Strategy and Finance Minister Bahk Jae-wan, fifth from left, and Bank of Korea Gov. Kim Choong-soo, second from left, pose with Japanese Finance Minister Jun Azumi, fourth from left, Bank of Japan Gov. Masaaki Shirakawa, third from left, Chinese Vice Finance Minister Li Yong, right, and People’s Bank of China Deputy Gov. Hu Xiaolian, left, before having a meeting at the Diamond Hotel in Manila, Thursday. The three countries agreed to promote their investments in one another’s sovereign bonds to prevent a liquidity crisis in the region. / Courtesy of Ministry of Strategy and Finance

Korea, China, Japan agree to invest in state bonds

By Kim Jae-won

MANILA ― Korea, China and Japan reached an agreement to increase investment in each other’s sovereign bonds to provide the economies stronger protection from another potential turmoil.

The agreement was reached after a meeting of financial ministers and central bank governors of the country that was held on the sidelines of the annual Asian Development Bank (ADB) congress hosted at Filipino capital Thursday.

``We agreed to promote investment by the foreign reserve authorities in one another’s government bonds, further strengthen our cooperation, including the information sharing,’’ the countries said in a joint statement.

The countries had previously agreed last year to enlarge bilateral currency swaps, designed to stabilize their financial markets faster when facing liquidity crisis.

The 12th Trilateral Finance Ministers' and Central Bank Governors' Meeting between Korea, China and Japan proceeded the ministerial and central bankers’ meeting of the Association of Southeast Asian Nations (ASEAN) plus three, which again, refers to Korea, China and Japan.

The meetings will provide policymakers the platform to exchange views on a variety of topics, including macroeconomic issues and regional policy coordination.

In terms of buying others’ sovereign bonds, the countries promised to have working-level officials further discuss the exact methods and procedures of the cooperation.

The latest trilateral meeting was chaired by Japanese Finance Minister Jun Azumi and was the first time to feature central bankers. Korea was represented by Strategy and Finance Minister Bahk Jae-wan and Bank of Korea (BOK) Governor Kim Choong-soo.

The policymakers said they will continue to implement appropriate macroeconomic policies, including promoting fiscal soundness, expanding domestic demand, increasing employment, and accelerating structural reforms in order to achieve strong, sustainable, and balanced economic growth.

The BOK said that the agreement illustrates increased economic status of Korea in the region.

``Japan and China showed their interests in Korean sovereign bonds, which means that they do not link Korea with emerging junk funds,” said BOK official Hong Seung-je.

However, Hong said that the plans for increasing the issuance of sovereign bonds should be endorsed by the lawmakers of each country. Expansion of national budgets of the countries should be followed to enable the agreement, he added.

Another BOK official said that sovereign bonds investment will contribute to developing bonds market in the region and stabilization of financial market.

“The agreement will prevent drastic change in the region provoked by excessive financial outflow in the three countries,” said Cho Seok-bang, a director from the BOK.

They also looked forward to seeing the concrete outcomes regarding ASEAN+3 Financial Cooperation, including strengthening the Chiang Mai Initiative Multilateralization in its size and function and enhancing the Asian Bond Markets Initiative.