Korea, Japan agree to resume currency swap deal

South Korea and Japan on Saturday agreed to resume a currency swap deal, which expired last year, as part of their efforts to strengthen bilateral economic cooperation amid a global slowdown and a possible US rate hike.

"The two countries agreed to start negotiations to reopen the currency swap deal," South Korea's Finance Minister Yoo Il-ho said after a finance ministers' meeting with his counterpart Taro Aso in Seoul.

"It represents the strong economic cooperation between Seoul and Tokyo amid rising uncertainties in the global financial market."

Details of the arrangement, including the total amount, will be decided later in the working-level meetings.

In February last year, Seoul and Tokyo agreed to end the $10 billion bilateral currency swap agreement that had been maintained since 2001.

A currency swap is an arrangement between two countries to exchange one currency for another at a specific rate of exchange in a bid to use the powerful foreign currency to soothe volatility in the currency market.

Yoo said the South Korean side first suggested to open talks on resuming the swap deal during the top economic policymakers' meeting, although the issue was not on the agenda.

"Considering the symbolic meaning of the bilateral economic cooperation, we, South Korea, proposed the resumption of the currency deal and Japan accepted it," said Yoo.

"When many countries reach swap deals with as many countries as possible, it will help ease uncertainties in the global economy.

That's the South Korean government's important policy."

In the midst of the 2008 financial crisis, South Korea concluded a $30 billion swap deal with the United States, which expired in 2010.

Currently, it has a couple of currency swap arrangements with countries including China, Malaysia and the United Arab Emirates.

Earlier, Seoul and Beijing agreed to extend their currency swap deal, worth 64 trillion won ($57.4 billion), scheduled to expire next year.

The British vote to exit the European Union, or Brexit, in June dealt a huge blow to the global financial market and the South Korean market, which had experienced wide fluctuations for days.

In recent weeks, moreover, the US Federal Reserve has been giving out hints that it will raise the key rate, further stirring up volatility in the global financial market.

Saturday's meeting was the seventh ministerial-level talks between Seoul and Tokyo, which have taken place on an annual basis since 2006, with some exceptions in 2008, 2010, 2013 and 2014.

Some 70 officials, including vice ministers, from the two countries having working-level sessions before and after the meeting. (Yonhap)