TOKYO, Aug. 24 (UPI) -- Japan's bond purchase and currency swap arrangement with South Korea could be affected by their island territorial dispute, a Japanese minister indicated.
Finance Minister Jun Azumi spoke to reporters Friday as Japan and South Korea remained embroiled in their competing claims over a group of Korean-controlled Sea of Japan islands, called Takeshima in Japan and Dokdo in South Korea. The row has grown bitter following a visit to one of the islands this month by South Korean President Lee Myung-bak that drew strong Japanese protests.
Azumi said whether Japan will continue the currency swap and mutual purchase of government bonds would depend on how Seoul responds to Tokyo's frustration over the island dispute, Kyodo News reported.
Japanese Prime Minister Yoshihiko Noda is reported to have has asked that Lee apologize for demanding Japan's emperor apologize for the colonial rule of Korea between 1910 and 1945.
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Azumi was quoted as saying the situation has escalated to a point that "the people of Japan can no longer consider the economy and politics as separate."
Under a currency swap arrangement, one country can exchange its currency to obtain U.S. dollar funds from the other and use the dollar funds to intervene in the markets to defend its currency. The government debt purchase program is designed to improve bilateral economic ties.
Azumi had indicated Last week the bilateral currency swap arrangement could be downsized, Kyodo reported.
He told reporters his government would consider every option, saying "nothing has been decided, including whether we will extend" the deadline of the expanded swap arrangement.
The countries last year temporarily increased the currency swap contracts to $70 billion from $13 billion. The arrangement is set to expire in October.
Separately Friday, Kyodo reported Japan's lower house of Parliament had planned to adopt a resolution to protest the South Korean president's visit to the disputed islands. The resolution, which is supported by Japan's main opposition party, says South Korean control of the islands constitutes an "illegal occupation" and that Tokyo strongly urges Seoul to end it as soon as possible.
In South Korea Friday, Yonhap News Agency reported Seoul planned to send a formal letter protesting Japanese Foreign Minister Koichiro Gemba's recent remark in which he was quoted as saying Korea's control of the islands was "illegal occupation."
A South Korean Foreign Ministry spokesman said Seoul "strongly demands" that Gemba's remarks "be withdrawn immediately and never be made again."
Earlier, South Korea had rejected a Japanese proposal to take the island issue to the International Court of Justice. It had also sent back the Japanese prime minister's letter.
