TOKYO (AFP) – Japan was moving to end a 14-year-old, $10-billion currency swap accord with South Korea, as the neighbouring US allies fail to mend their soured bilateral ties, reports said Saturday.
Tokyo was expected to announce the decision in the coming week with the current pact expiring on February 23, said major media, including the Nikkei, the Asahi Shimbun and Kyodo News.
“Deterioration of the Japan-South Korea relationship is seen to have affected the decision,” the Asahi said.
Under the contract, originally agreed in 2001, each country can obtain dollars by giving its own currency to the other at times of financial emergencies.
The two sides routinely adjusted the size and details of the agreement, which expanded to as much as $70 billion in 2011, after a series of global crisis, including the collapse of investment bank Lehman Brothers and the eurozone debt crisis.
The Nikkei newspaper added that the need for the accord has been reduced as South Korea’s foreign currency reserves have increased 18 times more than the level seen after the 1997 Asian currency crisis.
In October last year, Japanese finance minister Taro Aso said the pact would not be renewed unless South Korea requested it.
The Japan-South Korea relations have long been tense due to various disputes linked to Japan’s 1910-45 rule over the Korean peninsula.
The bilateral ties plunged again in 2012 after then-South Korean President Lee Myung-bak travelled to disputed islands in the Sea of Japan (East Sea).
“A clash of the egos between Japan and South Korea resulted in the decision not to renew it,” a Japanese official told the Asahi Shimbun.
The Nikkei added that the two countries could re-sign the deal again when necessary.