South Korea has slashed the budget for an ambitious plan to build a peace park inside the heavily fortified border with North Korea, the unification ministry said Thursday.

The National Assembly has earmarked 30.2 billion won ($28.7 million) for the pet project of President Park Geun-hye, 10 billion won less than requested by the ministry in charge of inter-Korean affairs. The Assembly cited a lack of feasibility as the reason for the reduction.

Last year, Park proposed that the two Koreas build an international park inside the Demilitarized Zone separating the two Koreas as part of efforts to improve their relations.

The budget cut illustrates lingering questions over the feasibility of the project that requires cooperation not only from North Korea, but the U.S.-led United Nations Command as well.

The DMZ, a four-kilometer-wide buffer zone separating the two Koreas, is under the jurisdiction of the U.N Command and North Korea.

The two Koreas technically remain in a state of war since the 1950-53 Korean War ended in a truce, not a peace treaty. (Yonhap News)

South Korean stocks closed 2.2 percent lower Thursday, the first trading day of the new year, as tech shares and automakers lost ground amid the yen's weakness, analysts said. The local currency rose against the U.S. dollar.

The benchmark Korea Composite Stock Price Index declined 44.15 points to 1,967.19. Trading volume was moderate at 204.4 million shares worth 4.22 trillion won ($4.02 billion) with losers outpacing gainers 546 to 252.

"Foreigners unloaded shares of Samsung Electronics on concerns about its fourth-quarter earnings," said Bae Sung-young, an analyst at Hyundai Securities Co. "The yen's weakness also weighed on local automakers."

Market analysts said the yen's weakness and tepid corporate earnings may cap gains of the KOSPI in January. Stock prices tend to rise in January on optimism for a new year.

The KOSPI started a tad weaker, and it extended its earlier loss in the afternoon trading, weighed down by the yen's weakness, analysts said.

Institutional and foreign investors remained net sellers of local stocks. Foreigners unloaded a net 342 billion won worth of Seoul shares on the main bourse.

Market leader Samsung Electronics declined 4.59 percent to 1,309,000 won, and chip giant SK hynix shed 3.4 percent to 35,550 won.

BNP Paribas estimated that operating profit of Samsung Electronics likely fell by around 14 percent on-quarter in the October-December period of last year.

Top carmaker Hyundai Motor lost 5.07 percent to 224,500 won, and its affiliate Kia Motors fell 6.06 percent to 52,700 won.

The local currency ended at 1,050.30 won to the greenback, up 5.1 won from Tuesday's close, as exporters unloaded the greenback, dealers said.

As the yen remained weak, the Korean currency was trading at 996.87 won per 100 yen as of 3:05 p.m., up 5.18 won from Tuesday's close. The greenback serves as the benchmark for the won-yen cross rate. (Yonhap News)