We welcome the latest agreement between Japan and South Korea, which should further improve bilateral relations in the economic field.
During the seventh round of financial talks in Seoul, Finance Minister Taro Aso and South Korea’s Strategy and Finance Minister Yoo Il Ho agreed that the two countries would start talks on resuming a bilateral currency swap agreement.
Under such a pact, U.S. dollars and other currencies can be provided to one of the two countries whenever there is a currency crisis. Tokyo and Seoul signed a similar agreement in 2001, which mostly worked to counter currency turmoil in South Korea. However, the accord expired in February last year.
South Korea’s won nosedived in June in the wake of Britain’s vote to leave the European Union. While it has been pointed out that for South Korea the need for receiving currencies has waned because the country has increased its foreign reserves, Yoo proposed resuming the agreement in what he said would be “proof of strengthening bilateral economic cooperation.”
A swap agreement would serve as a symbol of Japan-South Korea cooperation in the monetary field. Resuming the pact would help stabilize not only the financial markets of the two countries, but also those in Asia as a whole.
Japan-South Korea relations have steadily improved since they reached a deal on the comfort women issue at the end of last year. We believe the agreement to hold talks on resuming the swap agreement will aid this effort.
The financial talks started in 2006 with the major aim of serving as the first step to improve bilateral relations in the economic field, as they had soured over a visit to Yasukuni Shrine by then Prime Minister Junichiro Koizumi.
Accelerate trade talks
The dialogue was suspended in 2012 when Tokyo and Seoul confronted each other over the Takeshima islands issue, but resumed in May last year. The two countries should continue candid discussions on all economic issues.
In the latest dialogue, Japan and South Korea agreed that volatile commodity prices and geopolitical risks such as regional conflicts have increased misgivings over the global economy.
The two countries affirmed once more that they will use all possible policy means — monetary policies, fiscal spending, structural reforms — to bolster growth in the international community. This is reasonable.
Japan and South Korea face common challenges, such as falling potential growth rates, as their birthrates remain low and populations age. They should hold constructive talks on growth strategies, such as how to implement regulatory reforms to enhance productivity.
When it comes to trade, Japan and South Korea agreed that they will work hard to accelerate negotiations on a free trade agreement including China, as well as negotiations on the Regional Comprehensive Economic Partnership (RCEP) covering East Asia.
As the U.S. presidential election in November nears, it has become increasingly uncertain whether Washington will ratify the Trans-Pacific Partnership free trade pact, which was signed by 12 countries including Japan and the United States.
Japan and South Korea should not only keep an eye on U.S. moves in regard to TPP ratification, but also make steady efforts to advance negotiations on the trilateral free trade agreement and the RCEP.