South Korean President Yoon Suk Yeol issued his first apology over his wife receiving a luxury handbag under questionable circumstances, highlighting his efforts to set a new course for his government after a stinging defeat in parliamentary elections.  

In his first news conference in about two years, Yoon pledged Thursday to improve livelihoods and create a new ministry to boost the country’s birthrate, which is ranked lowest in the world and threatens long-term economic prospects.

He also laid out priorities for his remaining time in office, which include taming inflation, boosting growth led by the private sector and raising the basic pension for senior citizens to 400,000 won ($292) a month. Shares of South Korean companies related to baby products and services soared on Yoon’s plans to increase the birthrate.

The president has little room to maneuver for the remainder of his single, five-year term after the election last month in which the opposition bloc led by the progressive Democratic Party increased its majority in parliament.

“For the next three years, we will listen closely to the voice of the people and work to improve their livelihoods,” Yoon said. His government, which backs business-friendly policies, has fallen short in some areas but added there are “green lights” ahead for the economy, the president said. 

Last month, the central bank held its key rate at 3.5% for a 10th consecutive time, pledging to keep its focus on fighting inflation. The economy grew more than twice as fast as expected in the first quarter largely thanks to export growth and a rebound in construction investment. 

The president sought to further boost ties with the U.S. and Japan, which have been a trademark of his tenure. He said this would help in ensuring security in the region to counter threats from the likes of North Korea and expand economic opportunities. 

Yoon pledged to overhaul his administration after the election defeat and work with parliament to advance structural reform for the labor, education, pension and medical systems. But one of his most pressing tasks might be trying to thwart plans from the Democratic Party for probes that could embarrass his government—including one concerning the first lady.

The Democratic Party has sought legislation to start an investigation of Yoon’s wife, Kim Keon Hee, after a secretly recorded video surfaced several months ago that purportedly showed her receiving a Dior handbag. Yoon and his wife have denied any wrongdoing, and the president has said the bag was part of a “political maneuver.”

“I apologize for causing concern to the public due to my wife’s unwise behavior,” Yoon said at the news conference.

On Tuesday, Yoon appointed a former prosecutor as the new senior secretary to the president for civil affairs, a post he had previously removed, citing excessive power it could wield on government agencies, including the prosecutors’ office. Yoon has said the move was aimed at better listening to public opinion but the opposition criticized the appointment as an attempt to control prosecutors.

Yoon took power after winning by a razor thin margin and has since seen his support fall to among the lowest for any South Korean president, reaching 23% in a weekly Gallup Korea tracking poll after the April election.

The election result derailed Yoon’s plan to push through initiatives to benefit investors such as scuttling a capital gains tax, and it may have doomed his flagship policy of boosting stock valuations via the “Corporate Value-Up” program.

Policies being pushed by the Democratic Party include a 13 trillion won plan to extend cash handouts to households as a way to boost flagging consumer demand. Yoon has rejected the idea, saying it would spur inflation and strain the budget.

At the news conference, Yoon pledged support for companies that power the export-driven economy, especially the makers of semiconductors. He also called for opposition parties’ cooperation to abolish the upcoming financial income tax, saying it would cause a huge amount of money to flow out of the stock market.

The president’s main foreign policy initiatives include closer security cooperation with the U.S. and Japan, and taking a tough line with North Korea. Even though the Democratic Party has favored rapprochement with Pyongyang and improving relations with Beijing, it has little power in parliament to set a foreign policy agenda.

Yoon will face a test on the diplomatic front later this month when Seoul is set to host the first three-way summit since 2019 of figures from China, Japan and South Korea. There is also speculation he could have formal discussions in July with U.S. President Joe Biden and Japanese Prime Minister Fumio Kishida to build on their security cooperation.

“We must not miss this opportunity to revitalize the economy and open new avenues for diplomacy,” Yoon said. 

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