Japan, RI reach swap deal

Japan, RI reach swap deal

Dow Jones, New York

Japan and Indonesia have agreed on a bilateral rupiah-dollar swap arrangement aimed at ensuring stability in the currency market by supplying short-term liquidity, the two countries said in a joint statement, Kyodo News agency reported Tuesday.

The agreement, reached by the Japan's Finance Ministry and Bank Indonesia, will enter into force after a signing ceremony by officials of the Bank of Japan (BOJ) and the Indonesian central bank in Tokyo in mid-February, the statement said.

The agreement enables Bank Indonesia to swap rupiahs for up to $3 billion with Japan's central bank as short-term liquidity in the event of a temporary shortage of foreign reserves, according to the statement.

The move is part of an initiative agreed by the Association of Southeast Asian Nations (ASEAN) and China, Japan and South Korea in Chiang Mai, Thailand, in May 2000 to establish a currency swap network, Kyodo reported.

The currency swap scheme, known as the Chiang Mai Initiative, is aimed at linking the international reserves of the 10 ASEAN countries with those of the three dialogue partners through a set of bilateral pacts to prevent a currency crisis.

Indonesia will be the sixth country to conclude a bilateral currency swap deal with Japan. Other countries that have signed such deals with Japan are South Korea, Thailand, the Philippines, Malaysia and China, Kyodo said.