Japan’s Aso Urges Stronger South Korea Ties to Overcome Crisis

By Kevin Cho and Heejin Koo

Jan. 11 (Bloomberg) -- Japanese Prime Minister Taro Aso urged closer cooperation between Japan and South Korea to help overcome the current economic crisis.

“Our two countries should bring out their strengths through close cooperation,” Aso said at a luncheon arranged by South Korea’s four major business lobbies in Seoul today. “Economic partnership between Japan and South Korea expands opportunities for collaboration in Asia. A win-win situation for both countries will help overcome the crisis.”

Japan and South Korea are seeking closer economic ties to spur growth amid the global recession. Japan’s economy shrank 2.85 percent in the three months ended Dec. 31, contracting for a third straight quarter, according to a Bloomberg survey of economists. The Bank of Korea cut its benchmark interest rate by a half point to a record low on Jan. 9, saying the economy is deteriorating faster than expected.

Aso, on a two-day visit to Seoul, will meet South Korean President Lee Myung Bak tomorrow at the presidential Blue House.

“We hope South Korea and Japan will work together to overcome the current difficulties,” said S.R. Cho, chairman of the Federation of Korean Industries. “It’s essential for the Asian economy that the two nations cooperate.”

Aso announced a stimulus package of 10 trillion yen ($110 billion) on Dec. 12, doubling a 5 trillion yen plan he proposed two months earlier. South Korea’s government has allocated about 140 trillion won in extra liquidity, tax cuts and spending to avert the nation’s first recession since the Asian financial meltdown a decade ago.

Asia’s fourth-largest economy may worsen more than the government had anticipated at the end of last year, Lee said on Jan. 9. Lee said last month the economy, which grew at the slowest pace in four years in the third quarter, may shrink in the first half of this year, its first recession since 1998.

South Korea and Japan agreed last month to increase a currency swap arrangement to $20 billion from $3 billion. The won has gained 11 percent since reaching its decade low versus the dollar on Nov. 21.

To contact the reporter on this story: Kevin Cho in Seoul at kcho2@bloomberg.net; Heejin Koo in Seoul at hjkoo@bloomberg.net