The Bank of Korea said Monday that Korea and Japan have decided against extending their bilateral currency swap agreement.

“Authorities of Korea and Japan have concluded to end the bilateral won-yen currency swap arrangement equivalent to US$3 billion between the two central banks, which is due to expire on July 3, 2013,” said the BOK in a statement.

This would end their financial cooperation in which Korea sought to further globalise its currency and use the yen, one of the G3 or top three global currencies, for the purpose of financial stability in the face of the global financial crisis. Japan used the currency swap to buffer the crisis’ impact on its market.

Multilateral currency swaps have been in expanded use since the 2008 global crisis as economies sought to seek ways to buffer shocks.

The two central banks did not give specific reasons for not extending their won-yen swap agreement.

Analysts said the swap end has more to do with political reasons rather than economic. Japan has recently been increasing its rhetoric, with its politicians including Prime Minister Shinzo Abe making insensitive historical comments regarding its imperial rule over the Korean Peninsula.

The depreciating yen may have lost its appeal for Korea to hold on to the yen, analysts also said.

The two central banks are still participating in a won-dollar swap deal equivalent to $10 billion under the Chiang Mai Initiative of the Association of Southeast Asian Nations, launched in 2010.