TOKYO, March 23: Japan and China will sign a currency swap agreement to avoid financial crises, news reports said on Saturday.

“Under the agreement, to be signed by the Bank of Japan Governor Masaru Hayami and People’s Bank of China Governor Dai Xianglong ..., Tokyo will supply Beijing with yen in exchange for yuan if China’s balance of payments deteriorates sharply. China will supply Japan with yuan for yen under similar circumstances,” the Nihon Keizai Shimbun newspaper said.

“The loan ceiling is equivalent to three billion dollars,” the report said, without citing sources.

Also under the accord, to be officially signed on Thursday, the BOJ will be able to swap yen for yuan to finance the intervention by the Chinese central bank to support the yuan in case of speculative attacks, news reports said.

The deal is part of an expanded currency swap arrangement in Asia to strengthen financial systems and prevent a recurrence of a currency crises, Kyodo News said, citing financial sources.

The Association of Southeast Asian Nations (ASEAN) and China, Japan and South Korea agreed to extend the swap network among members as a ‘firewall’ against speculative attacks on their currencies when their finance ministers met in Chiang Mai, Thailand, in 2000, Kyodo noted.

“The currency swap scheme, known as the Chiang Mai Initiative, is aimed at linking the international reserves of the 10 ASEAN countries with those of the three dialogue partners through a set of bilateral pacts to prevent further currency crises,” it said.

Japan already has concluded a similar agreement with South Korea, Malaysia, Thailand and the Philippines.—AFP