In a symbolic thaw in their long-broken bilateral relations over their shared experience in World War II, Japan and South Korea decided on Thursday to renew an emergency-use currency swap arrangement that had lapsed eight years earlier.
As bilateral attempts to heal ties have expanded to the economic and financial fronts, South Korean Finance Minister Choo Kyung Ho and Japanese Finance Minister Shunichi Suzuki came to an understanding during the first finance discussion held since 2016.
Through the exchange of yen or won, the $10 billion currency swap agreement will guarantee access to the U.S. dollar in times of need.
The previous one concluded in 2015 and was not extended due to tensions over islets in the Sea of Japan that South Korea controls but Japan claims, as well as the ongoing problem of comfort women who were made to work in Japanese military brothels during World War II.
At a news conference held following the meeting, Suzuki stated, “Japan and South Korea are neighbors, and we should cooperate in various fields.” He added that the confidence among the finance authorities has been growing.
Having a swap arrangement in place for emergencies will be “a plus for the yen and the won,” Suzuki added, even though both countries have adequate foreign reserves.
The foreign reserves held by South Korea are equivalent to around one-third of Japan’s reserves, which total about $1.2 trillion. Due in part to the forceful interest rate increases the U.S. Federal Reserve adopted, the won and the yen have taken the brunt of the dollar’s relative strength.
In the wake of the Asian financial crisis, Japan and South Korea entered into their first currency swap agreement in 2001.
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