[INTERVIEW] 'Abandon ideology-driven politics to create dream team'

Waseda University professor Yukiko Fukagawa speaks during the Institute for Global Economics (IGE) Distinguished Lecture Forum at the Seoul Foreign Correspondents' Club office at Korea Press Center in Seoul in this July 2019 file photo. / Courtesy of IGE

Japanese economist considers Moon's economic team 'unprofessional'

This is the fifth in a series of interviews with global economic experts analyzing the economic fallout of the COVID-19 pandemic and possible countermeasures against a global recession. ― ED.

By Park Jae-hyuk

Waseda University economist Yukiko Fukagawa advised the Moon Jae-in administration to hire economic and diplomatic experts who have no ideological bias, if it wants to overcome the financial crisis that is part of the fallout from the ongoing coronavirus pandemic.

With over three decades experience studying the Korean economy, the Japanese professor said the government should "abandon ideology-driven politics to create a dream team of professionals, especially in economic affairs and foreign relations."

In a recent email interview with The Korea Times, she indicated that Moon's apparent preference for ideology rather than professionalism could make it difficult for the country to pursue international cooperation amid the present crisis, deepening nationalism across East Asia.

"Exuberance for nationalism has only narrowed the policy options for Korea," she said.

Her comments came as a debate has heated up here over whether or not cooperation with Japan is needed to mitigate intensifying volatility in the foreign exchange market.

Calls have emerged for the resumption of a bilateral currency swap agreement with Japan, which ended in 2015 and was not renewed because of ongoing historical disputes which eventually developed into a "trade war."

Demands have grown further since March 19, when the United States Federal Reserve established dollar swap lines with nine central banks, including the Bank of Korea (BOK).

Against this backdrop, Prime Minister Chung Sye-kyun told foreign correspondents March 27 that it would be "right" to bring back a currency swap deal with Japan, admitting it made a "big contribution" to the currency market when it was previously in place.

BOK Governor Lee Ju-yeol also told reporters that a currency swap with Japan would be "meaningful."

Skepticism about currency swap

Fukagawa however doubted the feasibility of the reestablishment of this arrangement.

"Making the commitment is politically unfeasible for both of us," she said.

"The currency swap unfortunately has become a symbol of anti-Korea emotion; it would be very difficult for Japanese politicians to approve former Chiang Mai Initiative (CMI) type of cooperation now."

Based on the CMI, a multilateral currency swap arrangement among the ASEAN+3 member countries, Korea and Japan signed a bilateral currency swap deal, which ― up until 2015 ― enabled both of them to receive up to $10 billion from their counterparts in exchange for their own currencies.

Regarding this issue, the economic expert criticized Korean policymakers for misleading the Korean people and media.

"I know Korea has many professionals and well-trained economists, but they stopped commenting on this issue probably from the fear of being involved in ugly politics," she said.

Fukagawa also considers resuming the currency swap deal with Japan is not the right answer for Korea to cope with the difficulties arising from the pandemic.

"I suppose in a situation like today of triple fall in Korea, Japan's commitment won't help the situation," she said.

According to the former adviser to the Committee for Foreign Exchange at Japan's Ministry of Finance, the nature of the Fed's measure this time is different from the currency swap network led by Japan just after the 1997 Asian financial crisis.

"First as far as I know, the Fed's commitment of $60 billion cannot be used to defend the Korean won, for it is just intended to smooth out Korean banks liquidity, while Japan's CMI was to stop a currency crisis directly," she said.

The professor stressed the economic fallout of COVID-19 is affecting the whole world, not just Asian nations, which were among only a few victims of the 1997 crisis.

Considering the unprecedented crisis at the moment, she thinks that Japan cannot afford to offer U.S. dollars to Korea anymore.

"So the priority for the basic currency economies, including Japan, lies absolutely in preventing global liquidity problems, not in trying to help someone," she said.

"This is why the Fed is cooperating with the European Central Bank, Bank of Japan and others."

She noted the renewal of a direct Korean won and the Japanese yen currency swap arrangement that ended in 2013 would also be "meaningless" for Korea, because the ratio of yen settlements has shrunk "substantially," even in Korea-Japan trade.

Known for her keen interest in economic development in East Asia, especially in Korea, Fukagawa served as a visiting fellow at Yonsei University in 2015 and previously at the Korea Institute for Industrial Economics and Trade in 1987.

The professor, who earned a Master's at Yale University and a doctorate from Waseda, was also a visiting fellow at Cambridge University in 2014.