Korea and Japan will let their currency swap agreement come to an end without efforts to renew it amid persistent tensions.
The Ministry of Strategy and Finance said Monday that the two countries decided to let the US$10 billion agreement expire on Feb. 23.
Currency swap deals allow each side country to use its respective currency to obtain U.S. dollars from the other at a pre-determined rate in case of an emergency.
The deal with Japan began in 2001 covering $2 billion and grew to $70 billion by 2011 in the wake of the 2008 global financial crisis.
The amount began to shrink as Seoul-Tokyo ties chilled following former president Lee Myung-bak's visit to the easternmost islets of Dokdo in August 2012, and the two sides did not extend a swap agreement of $57 billion when it expired in October of that year.
Another swap agreement for another $3 billion also expired in July 2013 and the remaining $10 billion expires next week.
Diplomatic ties have chilled to near-zero due to a lurch to the far right by Japanese Prime Minister Shinzo Abe's government. Inflammatory comments by Japanese politicians on sensitive issues like Korean women who were forced to serve as sex slaves for Japanese soldiers during World War II consistently soured the mood.
But the finance ministers of both countries stressed that the swap deal is coming to an end because it is no longer needed, and vowed to resume it if necessary.
The ministry here said the end of the agreement will not have a huge impact on the Korean economy. Korea has ample ammunition to shield itself against a sudden exodus of capital since its foreign exchange reserves stood at $362.2 billion as of end January, up $100 billion since the height of the global financial crisis in 2008.
During the 1997 Asian financial crisis, Korea's foreign reserves stood at a paltry $20.4 billion.
Korea also has currency swap deals with China (360 billion yuan-W64 trillion), the United Arab Emirates (20 billion dirhams-W5.8 trillion), and Malaysia (15 billion ringgit-W5 trillion) and access to another $38.4 billion through the Chiang Mai Initiative Multilateralization swap deal.
The combined amount is $120 billion.
