This article is a translation of the analysis of the South Korean economic crisis published in the January 2026 issue of “The Locomotive of Uprising,” the monthly magazine of the People’s Democracy Party, under the section “Feature 1 – Policy.”
Expanding Fears of an Unwinding of the Yen Carry Trade
No currency can be issued without limit. Since the abolition of the gold standard, money has become fiat currency, whose value is recognized through state credit and legal enforcement. Until the mid-1980s, the US dollar maintained high interest rates and strength despite large US fiscal deficits.
As US international competitiveness weakened, the United States sought to intervene in foreign exchange markets to prevent a decline in the value of the dollar, while major countries implemented excessively tight monetary policies to prevent their currencies from depreciating against the dollar, thereby accelerating economic recession. In response, in 1985 the finance ministers of the United States, France, Germany, Japan, and Britain agreed at New York’s Plaza Hotel to intervene in foreign exchange markets to depreciate the US dollar against the Japanese yen and the German mark.
In the two years following the Plaza Accord, the yen and the mark appreciated against the dollar by 65.7 percent and 57 percent, respectively. Despite the decline in the value of the dollar, the US current account deficit did not improve, and the Plaza Accord was no longer implemented as Germany and Japan hesitated to accept further currency appreciation out of concern for the loss of international competitiveness. However, the appreciation of the yen weakened the export competitiveness of Japanese firms and became a decisive turning point leading to Japan’s so-called ‘lost decades.”
At the time, Japan’s economy, fueled by low interest rates, experienced widespread asset bubbles between 1985 and 1991 across real estate, stocks, luxury goods, and even cultural assets, both domestically and abroad. The Nikkei index rose 3.5 times, from 11,992 points in 1985 to 38,915 points in 1989. Over the same period, real estate prices increased 3.5-fold, and golf course memberships surged fourfold. There was even a saying that selling Tokyo alone would be enough to buy the entire United States. In 1989, 14 Japanese companies were included among the world’s top 20 firms by market capitalization.
This boom collapsed when monetary tightening began with an increase in the official discount rate in 1989, leading to the evaporation of assets totaling 1,500 trillion yen. Thereafter, Japan implemented zero-interest-rate policies and quantitative easing—direct purchases of government bonds—as measures to respond to deflation. These policies were later massively expanded under “Abenomics,” introduced with the launch of the Abe administration in 2012 and centered on quantitative easing, fiscal expansion, and growth strategies.
As a result of decades of debt-based fiscal policy financed by near-zero-interest bond issuance, along with rising expenditures linked to structural problems such as population aging, Japan’s national debt reached 1,323.7 trillion yen (approximately 9 trillion dollars) as of the third quarter of 2025, amounting to about 200 percent of Japan’s GDP.
The Bank of Japan raised its policy interest rate to 0.1 percent in March 2024, marking its first rate hike in 17 years, followed by increases to 0.25 percent in July of the same year, 0.5 percent in January 2025, and a further 0.25 percentage-point hike in December 2025, bringing the rate to 0.75 percent. As Japan’s benchmark interest rate rises, concerns over an unwinding of the yen carry trade are growing.
The yen carry trade involves borrowing yen at relatively low interest rates and investing in higher-yielding currencies to earn arbitrage profits. When interest rates rise and borrowing costs increase, investors begin to withdraw overseas investments, and the larger the scale, the greater the risk of a sharp collapse in stock prices. If the unwinding accelerates due to higher yen interest rates, overseas assets are sold, yen are purchased, and capital is repatriated to Japan.
In the process of selling overseas assets, stocks and bonds in the ‘Republic of Korea (ROK, South Korea)’ also come under pressure. If the yen strengthens during the process of buying and exchanging yen, the Korean won weakens, exchange-rate volatility increases further. As capital flows back toward Japan, the burden is transferred to the ‘ROK,’ which has an open financial market.
Regarding the size of the yen carry trade, the Bank of Korea estimates it at 3.4 trillion dollars, the Bank for International Settlements (BIS) at 14 trillion dollars, and Deutsche Bank at 20 trillion dollars. While the interest rate hike at the end of 2025 has been assessed as sending relatively manageable signals for unwinding, in the ‘ROK’—where exchange rates are high and stock markets are overheated—the unwinding of the yen carry trade is highly likely to become a signal flare for chain defaults and bankruptcies.
While the Bank of Japan is pursuing monetary tightening, Prime Minister Sanae Takaichi is moving in the opposite direction with fiscal expansion. The BOJ has confirmed its exit from deflation and remains firm in its commitment to raising interest rates, whereas Takaichi, inheriting “Abenomics,” has announced stimulus measures through expansionary fiscal policy, leading to a depreciation of the yen.
Fiscal expansion also exerts upward pressure on government bond yields. The Korean won tends to move in tandem with the yen. At a time when the Lee Jae-myung administration is making all-out efforts to defend the value of the won, a weak yen is an unavoidable negative factor.
AI Bubble or Boom?
The “dot-com bubble” was a large-scale speculative bubble in which stock prices surged abnormally in the late 1990s due to excessive expectations regarding the value of internet and information technology (IT) companies, before collapsing sharply. In the early 2000s, the dot-com bubble delivered a major shock to global stock markets, and over the two-year period from 2000 to 2002 the US Nasdaq index fell by nearly 78 percent.
In August 1998, the US hedge fund Long-Term Capital Management (LTCM) collapsed, and as fear spread across financial markets, the US Federal Reserve (Fed) cut interest rates in an effort to calm anxiety, triggering a stock market boom. This boom continued into the early 2000s, and on March 10, 2000, the Nasdaq index reached an all-time high of 5,048.62 points. When the Federal Reserve signaled a shift toward interest rate hikes the following month, the Nasdaq plunged abruptly in May.
Subsequently, earnings at technology firms such as Intel slowed, stock prices collapsed, and the bubble burst. The Fed’s rate cuts and economic stimulus measures ultimately inflated the bubble further, and the episode is widely regarded as a representative case in which markets responded in an extremely fragile manner once monetary policy shifted toward tightening.
Today, stock markets are being led by an AI-centered surge driven by Big Tech firms such as Nvidia, Microsoft, Google, Amazon, and Tesla. Amid this overheating of equity markets, arguments warning of an “AI bubble” have emerged.
Analysts generally fall into two camps. One argues that concerns over an AI bubble are overstated. The other points to similarities with the dot-com bubble. The basis of the AI bubble argument lies in growing doubts over whether the enormous capital expenditures poured in by Big Tech companies can ultimately translate into commensurate profits.
Experts also acknowledge the possibility of short-term overheating in certain technology stocks. However, the prevailing view is that the structural growth of the AI industry—currently in the infrastructure-building phase—represents a real and tangible expansion rather than a speculative bubble.
At the same time, there are aspects that closely resemble the dot-com bubble. As of August 2025, the Buffett Indicator stands at 211 percent, the highest level in history. This exceeds the peak level of around 140 percent reached during the dot-com bubble in 2000. Margin debt has also surpassed one trillion dollars, more than five times the roughly 200 billion dollars recorded in 2000. By contrast, the Fear & Greed Index stands at 56, well below the 80–90 range seen during the dot-com era.
This suggests that while psychological overheating in the current market is relatively subdued, structural leverage—where investment volumes far exceed investors’ own capital—and valuation pressures, with stock prices elevated relative to corporate fundamentals, are more pronounced than in the past.
In 2025, AI investment has reached an all-time high, and MarketWatch warned that AI investment has already reached “17 times the size of the dot-com bubble, and even four times larger than the 2008 global real-estate bubble” and “the misallocation portion of gross domestic product is fueled by artificially low interest rates.”
Whereas the dot-com bubble was driven by speculative excess among retail investors and investments centered on unprofitable firms, today’s AI bubble is characterized by massive pools of capital concentrated in Big Tech and amplified by leverage. As a result, while the immediate shock may be less severe than during the dot-com collapse, it is said that macroeconomic indicators are signaling deeper and more structural risks, suggesting not a simple repetition of past crashes but an evolved form of systemic danger.
Investment banks such as Goldman Sachs and McKinsey describe this phenomenon as a “non-employee leverage” effect, in which AI diffusion raises productivity without increasing employment, effectively enabling limitless output growth without proportional job creation.
For the ‘ROK,’ where semiconductors have been the primary driver of current account surpluses, the implications of this effect are particularly significant. Over the past decade, the US stock market has delivered the highest returns among major economies, with the S&P 500 rising by 228 percent. The KOSPI of the ‘ROK’ also recorded a significant gain of 103%.
In the third quarter of 2025, the blended net profit margin of S&P 500 companies reached 13.1 percent, surpassing the five-year average of 12.1 percent. Profitability per unit of revenue has structurally increased.
If the bubble were to burst, asset losses and market volatility are expected to exceed those seen during the dot-com collapse or the 2008 global financial crisis. As AI-related stocks come to occupy an outsized share of the overall equity market, falling stock prices are likely to translate into reduced consumption and broader damage to the real economy.
With the current ‘ROK’ administration moving to relax the separation between industrial and financial capital in order to support AI and semiconductor industries, these risks are being further amplified.
A Soaring Exchange Rate Warning of an Economic Crisis in the ‘ROK’
The exchange rate is the rate at which one currency can be exchanged for another currency. In the ‘ROK,’ the exchange rate is defined as the amount of Korean won required to exchange for one US dollar. When the exchange rate rises, the amount of won needed to obtain one dollar increases; therefore, a rise in the USD/KRW exchange rate means a depreciation of the Korean won.
Foreign exchange reserves are generally the foreign assets held by government authorities and the central banks. These reserves serve as a buffer against sovereign default and help stabilize the exchange rate during disruptions in the foreign exchange market. For this reason, foreign exchange reserves are considered a key indicator of sovereign credit rating.
Just before the Asian Financial Crisis in November 1997, the USD/KRW exchange rate was in the 800-won range. However, following the crisis, it surged to the 1,900-won range in December, temporarily reaching a peak of 2,063.0 won on December 24. As a result, the ‘ROK’ requested a bailout from the IMF (International Monetary Fund) and implemented austerity measures, corporate restructuring, and high-interest rate policies, yet had to deal with severe economic consequences.
The global financial crisis in 2008, which began with the US subprime mortgage crisis, also had a major impact. The ‘ROK’ exchange rate surged from around 930 won to a peak of 1,570 won. During this period, the KOSPI plunged from 2,085 in 2007 to 892 in 2008. The KOSDAQ index also fell by more than 70 percent over the same period.
Meanwhile, the capital market liberalization in the ‘ROK,’ which had gradually progressed since the 1980s, accelerated in the early 1990’s. Following the 1997 foreign exchange crisis, in order to stabilize the financial and foreign exchange markets, the government strongly pushed forward restructuring of financial institutions and corporations. In December 1997, it abolished foreign investment limits on all listed bonds, thereby opening the domestic bond market. In 1998, it fully opened the stock market and short-term financial markets.
Such a fully liberalized financial system is extremely vulnerable to external shocks. The KOSPI, which stood at 650 in early 1997, fell to 277 in June 1998, a drop of about 58 percent.
During the 2008 global financial crisis, global capital flowed into the US dollar, considered a safe-haven asset. The COVID-19 shock in 2020 also triggered a stock market decline amid a high exchange rate. The USD/KRW exchange rate, which was around 1,100 won in January 2021, surged to 1,400 won by July 2022. During the same period, the KOSPI declined from 3,266 to 2,134, a drop of approximately 35 percent.
The sharp appreciation of the dollar in 2022 was triggered by the US Federal Reserve (Fed) raising its benchmark interest rate seven times. Typically, when US interest rates rise, capital flows to the United States in search of higher returns, leading investors to sell the won and buy dollars, resulting in dollar strength and won weakness. The outbreak of the Ukraine war in 2022 further strengthened safe-haven demand for the dollar.
One reason why the ‘ROK’ stock market is sensitive to the USD/KRW exchange rate is its export-dependent economic structure. When the exchange rate rises, import costs for raw materials increase, foreign exchange risk expands, corporate profitability deteriorates, and inflation rises. Foreign investors in the ‘ROK’ stock market also tend to withdraw funds. Even if high returns are recorded, overseas capital ultimately needs to be converted back into dollars, which increases sensitivity to exchange rate fluctuations.
According to a report dated December 31, 2025, the foreign exchange authorities net sold approximately $1.745 billion in the third quarter of 2025 to stabilize the currency market. As of December 31, 2025, the exchange rate closed at 1,439.5 won, marking the third-highest year-end closing rate in history, following 1,697 won during the 1997 crisis and 1,472.5 won on December 3, 2024, following the declaration of emergency martial law.
Exchange-rate pressures are increasing.
An Economic Crisis Deepened by a Treasonous Negotiation
As of November 2025, the foreign exchange reserves of the ‘ROK’ stand at approximately 430 billion dollars. The average exchange rate in December 2025 reached 1,467 won per dollar, a level comparable to that seen during the 2008 financial crisis. The high exchange rate is rooted in anxiety over capital outflows.
At the APEC (Asia-Pacific Economic Cooperation) summit held in Gyeongju on October 29, a summit meeting between the ‘ROK’ and the United States took place. On November 13–14, a joint fact sheet between the two countries was released. The ‘ROK’ government agreed to invest 350 billion dollars in the United States, of which 200 billion dollars will be paid in annual installments of 20 billion dollars over the next ten years. The package also includes a USD 150 billion ‘ROK’–US shipbuilding cooperation fund.
In return for this massive investment, US tariffs on automobiles exported from the ‘ROK’ were reduced from 25% to 15%. Although a July 31 report announced a 15% tariff agreement between the United States and the ‘ROK’, no final conclusion was reached during President Lee Jae-myung’s visit to the United States from August 24–26.
Following Trump’s remarks demanding that investment from the ‘ROK’ be made “in advance” and “entirely in cash,” and US Commerce Secretary Howard Lutnick’s call for an increased investment scale, pressure mounted for an amount equivalent to 80% of the ‘ROK’’s foreign exchange reserves. As a result, the high exchange rate struck in the second half of 2025.
On October 1, the financial authorities of the ‘ROK’ and the United States agreed on the “basic principles of exchange rate policy,” stating that neither side would manipulate its currency to hinder effective balance-of-payments adjustments or to secure unfair competitive advantages. Based on the premise that the ‘ROK’, as a country with a trade surplus with the United States, artificially weakens the won to boost export competitiveness, the United States effectively compelled the ‘ROK’—under its floating exchange rate regime—to leave exchange rate movements primarily to market forces.
While prohibiting exchange rate adjustments aimed at supporting exports through currency depreciation, the agreement also restricted government-level intervention by the ‘ROK’ to defend the currency except in cases of severe capital outflows.
After the release of the joint statement, the exchange rate continued its high trajectory, exceeding the 1,450 won range.
On November 24, the Ministry of Finance and Economy led the formation of a four-party consultative body involving the Bank of Korea, the National Pension Service, and the Ministry of Health and Welfare. On December 17, authorities introduced foreign exchange soundness measures centered on easing foreign currency regulations applied to banks and corporations and expanding dollar liquidity. On December 19, during an emergency Monetary Policy Committee meeting, the Bank of Korea decided to waive until June 2026 the foreign exchange levy that financial institutions are required to accumulate for external debt soundness management.
On December 23, the Ministry of Health and Welfare established a Strategic FX Hedge Flexible Response Task Force with the National Pension Service (NPS). The NPS operates a strategic and tactical currency hedging system that allows it to hedge overseas assets when the won–dollar exchange rate significantly deviates from its normal range.
According to a December 30 report, the NPS shifted from its previous system—under which hedging required prior approval from the fund management committee at specific trigger levels—to a more flexible and frequent execution mechanism. In practice, if the exchange rate rises more than expected, the NPS may sell dollar forward contracts equivalent to up to 10% of its overseas assets. This increases dollar supply in the market and exerts downward pressure on the exchange rate.
Following the formation of the task force on December 23, the authorities are presumed to have intervened in the market. On December 24, the exchange rate briefly fell to the 1,430 won range—the lowest level in December—only to surge again to the 1,440 range on December 30. Market participants interpret this as an effort by the authorities to manage the closing price on December 30 which was the last trading day of the foreign exchange market. As the perceived intensity of intervention weakened compared to the previous day, importers and overseas investors—real demanders of dollars—reportedly moved in for “buying on dips.”
The Lee Jae-myung administration has faced criticism for mobilizing the National Pension Service to defend the exchange rate.
Meanwhile, the depreciation of the won is intertwined with an expansionary fiscal stance and the limited feasibility of interest rate hikes. With over 70% of household assets tied up in real estate, raising interest rates—since loan interest is calculated as a percentage—would likely trigger personal bankruptcies and corporate defaults. The widening gap between the base interest rate of the ‘ROK’ and that of the United States is also linked to the surge in the exchange rate.
The record-high 2026 budget of 728 trillion won could further fuel inflation under high exchange rate conditions. Increased government bond issuance to finance the budget would heighten sovereign credit risk and external debt vulnerabilities, thereby exerting additional upward pressure on the exchange rate.
A chain reaction of economic crisis appears imminent.
Collapse of the Real Estate Bubble and the Onset of Prolonged Stagnation
Concerns are growing that the real estate crisis in the ‘ROK’ is beginning to resemble Japan’s property bubble collapse around 1990. Following the Plaza Accord in 1985, monetary expansion driven by yen appreciation fueled a massive real estate bubble in Japan. When the government tightened regulations in the early 1990s, the bubble burst, marking the beginning of Japan’s “lost decades.” Corporate insolvencies, bank failures, shrinking consumption and investment, and rising unemployment led to asset erosion and a contraction in investor confidence, resulting in more than three decades of low growth.
In early 2024, reports indicated that the number of vacant homes (akiya) in Japan had reached 10 million. With 10% of the population aged 80 or older, vacancies are expected to rise further. The Nomura Research Institute projected that by 2038, 31% of all housing in Japan could be vacant. In response, initiatives such as “vacant house banks” have emerged, along with programs allowing foreigners to purchase homes for free or at very low prices in order to settle in Japan.
Similarly, real estate in the ‘ROK’ faces structural risks stemming from low birth rates, rapid aging, capital region concentration, and regional depopulation. As in Japan, there are concerns that after a period of excessive price increases, the market could enter a correction phase—or even experience a sharp collapse. Rather than a general decline in all housing prices, polarization may intensify: urban centers becoming even more expensive while outer areas deteriorate into slums.
Under the Park Geun-hye administration, real estate stimulus policies included deregulation of construction and a prolonged low-interest-rate stance. Housing prices began rebounding in the latter half of her term, and under the Moon Jae-in administration, Seoul apartment prices recorded the largest increases in absolute price terms in history. A distribution- and income-centered policy orientation expanded liquidity. Although regulations targeting multiple homeowners and the wealthy were strengthened alongside supply measures, these efforts yielded limited results.
In February 2025, shortly before President Lee Jae-myung took office, Seoul Mayor Oh Se-hoon lifted land transaction permit designations in four Gangnam districts (Jamsil, Samseong, Daechi, and Cheongdam). After prices surged, the city reinstated and expanded restrictions within a month to cover all apartments in the three main Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan. Nevertheless, the upward price trend was not contained. Even strong regulatory measures—such as designating speculative overheating zones and expanding land transaction permit areas—failed to reverse the rise.
After taking office on June 4, the Lee Jae-myung administration announced the June 27 Household Debt Management Reinforcement Plan aimed at curbing excessive borrowing for high-priced home purchases—so-called “yeongkkeul” (maxed-out leveraged buying). Mortgage borrowers were required to move into the purchased home within six months to prevent “gap investment,” and additional loans for those owning two or more homes in the capital region were effectively blocked. Regardless of income or housing price, total loan ceilings were uniformly capped—an unprecedentedly strong demand-suppression measure.
In practice, however, actual consumers with insufficient financial capacity were pushed out of the market, while cash-rich individuals with low loan dependence gained greater opportunities, leading to a concentration of speculation among the wealthy. On July 1, 2025, financial authorities implemented the third stage of the Stress DSR (Debt Service Ratio) system, applying a 100% stress (additional) interest rate to loans across all financial institutions. The dual regulations of June 27 and July 1 significantly reduced the purchasing capacity of working-age buyers in their 30s and 40s who had income but insufficient assets.
Although transaction volumes declined due to government regulations, housing prices did not fall. Seoul apartment prices rose for 47 consecutive weeks from the first week of February 2025 through the fourth week of December, recording an annual cumulative increase of 8.71%. This exceeded the 2018 annual increase (8.03%) during the Moon administration’s housing boom and marked the highest rate in 19 years since the 23.46% surge in 2006 under the Roh Moo-hyun administration.
Industry analysts argue that a “lock-in effect” emerged, with sellers withholding listings while waiting on the sidelines. As a result, prices were sustained even with a limited number of transactions. Demand shifted to the rental market, and policies intended to curb purchase prices inadvertently fueled a surge in “Jeonse (lump-sum housing lease)” prices.
Ahead of new real estate policy measures and the 2026 local elections, new housing supply plans are being discussed, but uncertainty persists. President Lee Jae-myung has consistently argued that real estate ownership for investment purposes should be minimized and that investment demand concentrated in property should be redirected to the stock market.
Government policies aimed at stabilizing housing prices have never fully achieved their objectives, as housing demand remains structurally persistent. The larger the scale of the real estate market grows, the greater the concern over the economic shock that could follow from a potential bubble collapse.
Real Estate PF Threatening the Financial Sector
Another risk factor in the real estate market is real estate project financing (PF). In 2022, during the reconstruction project of Dunchon Jugong Apartments, construction companies demanded an increase in project costs as soaring raw material prices—triggered by the COVID-19 pandemic and the war in Ukraine—combined with the housing association’s requests for design changes. When the association refused to accept the higher construction costs, work was suspended for six months. As building materials and construction costs surged, apartment presale prices rose overall. In regional areas, unsold units snowballed due to insufficient demand.
Meanwhile, when Gangwon Province announced the rehabilitation filing of the developer behind the Legoland theme park project, the market interpreted the move as a withdrawal of Gangwon’s payment guarantee on approximately KRW 205 billion worth of ABCP (asset-backed commercial paper). As a result, the real estate bond market froze. Although Gangwon Province pledged to resolve the debt by the end of January 2023, the situation was only stabilized after the government announced measures to supply liquidity to the bond market on the scale of “KRW 50 trillion + α.”
Real estate PF is a financing technique that raises funds based on the future profitability of a specific real estate development project. Loans are extended not on the creditworthiness of the developer, but on the feasibility of the project itself. The project is carried out through a special purpose company (SPC) established for each development. It typically begins with a bridge loan (a short-term, high-interest loan) for land acquisition. The bridge loan is then repaid through a main PF loan, which also finances construction costs. During construction, part of the PF loan is repaid using presale proceeds, and after completion, the remaining balance is settled with final payments from buyers, thereby realizing profits.
Because it is premised on future profitability, PF inherently carries high risk. Its financial structure is complex, involving developers, construction firms, securities companies, savings banks, capital companies, and guarantee institutions. Compared to ordinary lending, the risk is far greater, and if even one link in this chain falters, it can trigger a cascading effect with serious consequences for the national economy. Domestic developers typically maintain very low equity ratios—around 3–5%—and rely on PF to finance most land acquisition and construction costs, which heightens insolvency risk. Moreover, if presale rates decline due to rising interest rates and a downturn in the property market, loan repayment difficulties intensify.
Real estate PF has become a latent threat to the financial sector. According to the October 17, 2025 report “Policy Responses to Korea’s Real Estate PF Crisis” by the Samil PwC Management Research Institute, the current scale of real estate PF is estimated at approximately 200 trillion won. This figure consists of 160 trillion won in direct lending—including PF loans and land-secured loans—and 40 trillion won in securitized amounts. The government provisionally estimated total financial sector PF exposure, including managed land trusts of Saemaeul Geumgo, at 216.5 trillion won as of the end of June 2024.
As of the end of the third quarter of 2025, the delinquency rate on PF loans rose to 4.49%, up 1.07 percentage points from the previous quarter. This marks the first time the rate has entered the 4% range since financial authorities began regularly disclosing the data. The delinquency rate on land-secured loans—primarily handled by non-bank financial institutions—has approached 30%.
According to the provisional figures in the “2024 Business Performance of Savings Banks and Mutual Finance Cooperatives” released by the Financial Supervisory Service on March 21, 2025, the delinquency rate of the country’s 79 savings banks reached 8.52%, up 1.97 percentage points from the end of 2023 (6.55%). Data from the Financial Statistics Information System show that this is the highest level since 9.2% at the end of 2015. The primary cause was a sharp rise in the corporate loan delinquency rate to 12.81%, driven largely by non-performing real estate PF loans—an increase of 4.79 percentage points from the end of 2023 (8.02%). In contrast, the household loan delinquency rate declined by 0.48 percentage points to 4.53% from 5.01% at the end of 2023.
The NPL (non-performing loan) ratio—an indicator of bad loans—also reached a record high of 10.66%, up 2.91 percentage points from 7.75% at the end of 2023. In general, within the secondary financial sector such as savings banks and mutual finance institutions, an NPL ratio below 5% is considered sound, and below 3% is regarded as excellent.
Financial authorities have announced that from 2027 they will gradually implement a “PF System Improvement Plan” that includes raising equity ratio requirements for PF projects. To minimize market shock, the new standards will apply only to newly originated projects, with the required equity ratio phased in over four years from 5% to 10%, then 15%, and ultimately 20%.
Although financial regulators continue to monitor developments through “Real Estate PF Situation Assessment Meetings,” concerns persist and the risks cannot be ruled out.
