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MANILA, Philippines - The central banks of the Philippines and Japan on Thursday extended a bilateral swap arrangement (BSA) established in the wake of the Asian financial crisis of 1997-1998.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said Governor Amando M. Tetangco Jr. and Bank of Japan (BOJ) Governor Masaaki Shirakawa signed the second extension agreement of the BSA on the sidelines of the 45th Annual Meeting of the Asian Development Bank Board of Governors.
The extension takes effect May 2 this year and would last until May 3, 2015.
Under the $6.5 billion BSA, the BOJ would provide the BSP up to $6 billion in financial assistance in exchange for a corresponding amount of Philippine currency in case Manila's foreign exchange reserves drop to a level that risks a run on the peso.
As a two-way swap arrangement, the BSP also would provide the BOJ up to $500 million in assistance in exchange for a corresponding amount of Japanese yen if Tokyo similarly were faced with balance of payments (BOP) difficulties.
The BOP is a summary of a country's economic transactions with the rest of the world, with a surplus indicating forex inflows outstripping outflows, and a deficit the reverse.
The BSA is part of the Chiang Mai Initiative, a scheme drawn up by Asean, Japan, South Korea and China following the Asian financial crisis. Under the initiative, each party to the arrangement can draw upon the financial resources of other parties in case of BOP difficulties.
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