As the won and the yen fell simultaneously in the wake of the recent war in the Middle East, the finance ministers of South Korea and Japan decided to strengthen cooperation to stabilize the foreign-exchange market. The two countries also appear likely to discuss extending the Korea-Japan currency swap agreement that expires in November.

On the 14th at the Japanese Ministry of Finance in Tokyo, Deputy Prime Minister and Minister of Economy and Finance Gu Yoon-cheol held the 10th Korea-Japan finance ministers meeting with Japanese Finance Minister Satsuki Katayama and discussed ways to expand economic and financial cooperation. This was the first finance ministers meeting since the inauguration of new governments in the two countries.

In a joint press release, the two ministers stated, “We express serious concern about the recent rapid depreciation of the won and the yen.” They also agreed to respond appropriately to excessive volatility and disorderly movements in exchange rates.

After the meeting, Gu told reporters in Tokyo, “Amid a strong dollar, the euro, the yen, and the won are depreciating,” and said, “Stabilizing the situation in the Middle East is important, but if necessary we can make verbal intervention (in the exchange rate).” He added, “The pace of depreciation of the won and the yen seems similar,” and said that, if needed, the two countries can coordinate a joint response to stabilize the foreign-exchange market.

In particular, they agreed to continue discussions on extending the Korea-Japan currency swap that expires in November this year. The two countries stated, “We reaffirmed the importance of bilateral financial cooperation, including the Korea-Japan currency swap, and the regional financial safety net, and agreed to continue discussions on additional measures for improvement going forward.”

In December 2023, South Korea and Japan concluded a three-year currency swap worth $10 billion. Under the arrangement, South Korea posts won and Japan posts yen, while the currency actually lent is unified as dollars. The swap allows the parties to secure dollar liquidity in emergencies.

Gu said, “We intend to consult with Japan on the size and the duration going forward,” adding, “Japan also said it would engage actively in the consultations.”

The two sides also held in-depth discussions on the recent situation in the Middle East and financial market volatility, and shared the view that close cooperation is needed to ensure a stable energy supply. In the economic and security fields, they agreed to strengthen cooperation to diversify supply chains for critical minerals.

The two countries agreed to hold the 11th Korea-Japan finance ministers meeting in South Korea within one year. The Korea-Japan finance ministers meeting began in 2006.