South Korea and Japan will be likely to agree on currency swap extension, South Korea's Yonhap News Agency reported on Monday.

According to Yonhap, South Korean Deputy Finance Minister Shin Je-yoon said South Korea's currency swap arrangement with Japan is expected to be extended automatically if contingency occurs.

"Of course, Japan's central bank is now holding the key to the issue, but we believe things will be done in a good direction," the official was quoted as saying, without giving details on its duration and size.

Shin is currently accompanying South Korean Finance Minister Yoon Jeung-hyun for the ASEAN Plus Three special meeting held in Phuket, Thailand.

During the meeting, finance chiefs of 10 ASEAN (the Association of Southeast Asian Nations) member countries plus South Korea, Japan and China have discussed on cooperation and countermeasures against the regional economic slump.

South Korea and Japan currently have a won-yen currency swap pipeline set at US$20 billion, which is to expire in April, while holding a three-year-long swap deal worth US$25.1 billion with China.

On Sunday, the finance chiefs agreed to increase the size of their joint currency pool to US$120 billion from an earlier-proposed US$80 billion.

The expansion was expected to help South Korea by supplying it with an additional channel for foreign currency.

As rumors are rampant that foreign financial firms are to draw a large amount of capital out of Seoul, the South Korean currency won plunged to a three-month low against the US dollar on Friday at 1,506 won against one US dollar.

Vice Finance Minister Hur Kyung-wook said on Monday that Asian countries need to expand currency swap lines in a bid to better cope with a regional financial crisis.

"Expanded Currency swaps in Asia will help us focus more on stimulating our economy without worrying over a foreign currency shortage. Eventually, that will also be in the interest of advanced countries," Hur said.

(Xinhua News Agency February 23, 2009)