The South Korean government announced a major cabinet reshuffle, nominating Lee Hyoung-il, First Vice Minister of Economy and Finance, to serve as the new Deputy Prime Minister and Minister of Economy and Finance, amid a bond sell-off and concerns over the sustainability of expansionary fiscal policy. The reshuffle also includes the nomination of Kim Seung-won, a lawmaker from the Democratic Party, as Minister of Justice, and Kang Shin-chul, former deputy commander of the South Korea-U.S. Combined Forces Command, as Minister of Defense. The changes come in the second year of President Lee Jae Myung's administration, with Lee Hyoung-il tasked with managing an overheating economy and coordinating policy with the Bank of Korea, which is tightening monetary policy, while the government is likely to increase spending next year. The government is expected to unveil the draft budget for 2027 next week, a closely watched issue. The nominees must undergo legislative confirmation before taking office, although the president has the ultimate authority in appointments.
New finance minister faces bond sell-off and policy coordination with tightening BOK, likely impacting yields.
