During recent financial discussions in Tokyo, the governments of Japan and South Korea agreed to revive a currency swap. This comes after a hiatus of eight years. The agreement allows for the exchange of foreign currencies in times of financial crisis.
With bilateral relations rapidly improving, the agreement resolves lingering concerns in the economic sphere. It could well prove a milestone in deepening economic ties between the two countries.
Moving Bilateral Relations Forward
Even as China pursues economic and military hegemony in East Asia, North Korea continues to develop nuclear weapons and missiles. It is therefore significant that Japan and South Korea are strengthening their relationship. Moreover, they are doing so not only in terms of diplomacy and security but also on the economic front.
Our two countries should now strive to forge new bilateral ties. We have learned well enough the lessons from Seoul's previous sterile anti-Japan stance that only exacerbated bilateral confrontations.
The Currency Swap Deal
This new agreement applies in the case of a financial crisis in either country. It calls for United States dollars and other currencies to be made available to deal with currency depreciation. It also addresses other problems associated with a financial crisis.
Since Japan has access to as many dollars as it needs under an existing agreement with the US, it is fair to see that the agreement assumes a crisis in South Korea.
As a matter of fact, South Korea also has sufficient foreign currency reserves at present. Therefore, there was no imminent need for an agreement. Nonetheless, the two countries moved to restart the program because of its significance as a symbol of improved economic relations.
Why the Original Deal Fell Apart
The agreement was first signed in 2001 after South Korea was battered by the Asian currency crisis. However, the relationship was not renewed in 2015. At that time, bilateral relations had deteriorated. The problems followed former President Lee Myung-bak's 2012 landing on Takeshima island and other events.
After that, anti-Japanese actions, such as the "comfort women" issue, raised new obstacles. The agreement could not be resurrected until President Yoon Suk-yeol recently moved to improve relations with Japan.
Progress on Several Fronts
On June 27, the Japanese government approved a Cabinet decision to redesignate South Korea as a "Group A Country" (formerly "White List") that qualified countries for preferential export treatment. It had earlier been excluded from the same category for inadequate evidence of controls on sensitive imports.
Earlier in March the Japanese government eased measures that had tightened controls on exports of semiconductor materials to South Korea. In both cases, the situation returns to how it was before 2019.
At that time Japan took these measures to suspend special export control treatment due to a lack of trust in South Korea. The Moon Jae In administration would not communicate with Japan on its concerns and adopted an increasingly anti-Japanese stance.
That Japan has lifted these restrictions at this point no doubt reflects progress in establishing the legal system Japan had been seeking from South Korea in relation to control of sensitive materials. Another major reason is that genuine dialogue between the two sides now seems possible.
Deal with Remaining Issues
South Koreans should bear in mind that anti-Japanese sentiment can only have negative effects on their economy as well.
The Yoon administration should now deal sincerely with yet-to-be-resolved issues. Among those is the radar lock-on of Self-Defense Force patrol aircraft by the fire control radar of a South Korean vessel.
Unless Seoul shows a willingness to address such issues, it will not be possible to continue to improve relations. That includes the economic sphere.
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