TOKYO Japan has decided not to extend a currency swap deal with South Korea after it expires at the end of this month unless Seoul seeks an extension, Japanese media reported on Wednesday.
The decision comes as Tokyo's ties with Seoul frayed badly after President Lee Myung-bak visited a set of islands in August claimed by both countries and located about midway between them, known as Takeshima in Japan and Dokdo in Korea.
The government will make a final decision later this month although South Korea has not asked for an extension so far, the Nikkei business daily reported, citing a Japanese official.
The two countries expanded their currency swap arrangements over five-fold to $70 billion in October 2011, citing the need for pre-emptive arrangements amid global economic uncertainty.
Expiration means that the total swap arrangements would be reduced to $13 billion as before from November.
Japan sees no need to extend the swap deal given that the situation in Europe has relatively stabilized and concerns about the economic outlook for South Korea have subsided, Nikkei said.
Tokyo has maintained that it would make a decision on the currency swap deal based on the economic situation and it has got nothing to do with the row over the islands.
Japan is also weighing a plan to buy South Korean government debt, which is part of efforts to boost bilateral economic ties.
(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)