South Korea is determined to avoid Japan's "timidity trap," which was responsible for some 20 years of lost growth, by aggressively pursuing an expansionary policy stance, a senior policymaker said Tuesday.
  

In a keynote speech at a gathering hosted by the Korean Economics Association in Seoul, Vice Finance Minister Joo Hyung-hwan said Tokyo's passive macroeconomic policies are largely the causes of the so-called two lost decades. Such policies sapped total factor input, which led to a drop in tax revenues, hurting the government's ability to implement policy measures to boost growth in the long run, he said.
  

To avoid such predicaments, South Korea is taking an aggressive expansionary policy posture, which coupled with record low interest rates, aims to fuel growth.
  

The finance ministry has set a growth goal of 3.8 percent for this year, up from the 3.4 percent estimated for 2014. This year's growth target is higher than the 3.4 percent predicted by the Bank of Korea and viewed by some economic analysts as too ambitious.
  

The South Korean government has also set up a 30 trillion won ($27 billion) business investment promotion program and has taken steps to help raise household income so that more money will circulate in the market and bolster consumption.
  

Joo said this year will mark a change in the overall makeup of the country through economic reforms.
  

"Lack of meaningful reforms following the 1997-98 economic crisis has led to inefficiency in the labor and financial sectors," he said, reasserting a government pledge to overhaul the labor, education, financial and public sectors for a healthier economy.
  

Such actions are critical because weaknesses in the eurozone and other emerging markets threaten to make deflation and secular stagnation the "new normal" for some countries, he said.
  

Although the plunge in oil prices hasn't had a tangible impact in the domestic economy, Joo expected its benefit to eventually trickle down to South Korea.
  

"South Korea will have $33 billion of income transfer from oil producing countries," Joo said. "The effect of low oil prices should pass through consumption and investment, but it is not yet clear. In the mid-term, however, (the South Korean economy) will clearly see the effect." (Yonhap)