The Ministry of Strategy and Finance and the Bank of Korea announced on the 1st that Korea and Japan have resumed currency swaps for the first time in eight years since 2015. It is assessed that cooperation between monetary authorities has also been achieved in an atmosphere of recovery in relations between Korea and Japan.
On this day, the Bank of Korea and the Bank of Japan announced that they had signed a currency swap contract worth 10 billion dollars (about 13 trillion won). The contract period is 3 years, and the currency of the country requesting swap funds is exchanged for U.S. dollars.
The signing of this currency swap agreement is a follow-up to the agreement reached between Deputy Prime Minister and Minister of Strategy and Finance Chu Kyung-ho and Japanese Finance Minister Shunichi Suzuki at the 8th Korea-Japan Finance Ministers’ Meeting held in Tokyo, Japan on June 29 this year. After the agreement at the end of June, it took about five months to reach the actual contract as the central banks of both countries went through related procedures, including detailed agreements and legal advice.
There is an analysis that the signing of a dollar-based currency swap has made it easier for both countries to secure dollars. If Korea deposits won, it will send dollars held in Japan, and if Japan deposits yen, Korea will send dollars.
This currency swap is evaluated not only to stabilize the foreign exchange market, but also to be meaningful in that it restores financial cooperation between the two countries. The Korea-Japan currency swap, which started with $2 billion (approximately 2.6 trillion won) in 2001, ballooned to $70 billion (approximately 91 trillion won) in 2011, but gradually decreased until the $10 billion contract expired in February 2015 and has been in effect for over 8 years. stopped. The Bank of Korea said, “We expect it to promote financial cooperation between the two countries and contribute to strengthening the financial safety net in the region.”
Source: Donga
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