November 27, 2024

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Korea's Finance Minister Choo Kyung-ho (right) shakes hand with his Japanese counterpart Shunichi Suzuki after holding a talk in Tokyo on Thursday. It was the first time in seven years for the two top finance heads to meet an official one-on-one talk. (Finance Ministry)

South Korea and Japan agreed to resume a $10 billion currency swap deal after an eight-year suspension, showing bilateral economic ties are on a path of recovery.

Finance Minister Choo Kyung-ho met with his Japanese counterpart Shunichi Suzuki in Tokyo on Thursday. It was the first time since 2016 for the top finance heads of Korea and Japan to hold an official one-on-one meeting.

The new currency swap program will last three years and be based on the US dollar.

A currency swap deal allows the entities to borrow foreign currency in exchange for their domestic currency at a predetermined rate, hedging currency risks. As the deal is a dollar-based contract, Korea and Japan can borrow each other’s dollars for the Korean won and Japanese yen.

The currency swap program between Korea and Japan began at $2 billion in 2001 and had expanded to $70 billion by 2011. But a swap deal worth $10 billion expired in February 2015 when the two countries did not renew the arrangement as the bilateral relationship was strained over diplomatic and historical issues.

“The currency swap deal shows the foundation for cooperation and solidarity between countries that share common values, including Korea, the US and Japan,” Choo said through the Finance Ministry.

He added that the deal would contribute to the expansion of a safety net for currency liquidity between developed nations with free market economies.

“Korea and Japan are important neighbors that have to cooperate on many agendas, including the global economy,” Suzuki said.

According to the Finance Ministry, a currency swap deal was one of the first priorities as Korea and Japan began to discuss cooperation in the past few months.

“Since the Korean-Japan authorities began to communicate with each other since the recovery of ‘shuttle diplomacy’ following the summit in March, both countries began to discuss a currency swap deal as it holds a symbolic meaning of financial, economic cooperation,” an official from the Finance Ministry said at a press briefing held shortly after the agreement.

At the meeting, the two countries also agreed to form a consultative body between the tax authorities of Korea and Japan to increase efficiency in discussing tax issues.

To support bilateral trade, heads of the customs services from each nation will hold a meeting in Korea in the second half of this year. The last such meeting took place in 2016.

The Export-Import Bank of Korea and the Japan Bank for International Cooperation will also sign a memorandum of understanding, agreeing to cooperate with each other in infrastructure development projects in other nations, forming a supply network to strengthen economic security and more.

Thursday’s meeting comes as Choo and Suzuki agreed to resume talks on the sidelines of the 56th annual meeting of the board of governors of the Asian Development Bank held here in early May.

Choo and Suzuki agreed to hold another one-on-one meeting in Seoul next year.

By Im Eun-byel (silverstar@heraldcorp.com)