South Korea’s import prices fell 1.2% year on year in January. This follows a 0.3% rise in the prior period.
The data marks a move from annual growth to an annual decline. It shows that imported goods were cheaper on average than a year earlier.
An import-price drop to -1.2% year over year is a clear deflationary signal. The shift from positive growth suggests external price pressures are not only easing, but turning negative. We think this raises the chance that the Bank of Korea will take a more dovish tone and may signal rate cuts sooner than the market expects.
This view puts pressure on the Korean won. Lower expected interest rates reduce the currency’s appeal. We saw a similar pattern in 2025, when worries about weaker global trade pushed the won past 1,350 per dollar. Traders may want to consider USD/KRW call options to position for possible won weakness.
For equities, the message is mixed but slightly negative for the KOSPI 200. Cheaper imported inputs can support margins. However, this drop likely reflects weaker global demand, also seen in falling commodity prices like crude oil, which slipped below $80 a barrel in January 2026. That points to softer earnings ahead for major Korean exporters, so KOSPI 200 put options could be a sensible hedge.
The clearest trade may be in rates. This data challenges the Bank of Korea’s still-restrictive stance. If markets price in easier policy, bond yields should fall and bond prices should rise. We recommend buying Korean Treasury Bond (KTB) futures to benefit from a potential rally in government bonds.
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