Redenomination: Why Now?

Governor Park Seung of the Bank of Korea commented on the issue of the redenomination of currency on September 17, following the announcement that Deputy Premier and Finance and Economy Minster Lee Hun-jae made during a hearing at the National Assembly on September 16 concerning this in which he said, "It has already passed the research phase and has started to undergo detailed review."

Governor Park said at a monthly breakfast meeting with presidents from other banks, "Although [redenomination] is a decision made by the government, the new system will be implemented eventually."

He added, "We have concluded all the research and studies on possible measures to improve the three-currency system including redenomination, anti-counterfeit measures, and issuance of larger notes." The comment implies that the bank is ready to implement the system as soon as the plan is laid out.

Experts also agree on eventually changing the monetary unit some time later.

However, they are questioning whether now, a time of recession, is the right time to be discussing the matter publicly because redenomination is an issue without urgency and needs thorough consideration because some side effects derive from it, including price fluctuations and more.

Economics Professor Hong Gi-taek of Chung-Ang University criticized, "Changing the currency unit will not bring down oil prices," and added, "At such a time of uncertainty, the currency reform will only add to the people`s psychological insecurity regardless of whether or not it was done with a good intention."

Choi Gong-pil, a senior researcher at Korea Institute of Finance, said, "I doubt that we are at leisure to talk about changing currency with all the other important economic problems to attend to," and added, "The matter deserves no second thoughts."

Some oppose the plan for the cost of having to issue new currency while re-configuring various accounting programs and payment systems.

The Bank of Korea estimates the total cost of altering the currency unit to amount to two trillion won.

In that regard, some propose the need of issuing notes with larger denomination which will cost less compared to changing the currency unit.

Professor Hong said, "There are some inconveniences in carrying out transactions with 10,000-won notes because the Korean economy grew a hundred times in volume since the first 10,000-won note was issued in 1973," and, "Issuance of larger denomination bills will be a welcomed and inexpensive method that will deal with such inconveniences."

Jong sik Kong Kang-Woon Lee kong@donga.com kwoon90@donga.com