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1 of 2. Ministers and governors pose for a picture after the 15th ASEAN plus 3 Finance Ministers and Central Bank Governors' meeting in Manila May 3, 2012. China, Japan and South Korea agreed on Thursday to boost cross-investment in government bond markets, worth nearly a combined $15 trillion, in a move that will better prepare the countries to protect their financial markets from external shocks.
Credit: Reuters/Romeo Ranoco
By Choonsik Yoo
MANILA |
Thu May 3, 2012 3:54am EDT
MANILA (Reuters) - China, Japan and South Korea agreed on Thursday to boost cross-investment in government bond markets, worth nearly a combined $15 trillion, in a move that will better prepare the countries to protect their financial markets from external shocks.
The three economic powers sought a formal agreement, a rare one on securities investment, to ease mutual concerns about possibly massive cross-border fund flows and because their capital markets are at different levels of development.
The move also comes as many of the heavily exposed economies in East Asia have struggled to find ways to avoid a repeat of the 1997/98 Asian financial meltdown and other turmoil that has struck during times of crises originating outside the region.
"We agreed to promote the investment by the foreign reserve authorities in (each other's) government bonds, further strengthen our cooperation, including information sharing, and thereby enhance the regional economic relationship among the three countries," they said in a joint statement issued after a meeting of finance and central bank chiefs in Manila.
Local currency-denominated government bonds in the three countries amounted to $14.61 trillion at the end of 2011, with Chinese and Japanese bonds accounting for 97 percent of the total, Asian Development Bank (ADB) data showed.
"We agreed to have working level officials of the three countries further discuss the methods and procedures of the cooperation," they added, as officials in Seoul have said the three were seeking ways to avoid conflicts that may arise from one country's massive holdings of another's bonds.
EMERGENCY PROGRAMME TO BE DOUBLED
The Chinese delegation was headed by deputy chiefs of the finance ministry and central bank. One source said that was because top leaders were at home hosting senior U.S. officials to China.
China started buying South Korea's local-currency government bonds a few years ago but Seoul began to invest in Chinese bonds only recently. Japan also recently announced its plan to buy China's bonds and is considering buying South Korea's.
Finance ministry and central bank chiefs from the three countries met ahead of a meeting with their counterparts from the 10 Association of Southeast Asian Nations (ASEAN). The ASEAN+3 meeting is also in Manila and begins later in the day.
Finance chiefs from the 13 countries meeting on the sidelines of the ADB's annual meetings, being held in Manila this year, will likely endorse ways to strengthen and improve their pool of currency swaps, launched about a decade ago.
They are expected to approve doubling of the Chiang Mai Initiative Multilateralisation (CMIM) program to $240 billion, cut the amount tied to International Monetary Fund programs to 70 percent from 80 percent now and extend the maturities of swaps to up to 12 months from 90 days, one official said.
Finance chiefs of China, Japan and South Korea were quoted in the statement saying that their economies were faced with "uncertainties and potential downside risks", but did not elaborate on the sources of risks.
"In order to achieve strong, sustainable, and balanced economic growth, we are committed to continue implementing appropriate macroeconomic policies, including promoting fiscal soundness, expanding domestic demand, increasing employment, and accelerating structural reforms," they said.
Japanese Finance Minister Jun Azumi told reporters separately after the three-way meeting that he had expressed concerns about the yen's strength. No details were immediately available on how the other two countries responded.
(Additional reporting by Rie Ishiguro; Editing by Jacqueline Wong)
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