Korea, Japan to begin talks on new currency swap

[THE INVESTOR] TOKYO -- Korea and Japan are planning to soon begin talks for reinstating a currency swap that was suspended last year due to a lack of demand stemming from frayed mutual ties.

“We suggested talks for discussing the currency swap deal, and Japan agreed,” said Korea’s Deputy Prime Minister Yoo Il-ho who doubles as finance minister, after meeting his Japanese counterpart Aso Taro on Aug.27.

The decision was also outlined in a statement the two countries released following the meeting.

“The Korean government has proposed to strengthen the bilateral economic cooperation between the two countries and as a token of the cooperation, to establish a new Bilateral Swap Agreement with the same amount to both countries. This agreement contributes to enhancing the regional financial stability,”said the public relations office of Japan’s Finance Ministry on Aug.29, quoting the official statement.

Both governments agreed to start discussing details of the swap agreement at an unspecified time.

The two sides held the seventh Korea-Japan Finance Ministers’ Meeting in Seoul last week where they discussed matters of mutual concern including currency swap. The details, such as the volume or rates, have yet to be set.

Just ahead of the meeting, the Korean government had denied that currency swap was part of the agenda this time.

A currency swap is an arrangement between two countries to exchange their currencies at a specific rate of exchange to use stronger foreign currencies to ease market volatility.

The agreement reached a peak of US$70 billion in October 2012, but took a downturn amid fraying mutual ties. The Japanese government’s continued visits to the Yasukuni shrine and its claims of sovereignty over Korea’s Dokdo islets were some of the thorny issues between the two.

By Kim Ji-hyun (jemmie@heraldcorp.com)  The Investor correspondent