Central bank governors meet for trilateral talks

The central bank governors of Korea, Japan and China met in Seoul to explore the topic of macro-leverage, although experts suspect that the discussion may also include currency swap deals between the countries.

Experts expect that the event will allow the governors to discuss currency swap deals as the bilateral agreements with China and Japan are either soon to expire or suspended.

Whether the Korean and Chinese governors will discuss the bilateral agreement, due to expire next month, has caused a lot of speculation against the backdrop of the ongoing tension over the deployment of the U.S.-led Terminal High Altitude Area Defense antimissile system. The Bank of Korea denied that the currency swap would be part of the discussions.

“The currency swap was not on the agenda for the meeting. This is more of a private annual gathering where the governors share their experience and freely discuss issues,” said Lee Kang-one, head of the financial cooperation team at the Bank of Korea.

“Macro-leverage is a shared common interest for all three nations. The governors will explore the impact of different types of debts - household, corporate and government,” Lee said.

The bank said that Bank of Korea Governor Lee Ju-yeol, People’s Bank of China Governor Zhou Xiaochuan and Bank of Japan Governor Haruhiko Kuroda planned to have a banquet on Wednesday and discussions today.

The central bank will likely refrain from revealing the results of the meeting, as has been the case for years.

But local media outlets and market observers suspect that it is plausible for Lee and Zhou to have a talk about the soon-to-mature $56 billion agreement during the gathering.

Since China accounts for nearly half of the $122 billion worth of currency swaps Korea has with other countries, the Korean government hopes to lengthen the deal.

Both the Ministry of Strategy and Finance and the Bank of Korea said that Korea and China have commenced working-level discussions.

Song In-chang, deputy minister of international affairs at the Ministry of Strategy and Finance said in January that the two governments “have in principle agreed to extend the currency swap.”

But growing tensions surrounding the deployment of Thaad, a system that China sees as a security threat, have raised a question mark over whether the extension will be possible or not.

In a report submitted to the national assembly in June, the Bank of Korea noted that the negotiation process could be affected by the diplomatic issues, adding that it will take cautious steps.

It is less likely that the currency swap will be discussed with the Japanese governor after Japan unilaterally suspended talks on the deal in January over a statue commemorating women forced to work as sexual slaves under Japanese colonial rule.

At the time, the Korean government expressed regret but made it clear that it has no plan to ask for a renegotiation.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]