Mubasher: South Korea’s central bank surprisingly cut its main policy interest rate, as it lowered its projections for economic growth and inflation.

The Bank of Korea (BoK) cut the seven-day repurchase rate to 1.5% down from 1.75%, for the first time in three years.

The Southeast Asian economy grapples with a global downturn, while embroiled in a trade feud with Japan.

The central bank lowered its forecast for economic growth to 2.2% this year, from 2.5% projected last April, while inflation was expected to rise 0.7%, compared with the previous 1.1%.

The BoK was the latest in a growing number of central banks elsewhere that cut rates to boost the growth of their economies, against the backdrop of a protracted trade conflict between the US and China.

Moreover, long-standing tensions between South Korea and Japan over the forced labour during World War II have bubbled over into a trade dispute that threatens to undermine the global tech market.

Japan banned exports of three chemicals, key for South Korean tech industry, and used by the sector’s giants, including Samsung and SK Hynix.

Should such restrictions be sustained or expanded, the South Korean economy would receive a “no small impact,” BoK’s governor Lee Ju-yeol said.

Ties between the two nations were heavily affected by Japanese expansionism in the first half of the 20th century, especially the colonisation of the peninsula.

South Korean President Moon Jae-in stated that Japan’s actions are politically motivated, resulting in an “unprecedented emergency” for the nation.