South Korea’s president is calling for the collapse of Japanese infrastructure to push the domestic goods agenda
South Korean President Lee Jae Myung delivers a speech during the opening ceremony of the 48th session of the UNESCO World Heritage Committee at the BEXCO convention and exhibition center in Busan on July 19, 2026. (Photo by JUNG YEON-JE / POOL / AFP via Getty Images)
Jung Yeon-je | Afp | Getty Images
South Korean President Lee Jae Myung invoked Japan’s asset crash in the early 1990s, stoking concerns about Seoul’s housing market as he prepared to review taxes aimed at stabilizing the housing sector.
Lee said that “a number of people” are worried that the country could face 20 or 30 years of “lost” Japan, according to the CNBC version. Lee was referring to Japan’s “lost decades,” when growth slowed following a real estate and stock market crash.
He pointed out at a public debate on housing policy on Thursday that Tokyo’s housing market “exploded like a balloon” in the early 1990s, as he sought to highlight South Korea’s housing market.
Real estate is a large part of South Korean domestic wealth, Lee added, saying that data shows that South Korea is among the countries with the highest proportion of domestic wealth concentrated in real estate in the world.
As of the end of March 2025, real assets accounted for 75.8% of Korean household assets, compared to 24.2% of financial assets.
The South Korean president has a history of making bold calls.
Before the 2025 presidential election, when the Kospi index is close to 2,500, Lee, who was running for the election, reportedly set a goal of 5,000 Kospi during his term by promising to solve the so-called “Korean discount.”
I Kospi briefly crossed 5,000 in January 2026, more than six months after taking office, riding the AI-powered chip boom.
Lee’s government has tried to move domestic wealth away from the overheated housing sector and into financial markets, a strategy that has had little success.
South Korea’s benchmark is now hovering around 6,700, with volatility due to heavy reliance on heavyweights Samsung Electronics and SK Hynix.
Anxiety is overwhelming
Economists told CNBC that the comparison with Japan overstates the risk.
“I think the chances of a real estate bubble bursting in Korea are limited,” Kang Min Joo, senior South Korea and Japan economist at ING, told CNBC.
He said mortgage conditions have been tight for several years, and authorities have maintained tight controls on loan-to-value ratios and credit-to-income ratios. “While the LTV ratio used to be as high as 80%, it has dropped to below 40% and is the lowest in the Seoul area.”
The ratio of household debt to GDP in the country stands at 90.14 as of 2024. Although down from the record high of 98.67 in 2021, it is still the second highest in Asia behind Australia.
Lee’s comments reflect concerns about the recent rise in housing prices, rather than the real estate boom about to burst, Kang said.
That view was also shared by Gareth Leather, senior Asia economist at Capital Economics, who said “the fear of bubbles appears to be exaggerated.”
He pointed out that property prices not only in Seoul are rising rapidly, but also in the capital, they are more than 10% above the level they were at in January 2022. In cities like Busan, prices have dropped to almost 80% of January 2022 prices.
Leather said the risk to financial stability is also limited by the fact that home buyers need to put down a large down payment, “so the risks of them getting the wrong equity and going into bank trouble are low.”
Experts said that while South Korea is unlikely to see the collapse of bilateral trade and markets like Japan in the 1990s, the country shares several financial and demographic characteristics with Japan.
Ma Tieying, senior economist at DBS Group Research, said South Korea has a high debt-to-GDP ratio and stock market value, similar to Japan’s pre-crash, leaving it exposed to high rates, tight debt and global shocks.
But Korea is not seeing the massive capital inflows or sustained currency appreciation seen in Japan a few years before the bubble burst, giving the Bank of Korea greater leverage to balance policy.
Ma said the central bank has also responded bluntly to inflation and financial imbalances like Japan did before the bridge burst.
Following a period of extreme speculation in real estate and stocks during the 1980s, Japan experienced a financial market downturn in the 1990s when its central bank began raising interest rates in December 1989, beginning decades of slow growth.
— CNBC’s Jenny Lee contributed to this report.
