Koo Yun-cheol: “Serious concern over sharp won-yen drop… Korea and Japan to respond jointly if needed”

10th Korea-Japan Finance Ministers’ Meeting

Met with Japan’s Finance Minister Katayama in Tokyo

Appropriate measures against excessive FX volatility

Korea-Japan currency swap to be discussed later

Deputy Prime Minister Koo Yun-cheol, who also serves as Minister of Finance and Economy, said on the 14th that the government will consider joint action with Japan’s fiscal authorities on the exchange rate and an extension of the bilateral currency swap.

In a briefing with correspondents held at Japan’s Ministry of Finance in Tokyo, Koo said regarding the steep fall in the value of the Korean won and Japanese yen that he would “consult with the (Ministry of Finance) if (joint) verbal intervention is needed.” He added, however, that “with the dollar strong and both the won and yen weakening due to external factors (the war in the Middle East), how quickly the Middle East situation stabilizes is more important.” Ahead of the briefing, Koo held the 10th Korea-Japan finance ministers’ meeting with Japan’s Finance Minister Satsuki Katayama and confirmed the need to take appropriate measures against excessive exchange-rate volatility and disorderly moves.

The two countries’ fiscal authorities reaffirmed the importance of bilateral financial cooperation—including the currency swap—and the regional financial safety net, and agreed to discuss additional improvements going forward. The two sides signed a US$10 billion currency-swap agreement in December 2023. It is entirely dollar-based rather than an arrangement in which the won and yen are exchanged. The term is three years and is set to expire in November this year. On extending the deal, Koo said, “We need to look at the situation comprehensively,” adding that he would “discuss (the swap’s) size and term with Japan.”

A day earlier, Koo met with major Japanese institutional investors to explain plans for Korean government bonds to be included in the World Government Bond Index (WGBI). He promoted the attractiveness of investing in Korea to Japanese capital, a major force in the bond market. Katayama praised Korea’s efforts to strengthen FX and capital-market fundamentals and create a more advanced investment environment to improve convenience for Japanese institutional investors. Koo also asked for cooperation on the Korea Investment Corporation’s (KIC) expansion into Japan, to diversify Korea’s investment portfolio.

Koo and Katayama also discussed heightened volatility in the two countries’ financial markets stemming from the Middle East situation and pledged close cooperation to ensure stable energy supplies. They also discussed ways to cooperate in the artificial intelligence (AI) sector to support growth in both countries. Koo said, “Korea has strengths in areas such as high-bandwidth memory (HBM), while Japan excels in (robot) joints,” adding, “If we also work with U.S. software, we can secure a global edge.” On economic security, he added that the two countries agreed to join forces to diversify supply chains for core minerals such as rare earths.

Tokyo=Correspondent Kim Il-gyu black0419@hankyung.com