South Korea: The National Pension Service (NPS) Plans to Issue Foreign Currency Bonds to Stabilize Markets

South Korea’s Deputy Minister of Health and Welfare, Seuran Lee, revealed an unprecedented strategy: the National Pension Service (NPS) will issue foreign currency bonds before the end of 2025. This move aims to strengthen the diversification of the country’s largest pension fund and the third-largest globally, especially amid turbulence in the currency markets.

The decision marks a significant milestone, being the first time a high-ranking official publicly discusses this dollar bond issuance plan. The announcement reflects the pressure faced by the NPS due to the sustained volatility of the South Korean won.

Won Volatility: The Driving Force Behind the NPS Bond Strategy

Since mid-2025, the South Korean won has depreciated approximately 7% against the US dollar, creating substantial pressure on the fund’s currency management. This monetary weakness has forced the NPS to implement defensive measures, including forward dollar sales in the foreign exchange market to support won stability.

The depreciation has also complicated the government’s plan to invest $350 billion in U.S. industries under a trade agreement with Washington. Concerns about potential capital outflows that could further weaken the local currency have intensified the need for coordinated actions to preserve foreign exchange market stability.

Diversification of Funding: How Foreign Currency Bonds Strengthen the Pension Fund

Issuing bonds in foreign currencies is a diversification strategy designed to improve the fund’s asset composition and reduce exposure to won fluctuations. By financing in foreign currencies, the NPS can more effectively manage its international portfolio and contribute to stabilizing South Korea’s exchange market.

Institutional Coordination: Ministries and Central Bank Act in Response to Exchange Market Instability

Lee also reported that the Ministry of Health and Welfare, the NPS, the Ministry of Finance, and the Bank of Korea will hold their first formal meeting as a quadripartite consultative body. This meeting, scheduled for next week, aims to coordinate efforts to address challenges to financial market stability.

The NPS bond issuance initiative is part of the government’s comprehensive approach to strengthen currency markets and protect the economy from external volatility. The combination of diversified financing instruments and institutional coordination reflects South Korea’s determination to maintain the robustness of its pension funds amid monetary uncertainty.