SEOUL: South Korea’s central bank on Thursday cut its key interest rate for the first time in three years as the economy struggles with sluggish global growth and with the country embroiled in a trade spat with Japan.

The Bank of Korea (BOK) lowered its key rate to 1.5 percent from 1.75 percent, citing slowing exports and “increased” volatility in domestic financial markets.

It joins a growing number of central banks worldwide that reduced borrowing costs to shore up their economies in the face of a prolonged trade dispute between the US and China.

People walking across the road in front of the Bank of Korea in Seoul yesterday. Photo: AFP

At the same time long-standing tensions between South Korea and Japan over the use of forced labour during World War II have bubbled over into a trade row that experts warn could hammer the global tech market.

Japan has restricted exports of three chemicals crucial to South Korea’s tech sector and used by major firms including Samsung Electronics and SK Hynix in the manufacture of microchips and smartphones.

Given the volume of trade between the two neighbours, if the restrictions are sustained or expanded it would have “no small impact on our economy”, BOK chief Lee Ju-yeol told reporters. – AFP