Japan, S. Korea agree to revive currency swap agreement

The resumption was agreed on as Japanese Finance Minister Shunichi Suzuki and his South Korean counterpart Choo Kyung Ho met in Tokyo for the first finance dialogue in seven years, as efforts to mend ties spread to the economic and financial fronts.

The $10 billion currency swap arrangement will ensure access to the U.S. dollar in times of emergency by exchanging the yen or the won.

The previous arrangement expired in 2015 and had not been renewed amid friction over South Korea-controlled, Japan-claimed islets in the Sea of Japan and the long-standing issue of comfort women forced to work in Japanese wartime military brothels.

«Japan and South Korea are neighbors, and we should cooperate in various fields,» Suzuki said at a press conference after what he described as «candid and meaningful» exchanges of views.

While both nations have sufficient foreign reserves, having a swap agreement in place for emergencies will be «a plus for the yen and the won,» Suzuki said.

South Korea possesses foreign reserves that amount to approximately one-third of Japan's reserves, which stand at roughly $1.2 trillion. The won and the yen have borne the brunt of the dollar's relative strength, partly due to the assertive interest rate hikes implemented by the U.S. Federal Reserve.

When Suzuki and Choo met in South Korea in May, they agreed to resume the finance dialogue last held in 2016. The framework involves senior officials from both nations discussing economic and financial issues.

In their most recent round of discussions, Japan and South Korea also addressed the importance of cooperating with other regional economies, emphasizing the necessity of bolstering the financial safety net.

They underscored the importance of cooperating in building robust supply chains for clean energy and working toward the early launch of a multilateral framework for resilient and inclusive supply-chain enhancement.

The Group of Seven nations envisions the framework as helping low- and middle-income countries assume more significant roles in the supply chains for critical items.

The next bilateral finance dialogue will be held in South Korea next year.

Under Yoon Suk Yeol, who became South Korea's president in 2022, bilateral ties have begun to gradually improve after he proposed a solution to the long-standing issue of wartime labor compensation that had sent Seoul-Tokyo ties to their lowest point in years.

Prime Minister Fumio Kishida visited South Korea in May, becoming the first Japanese leader in over five years to do so. Japan on Tuesday formally decided to relist South Korea as a preferred trade partner on July 21 in a reciprocal move after Seoul similarly changed Tokyo's status.

During the peak of bilateral tensions, Japan implemented export controls on crucial materials utilized in semiconductor manufacturing. However, those measures have already been lifted.