ADB summit forges deal on currency reserves
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Japan agreed to increase the amount of currency reserves swaps with Korea and Malaysia to strengthen its safeguard against a repeat of the rapid fall of Asian currencies that sparked a regional recession in 1997-98.
Japan and Korea will raise the amount of currencies swapped with each other to $7 billion from $5 billion, and Japan and Malaysia will increase their currency swap to $3.5 billion from $2.5 billion, officials announced yesterday at the Asian Development Bank meeting at the Hawai'i Convention Center.
Japan and Thailand will swap $3 billion of their currencies, and negotiations are under way with the Philippines and China, Japan's Ministry of Finance said in Tokyo.
The pacts are meant to avert another Asian financial crisis like the one in 1997 and 1998, which started with a devaluation of the Thai baht. Central banks would be able to draw on the reserves to support their currencies.
Japan, China, Korea and the Association of Southeast Asian Nations agreed a year ago to establish the network of currency swaps and repurchase agreements.
The system effectively allows the countries to borrow U.S. dollars from Japan to shore up currency reserves.
