Karthik007’s Blog

The leaders of three of Asia’s biggest economies have vowed to work more closely together to reduce the damage caused by the global financial crisis.

Japan and China’s prime ministers and the South Korean president – meeting in Japan – agreed to boost trade and greatly increase currency swaps.

China’s Wen Jiabao called the summit, the first of its kind, a “milestone”.

He said such co-operation would “have real significance” as the crisis impacted on economies around the world.

The North Asian nations, former enemies, have held talks on the sidelines of international meetings, but this is their first independent trilateral summit.

“It is quite a milestone to hold a stand-alone China-Japan-South Korea summit,” Mr Wen said as he opened talks with Japanese Prime Minister Taro Aso and South Korean President Lee Myung-bak in the southern city of Fukuoka.

Swap facilities

The Duncan Bartlett in Tokyo says China, Japan and South Korea are closely intertwined economically and their leaders regard co-operation with their neighbours as a vital means of lifting the East Asian region out of its current financial malaise.

In a joint statement, the leaders said that Asia was “expected to play a role as the centre of world economic growth in order to reverse the downward trend of the world economy”.

The countries said they planned to increase the amount of money swapped between them through the Chiang Mai Initiative – a move which should benefit South Korea especially, as the won has lost a third of its value since the start of the year.

Our correspondent says the nations believe the swaps will prevent a repeat of the situation 11 years ago when sudden slides in currency values triggered a major financial crisis in Asia.

The three men also called for an urgent injection of capital into the Asian Development Bank.

Ahead of the talks, the South Korean central bank announced in a statement that it had increased its bilateral swap facility with the Bank of Japan to $20bn (£13bn), and a similar facility with the People’s Bank of China to $26bn.

Japan is also trying to put aside its past differences with China, partly because it was trade between them that helped pull Japan out of its last prolonged recession during the 1990s, our correspondent says.

All three countries – which account for 75% of the region’s economy and two-thirds of its trade – have announced major individual economic stimulus packages in recent months.

On Friday, the Japanese government increased by 23 trillion yen ($255bn) its stimulus plan, more than half of which will be used to bring stability to the financial markets. It follows a 27 trillion-yen package in October.

“This is a great global recession which comes once in a hundred years,” Mr Aso said. “But by taking appropriate measures without any delay, we can minimise the impact.”

Earlier this week, China revealed that its exports had fallen for the first time in seven years. However, it still reported a record monthly trade surplus.

Beijing launched a four trillion yuan ($586bn) stimulus plan last month, and on Wednesday pledged to boost public spending and cut taxes.

South Korea, the hardest hit by the financial crisis, meanwhile offered $130bn of guarantees on foreign-currency borrowing and liquidity to its banks.

At a separate meeting on Saturday, the South Korean and Japanese leaders condemned North Korea for showing an “unco-operative attitude” in the latest round of six-party talks aimed at dismantling its nuclear disarmament programme in Beijing this week.