Korea and Japan Signs a $10 Billion Currency Swap Deal
Deputy Prime Minister Kyungho Choo had the 8th Korea-Japan Finance Ministerial Dialogue with Japanese Finance Minister Suzuki Shunichi at the Japanese Ministry of Finance in Tokyo on June 29 to discuss global and regional economic circumstances and measures to strengthen both bilateral and multilateral cooperation.
The major discussions are as follows:
[Sharing views on domestic and overseas economic situations of Korea and Japan]
In the first session, both parties shared views on their domestic and overseas economic situations. Both countries acknowledged that although the global economy is on the road to recovery, the uncertainties still persist due to downside risks such as the prolonged war between Russia and Ukraine and the continued monetary tightening in response to inflation. To this end, Korea and Japan agreed to facilitate mutual cooperation in a responsible manner against pending global crises such as geopolitical risks, supply chain fragmentation, threats posed by the pandemic, increased debts of developing countries and financial volatility.
[Revival of Korea-Japan currency swap deal and bilateral financial cooperation]
In terms of financial cooperation, the ministers reached an agreement on the revival of the currency swap deal that expired in 2015 and discussed measures to revitalize bilateral financial investment.
In particular, the currency swap agreement resumed after an 8-year hiatus, which symbolizes that the rapidly-recovering relations between the two countries prompted by the Korea-Japan summit in March are even making their way in restoring financial cooperation. The renewed swap deal is worth US $10 billion, unchanged from the previous deal that ended in February 2015.
The currency swap deal is expected to serve as mutual safeguards in the event of an emergency in either country as well as have positive effects on maintaining the economic and financial stability in the region such as ASEAN+3.
DPM Choo said that the agreement is significant in terms of building up a framework of strong solidarity and cooperation among nations sharing universal values such as Korea, U.S. and Japan. He added that the swap deal will expand the safety net of foreign exchange liquidity enjoyed by advanced countries with free market economy to include the Korean financial and foreign exchange markets.
[Intergovernmental assistance in the global community such as G20, G7 and ASEAN+3]
As members of the global community, Korea and Japan pledged to work together with responsibility to deal with global agendas discussed in G20 and G7 such as debt relief for low income countries, and Resilient and Inclusive Supply-chain Enhancement Partnership (RISE), etc. In addition, in order to enhance the effectiveness of Chiang Mai Initiative Multilateralization (CMIM), a regional financial safety net, both countries agreed to actively engage in discussions on financial system improvements such as reorganizing financial resources and introducing new financial programs.
[Cooperation on taxes and tariffs and human resource exchanges]
Considering that discussions on global taxation are currently underway through multilateral cooperation channels such as G20 and OECD, both countries decided to organize and operate joint working groups between the two countries’ tax authorities to facilitate relevant consultations. In addition, both sides planned to resume a bilateral meeting between the heads of customs agencies, which has been halted since 2016, in the latter half of this year in Korea with a view to forming a stable trade environment.
Both countries also agreed to establish annual exchange programs for young government officials based on the shared views that enhancing ties and mutual understandings between them will provide substantial contributions to strengthening financial cooperation.
[Cooperation on joint entry into third countries]
The Export-Import Bank of Korea and the Japan Bank for International Cooperation singed an MOU on the joint entry into third countries during their meeting. The MOU includes support measures to promote collaboration between the two countries’ policy financial institutions; infrastructure projects development in third countries that Korea and Japan will participate in, establishment of supply chains, and implementation of global carbon neutrality, which are anticipated to encourage companies from the two countries to boost overseas expansion.
As the two ministers agreed to further strength bilateral commination and cooperation between both financial authorities moving forward, they decided to hold the 9th Korea-Japan Finance Ministerial Dialogue in Korea in 2024.
Please refer to the attached file.