The finance ministers of Japan and South Korea declared on Thursday that their nations would closely cooperate on economic and financial issues, in talks aimed at limiting the political damage from a diplomatic clash over contested islands.
The talks took place during annual meetings in Tokyo of the International Monetary Fund and the World Bank that were supposed to focus largely on the debt crisis in Europe. Instead, they have been at least partly overshadowed by concerns that the rekindling of territorial disputes in eastern and southeastern Asia could hurt the region’s vital role as a source of growth for the global economy.
On Thursday, the head of the I.M.F., Christine Lagarde, told participants that fixing Europe’s debt problems and averting drastic fiscal cuts in the United States were needed to lift global economic confidence. That lack of confidence is “having a ripple effect on emerging markets, and in particular in Asia,” Lagarde said.
The I.M.F. has already lowered its global growth forecast to 3.3 percent this year from 3.5 percent, and has warned of further downward revisions if the American and European financial problems remain unresolved.
At such a crucial time, Lagarde said it was important for relatively robust economies in Asia to not let their differences over territory or history prevent them from working together to pull the global economy out of its long slump.
“We hope that differences, however longstanding, can be resolved harmoniously and expeditiously so that from an economic point of view cooperation can continue,” she said. “We are all very closely interconnected.”
The risk of these problems spilling over into the economy was highlighted on Wednesday, when Japan announced that China’s top finance officials would not be attending the meetings, apparently to show displeasure with Japan as part of a dispute over islands claimed by both nations in the East China Sea. The row has already hurt trade ties between Asia’s two largest economies, as Chinese consumers have boycotted Japanese goods.
Lagarde said the Chinese officials would lose out by not attending. “We have a lot of substantive issues to discuss,” she said.
That the Japanese and South Korean officials met at all was seen by many here as a hopeful sign. Relations between Japan and South Korea have markedly deteriorated since August, when the South Korean president, Lee Myung-bak, visited the disputed islands, known as Dokdo in Korean and Takeshima in Japanese. The small island group is claimed by both nations but controlled by South Korea. That visit came a little more than a month after Lee’s government abruptly announced that it would sign a military cooperation pact with Japan aimed at increasing their ability to grapple with the threat from North Korea, a move that drew intense domestic criticism and forced South Korea to abandon the deal, to the dismay of the United States.
The talks on Thursday between Japan’s finance minister, Koriki Jojima, and the South Korean strategy and finance minister, Bahk Jae-wan, were one of the first meetings between top officials of the two nations since Lee’s island trip.
The talks showed few concrete results, beyond a vague commitment to resume regular, lower-level talks between the two nations’ finance officials. Still, the two ministers agreed that their nations should maintain their close economic ties.
“We agreed to closely cooperate in the area of economy and finance,” Jojima told reporters.
The two ministers also sought to play down the political significance of a decision this week to shrink the size of an emergency bailout plan that Tokyo had previously offered South Korea to prop up its currency during the European debt crisis. The nations agreed to reduce the size of the so-called currency swap contract to $13 billion from $70 billion, saying that markets had sufficiently stabilised to the point that such a large bailout was no longer needed.
However, the reduction was widely seen as a sign of cooling ties between Japan and South Korea. Japan’s previous finance minister had threatened to end the swap agreement after Lee followed up his visit to the disputed islands by saying the Japanese emperor should apologise for Japan’s brutal early 20th-century colonisation of the Korean Peninsula.