Japan, China seek to restart FX swap line in sign of warming ties - Kyodo

By Stanley White and Tetsushi Kajimoto

TOKYO (Reuters) - Japan and China are in talks to resume a currency swap arrangement between their central banks worth about 3 trillion yen ($27.2 billion), Kyodo News agency reported on Tuesday.

The resumption of the swap agreement represents a thaw in relations between the world's second- and third-largest economies, which soured in recent years due to territorial disputes and tensions over Japan's wartime history.

A Japanese finance ministry official confirmed the two sides were in talks but said the amount had not been decided yet.

Previously, Japan and China had a smaller currency swap in place, but it was allowed to expire in September 2013 amid a low point in Sino-Japanese relations.

Chinese Premier Li Keqiang flagged the proposed resumption of the swap agreement with Japan in May.

The Kyodo report said a deal would be announced at a financial dialogue to be held in Beijing this month, but the Japanese finance ministry official said it was more likely that it would come at an upcoming Japan-China summit.

Tokyo is trying to arrange a meeting between Prime Minister Shinzo Abe and Chinese President Xi Jinping in October and wants to use the renewed swap agreement as a symbol of cooperation, Kyodo said, without citing sources.

The People's Bank of China did not immediately respond to a faxed request for comment.

In case of financial turmoil, the swap could act as a safety net by providing yuan to Japanese banks operating in China and yen to Chinese businesses.

The swap was originally launched in March 2002 as part of multilateral currency swap lines known as the Chiang Mai Initiative, which was established in response to the Asian financial crisis in the late 1990s.

($1 = 110.4900 yen)

(Additional reporting by Beijing Newsroom; Editing by Sam Holmes and Kim Coghill)