropped by half in 2010. Subsequently, investment has recovered with the influence of recent events including the 2011 Great East Japan Earthquake, Tokyo’s successful bid to host the Olympics and Abenomics. The recent construction market in Japan is characterized by an increasing volume of maintenance and repairs as existing infrastructure and buildings are aging. Against this backdrop, there is a higher proportion of senior workers while fewer younger workers enter the workforce. Therefore, the Japanese government is working to mitigate a possible labor shortage by pursuing a relaxed policy regarding the employment of foreign workers and improving the working environment in the construction sector.