Finance Ministers Of Japan, China, South Korea Pledge Cooperation

May 4, 2007
Pledged to develop multilateral system of currency swaps

The finance ministers of Japan, China and South Korea pledged May 4 to step up financial cooperation to prevent regional currency turmoil, while taking an upbeat view on the economic outlook. They agreed to work on a multi-nation currency swap arrangement together with Southeast Asian nations that could swing into action more quickly in the event of a currency crisis, and to foster Asian bond markets.

The ministers noted "the continued solid growth" in their three economies but said they would remain vigilant on potential risks such as high oil prices and the U.S. housing market slowdown. "In general we were optimistic about the economic prospects for both regional and global economies in 2007," they said in a joint statement.

They welcomed the deepening bilateral swap arrangements under the Chiang Mai Initiative that was set up in 2000 in a bid to prevent a repeat of the financial crisis that rocked the region a decade ago. The ministers pledged "to further strengthen our efforts" to develop a multilateral system of currency swaps that could be quicker and more effective than arrangements between individual countries.

Southeast Asian nations with small, open economies such as Thailand are seen as particularly exposed to currency volatility, while Japan and China have huge foreign exchange reserves to prevent against speculative attacks.

But the statement made no mention of Japan's desire for China to make its currency more flexible and to allow an appreciation of the yuan against the dollar.

The talks between Japanese Finance Minister Koji Omi, Chinese Finance Minister Jin Renqing and South Korean Finance and Economy Minister Kwon O Kyu were held on the sidelines of an Asian Development Bank meeting in Kyoto. Finance ministers from the Association of Southeast Asian Nations (ASEAN) as well as China, Japan and South Korea also meet on April 28 to discuss how to bolster their defenses against a possible repeat of the 1997 regional financial crisis. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Copyright Agence France-Presse, 2007

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