Kawamura Says Japan May Help South Korea Prop Up Won

By Takashi Hirokawa and Sachiko Sakamaki

Oct. 9 (Bloomberg) -- Japan may help South Korea prop up the won after it tumbled against the yen, threatening to hurt Sony Corp. and other exporters that compete with Korean companies.

Japan's Chief Cabinet Secretary Takeo Kawamura said in Tokyo today the topic of what Japan can do to help South Korea ``will be discussed'' in the future. Japan will decide on a summit meeting with China and South Korea on financial crisis after next week's Group of Seven meeting in Washington, he said.

South Korea's President Lee Myung Bak last week called on Japan and China to discuss a response to the credit crisis that caused the won to slump 39 percent against the yen this year. South Korean officials have suggested fast tracking an agreement hammered out at the Asian Development Bank in May to create an $80 billion fund to help shield the region's currencies against speculative attacks.

``Japan may help won through a swaps agreement to provide dollars,'' said Tomoko Fujii, Tokyo-based head of economics and strategy at Bank of America Corp. ``Many Japanese companies are doing business there.''

Japan, South Korea and China discussed creating a pool of $80 billion in Asian foreign-exchange reserves to be tapped by nations in case they need to protect currencies at a meeting of the ADB in Madrid in May. The three nations would provide about 80 percent of the pool, with the 10 members of the Association of Southeast Asian nations making up the rest.

The contributions haven't been decided, Shin Je Yoon, South Korea's deputy finance minister in charge of currency and international affairs, said Oct. 5.

``The financial crisis that started in the U.S. is spreading, and international cooperation is a big agenda item,'' Kawamura said. ``Japan-South Korea relations are important, and that will be discussed in the future.''

South Korea's won rose to 7.274 versus the yen at 1:38 p.m. in Seoul from 7.126 late yesterday, the lowest in more than a decade. A lower won makes South Korea exports more competitive versus their Japanese rivals.

To contact the reporter on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net; Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net