According to Pulse by Maeil Business News Korea,

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 last year.

“Korea suggested discussions on currency swap and Japan agreed, and it would take a few months for the contract to take effect, said Yoo.

Details including the scale and period of the currency swap contract have not been decided yet.

A currency swap is an agreement between two countries enabling them to exchange their currencies at a specific rate in times of crisis to maintain foreign exchange reserves.

The two countries started the currency swap worth $2 billion in July 2001 and expanded the currency deal to $70 billion in October 2011. This was a win-win for the countries as Korea could brace for another financial crisis and Japan could improve the international presence of yen.

However, with the worsening relationship between Korea and Japan caused by then President Lee Myung-bak’s visit to Dokdo in August 2012, the countries failed to extend the currency swap contract worth $57 billion that was due to be expired in October in 2012.

As diplomatic ties between the two countries have been strained since then, the last currency swap deal worth $10 billion was expired on February 23 last year to put an end to currency swap between the two countries.

By Cho Si-young

Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.

Source: Pulse by Maeil Business News Korea (Aug. 28, 2016)