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South Korea, Japan to Set Free-Trade Talks
October 19, 2011

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The leaders of South Korea and Japan agreed on Wednesday to expand the size of a currency swap deal and push to resume stalled free-trade negotiations, as Tokyo returned looted Korean royal documents in a goodwill gesture.

Seoul and Tokyo have close economic ties and are key US allies in Asia, but many older Koreans still harbor deep resentment against Japan over its 35-year colonial occupation of Korea that ended in 1945. Ties suffered this year because of a territorial dispute and differences over the occupation.

On Wednesday, the leaders of the two countries agreed in a meeting in Seoul that they would expand the size of their South Korean won and Japanese yen currency swap scheme to $70 billion from the current $13 billion as a backstop against global economic turmoil.

Swaps allow one central bank to borrow a currency from another, offering an equivalent amount of its own as collateral.

“We reached the agreement... based on a belief that we should strengthen our financial and currency cooperation to preemptively stabilize the financial market as the world’s economic uncertainty is deepening,” South Korean President Lee Myung-bak said at a news conference with Japanese Prime Minister Yoshihiko Noda.

Lee said that South Korea and Japan also agreed to bolster efforts to resume stalled negotiations on signing a free-trade agreement.

The two countries began free-trade talks in 2003, but the negotiations remain stalled over trade barriers on agriculture and fish. The South Korea-Japan deal drew renewed attention after the US Congress ratified a free trade accord with South Korea this month. That deal still needs approval from South Korea’s parliament.

In an effort to improve ties, Noda repatriated five volumes of Korean royal documents that his country took away during its rule.

The documents are part of 1,205 historical volumes that Japan agreed to give back to South Korea when Noda’s predecessor, Naoto Kan, met with Lee last year. Noda told Lee that he would seek to return the remaining books at an appropriate time.  AP