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June 29 (UPI) -- Japan and South Korea have agreed to reestablish currency exchanges as the frayed allies continued to emerge from a nearly decade-long breakdown in relations due to unresolved political tensions and territorial disputes. Japanese Finance Minister Shunichi Suzuki reached terms with his South Korean counterpart Choo Kyung Ho during the first economic summit between the Asian powers since 2016.
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The deal was a further sign of reconciliation between the allies following Japan's announcement earlier in the week of its intention to reinstate South Korea to its "white list" of preferred trade partners after a four-year absence.
Japan's Ministry of Economy, Trade and Industry said the revised status, which will smooth export procedures for Japanese companies to South Korea, will take effect July 21.
The leaders agreed to a multilateral framework that aims to expand supply chains with the G7 partners, including the United States, Britain, Canada, France, Germany, Italy and the European Union.
As part of the deal, the Japan Bank for International Cooperation and the Export-Import Bank of Korea agreed to finance new infrastructure projects that would serve to deter China throughout the Indo-Pacific region.
The deal will also ensure that Japan and South Korea keep unceasing access to the U.S. dollar and allow for the free exchange of Asian currencies during national emergencies.
A previous currency exchange agreement was scuttled in 2015 as tensions boiled over due to Japan's claim to a number of South Korean-controlled islands in the Sea of Japan. Relations also continue to be strained by open wounds from World War II, when the Japanese military forced South Korean women to work as sex slaves.
The finance chiefs acknowledged a willingness to put those differences aside as U.S. allies in the region faced increased Chinese aggressions and a growing threat from North Korea's nuclear arsenal.
"Japan and South Korea are neighbors, and we should cooperate in various fields," Suzuki said after the meeting, while calling the revived deal "a plus for the yen and the won."
Suzuki and Choo began talks on the new agreement in May, which opened the door for officials of both nations to discuss their mutual economic concerns.
"The resumption of the finance dialogue symbolizes that normalization of ties, prompted by our leaders' summit, is spreading fully" in both nations, Choo said.
Both nations have strong foreign reserves, with South Korea's central bank touting $1.2 trillion in foreign currency holdings, which was roughly one-third of Japan's total foreign assets.
Japan and South Korea established currency exchanges in 2001 following the Asian financial crisis.
Some economists said the new agreement stood to benefit South Korea more than Japan, although the deal would promote less volatility among other economies in the region, providing a huge boon for Tokyo.
Relations between Seoul and Tokyo have improved in recent months as South Korean President Yoon Suk-yeol has called for reparations to help heal the long-standing scars of the war.
In recent months, the White House has sought to reaffirm U.S. defense commitments throughout Southeast Asia as Beijing was making increasingly aggressive claims to Taiwan.
A strategic agreement signed earlier this year will boost the U.S. military presence in the Philippines with four new naval installations along the southern end of the South China Sea.
In January, Japanese Prime Minister Fumio Kishida signed a new security agreement with the U.S., while a meeting between Yoon and President Joe Biden in late April resulted in an agreement to dock U.S. nuclear-armed submarines in South Korea for the first time in more than 40 years.
