$350 billion in remittances? ...Why Korea is different from Japan

South Korean President Lee Jae-myung, who attended the 80th UN General Assembly, stressed that investment negotiations with the US cannot be accepted at face value at every opportunity.
This is why they are reluctant to accept the request to establish a $350 billion investment fund in the United States, citing the completely different economic size and foreign exchange reserve situation.
On the 22nd, he met with members of the U.S. House and Senate, and on the 23rd, he met with American opinion leaders to explain the state of the Korean economy.
On the same day, he met with U.S. Treasury Secretary Scott Bessent and made it clear that if the South Korean economy were to go ahead with the $350 billion in direct investment as requested by the United States, it could plunge the South Korean economy into chaos.
Prior to this, the Japan-US negotiations that South Korea used as a reference case resulted in a US investment agreement worth $550 billion. Japan reduced tariffs on US exports such as automobiles by 15%.
However, the structure of the agreement has been criticized as being unbalanced. It has become clear that Japan provides a huge amount of capital but has no right to make investment decisions, and is left to bear only the risks.
The decision on where to invest the $550 billion Japan is offering is entirely up to President Donald Trump. The investment committee is also made up entirely of American personnel.
Japan has no de facto veto power. Even if losses occur, the United States will not take responsibility and Japan will bear the full cost. The structure is such that if there are profits, the United States will receive a share, and if there are losses, Japan will bear them.
It's like the Japanese government has opened up an "unlimited credit card" to the US. The distribution of profits is also unfair. On the surface it's 50/50, but after a certain period of time, the US's share will be 90%.
The foreign media commented that "Japan, the world's fourth largest economy, has accepted extreme concessions in order to lower tariffs." It is unclear whether the agreement will actually proceed as agreed, but the Japanese government
If the $350 billion were to be provided to the United States in the form of cash flow, it would place an even greater burden on the Korean economy.
If the government were to provide cash transfers rather than the guarantees and credit lines it had expressed, it could lead to a massive drain on national wealth, amounting to 19% of GDP in 2024, 72% of the 2025 budget, and 10% of the foreign exchange reserves.
This is because it is equivalent to 85% of the total foreign currency reserves. The foreign currency situation is also extremely unfavorable for South Korea. If South Korea accepts the US demands as they are, the demand for dollars to be sent to the US will increase, leading to a massive sell-off of won.
This will cause the dollar to appreciate and the won to depreciate, making it inevitable. Considering the fact that there is almost no demand for won outside of Korea, an exchange rate shock is inevitable.
The stability could soon spread to the entire real economy. The political ripples are not small either. The $350 billion investment requires the approval of the National Assembly, so strong opposition from the domestic political community can be avoided.
The issue of fiscal soundness and the burden on the people could come up at the same time. While Japan had a buffer in the form of its GDP and foreign exchange reserves, South Korea does not have that kind of capacity.
The perspective of international credit rating agencies is also a variable. If South Korea were to forcefully accept a large investment fund, it could lead to a downgrade of the country's credit rating.
This will immediately lead to a decline in foreign investment and an increase in borrowing costs, placing a burden on the entire Korean economy. Some say that Japan will not simply accept the US demands.
There are rumors that this is a so-called "secret agreement" that will save face for the US by signing it for now, and then be flexible in terms of actual implementation. However, President Lee Jae-myung has decided to
At a press conference on Sunday, he drew the line at saying, "There is no secret agreement." As South Korea is not a key currency country, the mere fact that it has "signed" could send shock waves through the financial markets. Unlike Japan, South Korea is a foreign currency reserve country.
The president appears to have been wary of the risk that simply signing the agreement during the negotiation process could pose a risk.
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