The South Korean government on Friday protested to Japan’s decision to end discussions to renew bilateral currency swap arrangement by connecting it to the diplomatic skirmish over a new comfort women statue placed in front of the Japanese consulate in southern Korean port city of Busan.

“It is regrettable that currency swap talks have ended because of political and diplomatic reason,” said the Ministry of Strategy and Finance in a statement.

Tokyo has acted furiously against the installation of the statue of a sitting girl facing the consulate similar to the one sitting across the Japanese embassy in Seoul since 2011, recalling its ambassador in Seoul and consul-general in Busan in protest, claiming it was in violation of the deal struck between the two governments last year as a final compensation for the victims forced to work in brothels run by Japanese army during the World War II. The local administration decided not to remove the statue installed by a civic group late last month despite urging by Japanese officials due to strong public protest.

Seoul has been engaged in working-level talks with Tokyo to renew currency swap amid increasing volatility in the currency market from strengthening in the U.S. dollar and signs of capital flight to the U.S. market following rate hike.

By October 2011, bilateral currency swap built up to $70 billion in October 2011 from starting volume of $2 billion. Soured relationship after former Korean President Lee Myung-bak’s visit to Dokdo island in August 2012 failed to renew the account of $57 billion that expired in October that year. Another $3 billion expired in July 2013. Bilateral currency swap pact formerly became nonexistent after the last $10 billion expired in February 2015 amid ongoing diplomatic spat between summits of the two nations.

By Kim Gyu-sik

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