TOKYO: Asian finance leaders agreed to consider adding the Chinese yuan and the Japanese yen to their mutilateral currency swap arrangement to ramp up their firepower to deal with potential financial crises, the Nikkei newspaper reported on Friday.
The addition of local currencies to the swap deal, known as the Chiang Mai initiative, ”may be one enhancement option,” the finance ministers and central bank governors of Japan, China, South Korea and the Association of Southeast Asian Nations (ASEAN) said in a joint statement on Thursday, the Nikkei reported.
Such a move would help alleviate concerns held by some Asian economies over the swap arrangement’s reliance on the dollar. It would also build stronger buffers for emerging economies in the region, which are vulnerable to market turbulence caused by monetary policy shifts by U.S. and other major central banks.
Japanese Finance Minister Taro Aso told a news conference that it was important that countries receiving support be able to choose the currency they want, the Nikkei said.
People’s Bank of China Deputy Governor Chen Yulu was quoted as saying that introducing local currencies spreads out the risk of relying on a single currency for swap arrangements. Beijing has been promoting the yuan for trade but wider use of the currency has been hindered because it is not fully convertible.
The finance leaders of Japan, China, South Korea and ASEAN - together known as ASEAN plus 3 - met in Fiji on the sidelines of the annual meeting of the Asian Development Bank.
Created in 2000 after the Asian financial crisis in 1997, the Chiang Mai Initiative is a multilateral currency swap arrangement under which member nations facing capital flight can access a pool of dollars in exchange for their currencies. The size of its safety net was doubled to $240 billion in 2014. - Reuters