The Philippine and Japanese central banks have signed a restated currency swap arrangement that will allow monetary authorities to stabilize exchange rates during times of volatility.
“The Bank of Japan, acting as agent for the Minister of Finance of Japan, and the Bangko Sentral ng Pilipinas, signed the Restatement Agreement of the third Bilateral Swap Arrangement (restated BSA) to take effect today,” the central bank announced on Friday.
It said the arrangement would enable the Philippines to continue to swap the peso against the Japanese yen, “in addition to US dollars of up to $12 billion equivalent for the Philippines and $500 million for Japan”.
Currency swaps are useful in times of economic stress, when normal foreign exchange markets can seize up, as these allow monetary authorities to buy local currencies with something much more liquid, usually the US dollar.
“The authorities of both countries believe that the strengthened bilateral financial cooperation will contribute to the stability of financial markets, promote the use of local currency including the Japanese yen in Asia in the medium term, and thereby further develop growing economic and trade ties between the Philippines and Japan,” the Bangko Sentral said.
The original third bilateral swap agreement between the BSP and BoJ was signed in October 2014.
That time, the BSP doubled the limit of the currency it could exchange with the BoJ to $12 billion from $6 billion, while Japan set a swap limit of $500 million.