The Japanese government has decided not to extend a currency swap deal with Korea unless Seoul requests it, NHK reported Wednesday quoting a Finance Ministry official who attended a recent meeting of the Liberal Democratic Party.
"We have yet to receive a request from Korea to extend the currency swap agreement and will not extend it if there is no request," it quoted the official as saying.
In October last year, Seoul and Tokyo expanded the swap from US$13 billion to $70 billion, but the deal expires on Oct. 31. The arrangement would allow Seoul to swap won for yen in a crisis because the yen is one of three key global currencies alongside the dollar and the euro.
When President Lee Myung-bak visited Dokdo in August, then-Japanese finance minister Jun Azumi signaled the possibility of severing the agreement in retaliation. The Japanese government lodged a protest against Seoul when it learned that Korean government officials said at the time that the currency swap deal had been made at Tokyo's request, not the other way around.
Seoul says it is still considering the matter. A high-ranking official at the Ministry of Strategy and Finance said, "When we expanded the currency swap last year, the issue was limited to economics, so the ministry could decide by itself. But with diplomatic tensions rising, it has become necessary to discuss the matter with Cheong Wa Dae and the Foreign Ministry."
Another high-ranking government official said, "Financial markets have stabilized recently so that we do not need to extend the currency swap deal. But we need to approach the matter cautiously, since a decision by the government not to extend it could be taken by Japan as a sign that there are problems in Korea-Japan relations."
The government plans to dispatch Minister of Strategy and Finance Bahk Jae-wan to the IMF General Assembly being held in Tokyo on Oct. 12 to gauge the stance of Japan’s Finance Ministry before reaching a final decision.