China, Japan and South Korea agreed to promote the use of their foreign exchange reserves to invest in each other's government bonds to strengthen regional cooperation and stave off the impact of the European debt crisis.

In a joint statement released by the Bank of Korea, the countries said they aim to further enhance their economic relationship to counter risks and uncertainties in the global economy.

The statement was made after a meeting of the three countries' central bank governors and finance ministers in Manila on Thursday.

The three countries also agreed to improve information sharing to further deepen regional ties.

"Our view is that overseas demand, especially from central banks for foreign exchange reserve diversification, is one factor behind a medium-term convergence of long-term rates in South Korea and the global US benchmark," said Young Sun Kwon, a Hong Kong-based economist at Nomura Holdings Inc.

By the end of March, China's $3.3 trillion of foreign reserve holdings ranked the world's largest, followed by Japan's nearly $1.3 trillion. South Korea's foreign reserve holdings of $316 billion were the world's seventh-largest.

"Today's statement from the three countries shows the governments will enhance the status of Asian currencies by encouraging investment within the region," Bloomberg quoted Choi Seok-won, head of research at Hanwha Securities Co in Seoul, as saying.

It would have the effect of reducing volatility from money coming in and out from other regions, said Choi.

Japan announced on Thursday that it will start purchasing South Korean bonds to diversify its foreign reserves, beginning with a "small amount". It signed a similar agreement with China last December and applied to buy about $10 billion of Chinese bonds in February.

The three countries, which account for 70 percent of Asian GDP, are also considering strengthening their cooperation by setting up a trilateral free trade zone.

A summit meeting of the leaders of China, Japan and South Korea, to be held in Beijing later this month, will be "a positive signal for the arrangement of the China-Japan-South Korea FTA", said Commerce Minister Chen Deming.

China and South Korea on Wednesday jointly announced the launch of FTA talks in Beijing, which are expected to be completed within two years.

Along with the 10 members of the Association of Southeast Asian Nations, the three economies are expanding a regional liquidity safety net by doubling the Chiang Mai Initiative multilateralization agreement to $240 billion.

The pact permits countries to swap their local currencies for US dollars in times of crisis.

A draft of the communique, scheduled to be published after the one-day meeting of the 13 countries in Manila, highlighted the significance of expanding the currency swap arrangements given the current financial problems in Europe, AFP reported.

"We are fully aware of the potential downside risks to the region's economic performance in 2012 ... The prolonged sovereign debt crisis in the eurozone could continue to weigh on ASEAN+3 economies through trade and financial channels," it said.

The effects of the eurozone debt crisis have been spreading at an obvious pace to Asian countries, and the region's economic growth is not expected to regain momentum in the short term, said Liu Mingkang, former chairman of the China Banking Regulatory Commission.

The 13 countries will also increase the amount of money available for lending to troubled members without conditions set by the International Monetary Fund, the draft said.

The IMF-delinked portion, currently at 20 percent of the total, will rise to 30 percent next year and 40 percent in 2014 if conditions warrant, AFP reported.