During the Saturday session of Japan and South Korea’s dialogue on financial issues in Seoul, South Korean Strategy and Finance Minister Yoo Il Ho said a new pact would be evidence of improved bilateral economic cooperation.
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South Korea’s Strategy and Finance Minister Yoo Il-ho and his Japanese counterpart Taro Aso reached an agreement on Saturday that they would sign the currency swap contract again that was expired in February a year ago.
The move, first suggested by Korea, is meant to hedge risks amid uncertain global economic landscapes.
A currency swap scheme will allow the two countries to supply each other with foreign currencies if they run short of USA dollars or other foreign currencies in the event of emergencies such as a financial crisis.
The specific size of the deal has yet to be announced. On the second and final day of the meeting, the ministers discussed an array of business the three countries have been working on, or need to work on, to further strengthen cultural ties while promoting each of the countries’ cultures and traditions.
Japan agreed to start talks, saying that a new pact would increase the stability of financial markets in East Asia.
The proposal comes as diplomatic tensions between the two countries have retreated following an agreement that aims to settle the row over “comfort women”.
After former President Lee Myung-bak visited Dokdo, a set of islets in dispute between the two countries, in 2012, the amount of currency swap shrank.
In February past year, Seoul and Tokyo agreed to end the $10 billion bilateral currency swap agreement that had been maintained since 2001.
Analysts said that the renewed currency swap with Japan will also act as a countermeasure to reduce economic dependence on China. But some people are raising concerns that the agreement means that Korea became one step closer to Japan which is a rival of China at a time when Korea-China relationships became frosty due to Korea’s plan to deploy the Terminal High Altitude Area Defense (THAAD) system on its soil.
China is now Korea’s largest trading partner.
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Earlier, Seoul and Beijing agreed to extend their currency swap deal, worth 64 trillion won ($57.4 billion), scheduled to expire next year.
