South Korea and Japan agreed to expand their currency swap volume to US$70 billion from the current $13 billion and strengthen working-level discussions on a possible free trade agreement between the two neighbors, their leaders announced Wednesday.
The currency deal was the most tangible agreement from the summit between South Korean President Lee Myung-bak and Japanese Prime Minister Yoshihiko Noda, which also covered improving bilateral relations that are often strained over issues related to Japan's 1910-45 colonial rule.
"We agreed that it is important to strengthen currency cooperation in order to preemptively stabilize financial markets amid deepening uncertainties in the global economy," Lee said during a joint news conference.
Noda said the deal is expected to accelerate stabilization in the financial markets.
Under the agreement, the two nations will boost their $3 billion won-yen swap facility to $30 billion and add a new $30 billion U.S. dollar-local currency arrangement. A separate $10 billion currency swap line will be maintained under the Chiang Mai Initiative aimed at cushioning regional currencies from global turmoil.
The Japanese leader arrived in Seoul on Tuesday for a two-day trip, his first to South Korea since taking office last month. Wednesday's summit will be the second face-to-face meeting between Lee and Noda as they met on the sidelines of the U.N. General Assembly last month.
Officials said that Noda first offered to visit Seoul, a move seen as an attempt by Tokyo to fix relations with Seoul that were strained when Tokyo raised a series of territorial claims over South Korea's easternmost islets of Dokdo earlier this year.
In a friendly gesture, Noda brought with him five volumes of centuries-old, royal Korean books seized during its 1910-45 colonial rule of Korea, the first batch of a total of 1,205 volumes that Japan has pledged to return to Seoul to back up last year's apology by former Prime Minister Naoto Kan for the colonial rule.
Noda returned the books to South Korea during the summit.
On bilateral relations, Lee stressed that the two countries should move forward "without forgetting history" and former colonial ruler Japan should make greater efforts to resolve issues related to the sad past.
"I remarked many times that moving toward the future without forgetting history is the basis for Korea-Japan relations, and I emphasized that Japan needs to make active efforts over issues stemming from" the 1910-45 colonial rule, Lee said during the news conference.
Noda said that "various problems" may happen between the two countries, but from a broader viewpoint, the two sides should work together to prevent those issues from negatively affecting their ties.
"Various difficult problems have happened so far, but as I said before, we should have a broader viewpoint and pull wisdom to make sure they won't have bad effects on relations between the two countries," he said.
The summit was watched for signs of whether there would be any change in Japan's rejection of South Korea's demand that Tokyo compensate the aging Korean women, known euphemistically as "comfort women," who were forced into sexual slavery to serve Japanese soldiers during World War II.
But Noda said the issue was not on the table.
On a possible free trade deal, the two leaders said they agreed to strengthen working-level discussions to restart formal negotiations on the issue. Seoul and Tokyo launched official free trade negotiations in 2003, but the talks have been stalled for years amid concern in South Korea that such a deal would widen its trade deficit with Japan.
"I have a principle that it is good to have an FTA with Japan at an early date if possible," Lee said. "However, an FTA should be a win-win for both nations and there could be (different) views by industries. After coordinating these well, I think we have to positively seek a Korea-Japan FTA if possible."
Lee thanked Japan for inviting him to make a state visit but did not make a firm commitment.
"It is true that there are outstanding issues between Korea and Japan. I said there are difficulties. I believe Prime Minister Noda can work more actively than anybody else to resolve them," Lee said. "On a state visit, I think I can go at the most appropriate time after proper discussions between the two countries."
South Korea has apparently been reluctant about Japan's invitation after their relations were strained earlier this year over Japan's renewal of territorial claims to Dokdo. A presidential official said that relations with Japan should become "a little more friendly" before Lee can make such a visit.
During the summit, Lee cracked a joke about Noda's self-given nickname, a loach, asking the Japanese leader to serve him loach soup if he visits Japan in the future, and Noda agreed to do so, according to the presidential official who spoke on condition of anonymity.
Since taking office, Noda has compared himself to a loach, underscoring his commitment to working hard like the humble mud fish. After arriving in Seoul on Tuesday night, Noda had dinner, including loach soup, at a Korean restaurant, the official said.