TOKYO (MNI) – Japanese Finance Minister Jun Azumi said Friday that
his government has not yet decided on whether it should go ahead with a
plan to buy South Korean government bonds amid a long-standing bilateral
territorial dispute.

Japan and South Korea agreed in May to mutually hold each other’s
government bonds in a bid to help stabilize regional financial markets.

Azumi also told reporters that Tokyo will decide whether to extend
its currency swap agreement with South Korea after it sees a response
from Seoul about the territorial row and remarks by South Korean
President Lee Myung-bak regarding Japan’s wartime past.

Tokyo protested Lee’s visit earlier this month to Takeshima — or
Dokdo in Korean — a group of islets between the two countries
controlled by South Korea but claimed by Japan.

Japanese Prime Minister Yoshihiko Noda has also urged Lee to
apologize for controversial remarks about Emperor Akihito.

Lee said the emperor would not be welcome in South Korea without a
direct acknowledgment of guilt for Japan’s colonial rule of the Korean
Peninsula from 1910 to 1945. Akihito acceded to the throne in 1989.

Last year, Tokyo and Seoul increased the currency swap agreement to
$70 billion from $13 billion to ensure South Korea had ample dollar
funds amid global financial market turmoil caused by the European debt
and political crisis.

Azumi has said Japan responded to South Korea’s request for help.

Of the $70 billion, the Bank of Japan agreed with the Bank of Korea
last October to boost their yen-won swap accord to a maximum $30 billion
U.S. dollar equivalent from $3 billion, amid fears that the European
debt crisis could push the global economy back into a recession.

The temporary increase is effective until the end of October this
year.

At the height of the European crisis, some lenders in emerging
economies — including South Korea, Thailand, Indonesia and Brazil —
found that European banks they rely on for funding were withdrawing
their loans to tackle their own credit risks.

The yen-won swap agreement, which is designed for a non-crisis
situation, took effect in May 2005, with a view to stabilizing regional
financial markets through supplying short-term liquidity.

tokyo@marketnews.com
**MNI Tokyo Newsroom: 81-3-5403-4833 **

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