South Korea is "closely analyzing" volatility in foreign purchases of government bond futures and preparing a contingency plan should overseas investors yank money from the market, a senior Finance Ministry official said.

The swings may increase as Japan ramps up monetary easing and speculation grows that the U.S. Federal Reserve will roll back stimulus, Gwak Bum Gook, director general at the treasury bureau, said in an interview in Sejong yesterday. The contingency plan will include stronger cooperation with the Bank of Korea, financial regulators, and the stock exchange, Gwak said. He didn't provide more details.

"Stimulus policies of the U.S. and Japan are likely to cause higher volatility in the second half in the bond market, and we will closely monitor and respond to such a case," Gwak said. "Volatility may increase in the currency, bond, and stock markets, as debate over a U.S. exit from quantitative easing policies develops."

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