South Korea, Japan and China agreed to set up regular meetings to consult on issues facing the regional economy and work more closely to help counter challenges stemming from the global financial turmoil.
Strengthened cooperation was necessary “to cope with the situation, in an effective manner, where the world economy and the financial markets are facing serious challenges,” South Korean President Lee Myung Bak, Japanese Prime Minister Taro Aso and Chinese Premier Wen Jiabao (溫家寶) said in a joint statement.
The leaders met yesterday in Fukuoka, Japan.
The summit comes a day after South Korea agreed on bilateral currency swap accords with Japan and China, the world’s biggest holders of foreign reserves, in an effort to ensure financial stability in Asia. South Korea and Japan will increase an existing won-yen arrangement to US$20 billion while China and South Korea agreed on an accord worth 38 trillion won (US$28 billion).
“Asian countries are expected to play a role as the center of world economic growth in order to reverse the downward trend of the world economy and return it to the path of sustainable growth,” the leaders said in the statement provided by the South Korean presidential office. “Our economies are dynamic, resilient and closely interlinked.”
South Korea’s Lee pursued the swap arrangements to secure access to funds and prevent a repeat of the 1997 currency crisis that caused the won to plunge and required a US$57 billion bailout from the IMF.
The won rose 7.5 percent against the dollar this week, completing the best weekly gain since the end of October, partly in anticipation of Friday’s announcements.
“The currency swap increase provides further funds in case of a liquidity shortage and a financial emergency,” said Oh Suk Tae, an economist with Citigroup Inc in Seoul. “The three nations want to get together to solidify their cooperation so they can better counter global turmoil.”
South Korea, Japan and China yesterday agreed to facilitate trade and investment in the region and “confirmed the significance of measures that will reinforce growth and expand domestic demand,” the statement said.
The countries will “refrain from raising new barriers to investment or to trade in goods and services, from imposing new export restrictions,” it said.
The three nations account for 74 percent of East Asia’s GDP and two-thirds of regional trade volume, the Japanese foreign ministry said.
The leaders said they will work with the members of ASEAN to speed up a plan agreed earlier this year that extends the so-called Chiang Mai Initiative, a deal allowing countries to lend each other money at favorable terms if help is needed to support exchange rates.
Finance ministers from 13 Asian nations, including South Korea, Japan and China, agreed in May to create a pool of at least US$80 billion in foreign-exchange reserves.
The leaders also reiterated a commitment to strengthen monitoring of the regional economy and financial markets, the statement said yesterday.
China wants contributions to the US$80 billion fund to be made in accordance with the size of each country’s foreign-exchange reserves while Japan wants to use the value of GDP as a measure, South Korea said earlier this year. The remaining 20 percent of the fund will be provided by the 10 members of ASEAN.