People's Bank of China, Japan Sign Currency Swap Deal

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Last updated at: (Beijing Time) Friday, March 29, 2002

People's Bank of China, Japan Sign Currency Swap Deal

The central banks of Japan and China signed a currency swap agreement Thursday aimed at ensuring exchange market stability. Japan has already concluded similar currency swap agreements --- which help countries deal with short-term cash problems --- with South Korea, Malaysia, Thailand and the Philippines.

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Currency swap agreement signed

The central banks of Japan and China signed a currency swap agreement Thursday aimed at ensuring exchange market stability, the Bank of Japan said.

The Bank of Japan and the People's Bank of China have set an upper transaction limit of 3 billion worth of Japanese yen or Chinese yuan on the swaps, the Bank of Japan announced.

The agreement is in line with an initiative to set up a network of currency swap agreements among the 10 members of the Association of Southeast Asian Nations and Japan, South Korea and China.

Those countries agreed in 2000 to increase monetary cooperation in attempt to prevent financial crises like the one that battered East Asia in 1997 and 1998.

The Association or Southeast Asian Nations, or ASEAN, comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Japan to provide US dollars if their currency plunge

Japan has already concluded similar currency swap agreements --- which help countries deal with short-term cash problems --- with South Korea, Malaysia, Thailand and the Philippines.

Under those accords, Japan is expected to provide U.S. dollars to the other countries' central banks if their currencies plunge.

China, however, has large holdings of U.S. currency --- so under Thursday's agreement, Japan is expected to supply the Chinese central bank with Japanese yen if Beijing needs to defend its currency by selling yen for Chinese yuan.

People's Bank of China Governor Dai Xianglong is visiting Tokyo for the conclusion of the swap agreement and talks with Bank of Japan chief Masaru Hayami.

FM Spokesman on Devaluation of Japanese Yen

China hopes the Japanese government will assume a responsible attitude and prevent the depreciation of currencies in the rest of Asia because of the devaluation of the Japanese yen, said a Chinese Foreign Ministry spokesman on January 12.

Sun said that Japan is Asia's biggest economy with a strong economic strength. The continued devaluation of the Japanese yen will have an adverse impact on the economic development and financial stability in Asia, he said. >>details

Source: Agencies

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