IMF: Won's Strength Against Yen Driven More by AI Boom Than Interest Rate Divergence

The IMF stated that the divergence in trends between the won and the yen is likely driven more by the AI boom than by differences in interest rates between the two countries. The IMF noted that the bond yield spread between Japan and South Korea has not widened significantly, and markets have already priced in expectations of rising policy rates in both nations. Nevertheless, the won appreciated 11% against the yen from July 1 to September 3. The IMF believes this indicates that the impact of the AI boom on current and capital accounts is more likely the explanation for the divergence in the two currencies' trends.