South Korea and Japan Take Joint Action to Address Currency Volatility Concerns

South Korea and Japan express concerns over currency depreciation, ready to intervene to stabilize forex markets amid global economic challenges.

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South Korea and Japan Take Joint Action to Address Currency Volatility Concerns

South Korea and Japan Take Joint Action to Address Currency Volatility Concerns

The finance ministers of South Korea and Japan have expressed serious concerns about the recent depreciation of their local currencies. In a meeting held on Tuesday in Washington, Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok stated that they are ready to deploy measures to stabilize excessive volatility in foreign exchange markets. The statement from South Korea's finance ministry indicates that the two countries are taking joint action to address the currency volatility concerns.

The South Korean won has weakened more than 7% against the dollar this year, making it the worst performer in emerging market currencies . Officials have used various levels of language to signal their willingness to intervene, ranging from 'closely monitoring' the market to pledging 'stern' or 'swift' action. The Bank of Korea governor stated the central bank is 'ready to deploy' stabilizing measures.

Japan's Finance Minister Shunichi Suzuki has also warned that the government is prepared to take all necessary steps to counter excessive volatility in the currency market, as the yen continued to tumble, dropping past 154 against the U.S. dollar to a 34-year low. Suzuki said the government is closely monitoring developments in the currency market but declined to comment on whether the yen's recent fall was rapid and volatile, which could trigger another market intervention to slow its decline.

Why this matters: The joint action by South Korea and Japan aims to enhance the resilience of the financial systems in both countries and promote economic growth in the face of external challenges. The resurgent US dollar has weakened many global emerging-market currencies, forcing some officials to intervene to stem the losses. A strong dollar can trigger capital flight from emerging economies, and the G20 has taken the view that volatile and disorderly movements are not desirable because they negatively affect economic and financial stability.

The finance chiefs of the Group of 20 major economies are scheduled to gather in Washington this week, and the G7 finance chiefs are also planning to meet in the U.S. capital. The dollar's strength against the yen and other currencies is expected to be a topic of discussion at these meetings. As Suzuki stated, the Japanese government is closely monitoring developments in the currency market and is prepared to take all necessary steps to counter excessive volatility.

Key Takeaways

  • South Korea and Japan express concerns over currency depreciation.
  • Both countries ready to deploy measures to stabilize FX volatility.
  • South Korean won is the worst performing emerging market currency.
  • Japan prepared to take necessary steps to counter yen's decline.
  • G20 and G7 finance chiefs to discuss the strong US dollar impact.