South Korea and Japan extend $10 billion currency swap for three years
In short
South Korea and Japan agreed on October 15 to extend their $10 billion currency swap for three years, through November 2029. Their finance ministers reached the agreement at a meeting in Bangkok.
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South Korea and Japan agreed on October 15 to keep their $10 billion currency swap in place for another three years, extending it through November 2029. The agreement leaves the size of the arrangement unchanged. The two countries' finance ministers reached the decision during bilateral talks in Bangkok, according to reports citing South Korea's finance ministry. [ 2 , 11 , 16 ]
Under the arrangement, South Korea can provide won to Japan and borrow dollars, while Japan can provide yen to South Korea and borrow dollars. The swap serves as a foreign-currency safety net during financial-market instability. Both ministers agreed that their foreign-exchange authorities currently held sufficient foreign-currency liquidity. The ministry said they nevertheless considered the swap important as a symbol of financial cooperation and coordination between the two countries. [ 2 , 11 , 14 , 16 ]
The existing three-year, $10 billion agreement began on December 1, 2023, and had been due to expire at the end of November this year. Its restoration in 2023 followed a suspension lasting more than eight years after the previous agreement expired in February 2015. Newsis described the new agreement as the first extension since the swap was restored. Reports said the current structure allows borrowing entirely in dollars, unlike the earlier arrangement under which South Korea could borrow both yen and dollars. [ 2 , 11 , 16 , 17 ]
The countries first established a $2 billion currency swap in 2001. Its size rose to $70 billion in 2011 amid global financial-market instability before shrinking as bilateral relations deteriorated, the reports said. At their latest meeting, the ministers also agreed to hold the next bilateral finance ministers' meeting in South Korea soon, following their March meeting in Tokyo. [ 6 , 11 , 16 ]
Why it matters
The arrangement lets either country obtain dollars by providing its own currency when needed. South Korea's finance ministry said the ministers considered the swap a symbol of bilateral financial cooperation, while agreeing that both countries already had sufficient foreign-currency liquidity.
Key facts
- The swap's $10 billion size will remain unchanged. [ 2 , 11 , 16 ]
- The renewed arrangement runs through November 2029. [ 2 , 11 , 14 , 16 ]
- The current agreement began on December 1, 2023, with a three-year term. [ 11 , 14 , 16 ]
- The ministers also agreed to hold their next bilateral finance meeting in South Korea soon. [ 2 , 6 , 16 ]