Korea Resumes Currency Swap Deal with Japan © This is copyrighted material owned by Digital Chosun Inc. No part of it may be reproduced or transmitted in any form or by any means without prior written permission.

Korea and Japan have signed a fresh currency swap deal worth US$10 billion, the Ministry of Economy and Finance said last week. The resumption comes after an eight-year hiatus as relations chilled.
A currency swap involves depositing one country’s currency with the partner country and borrowing the partner country’s currency or dollars at a pre-agreed exchange rate when needed. The aim is to stabilize currencies in volatile times.
The ministry said the deal will promote financial cooperation between the two countries and strengthen the regional financial safety net. The duration is three years, but it differs from previous arrangements as it involves U.S. dollars rather than exchanging Korean won and Japanese yen directly.

The deal follows an agreement between Finance Minister Choo Kyung-ho and his Japanese counterpart Shunichi Suzuki during a meeting in June. The contract took about five months to finalize because it required discussions between central banks and other procedural steps. A ministry official said, “Extending an existing swap agreement would not take as long, but in this case we had to start over again.”
Korea and Japan began their currency swaps with a modest $2 billion in 2001, which expanded to $70 billion by October 2011 amid the global financial crisis and European fiscal crisis.
But tensions between the neighbors led to a reduction of the swap, and the last remaining $10 billion agreement expired in February 2015

Source: Chosun.com