Japan and China to start direct currency trading

JAPAN: Japan said Tuesday it will start direct currency trading with China for the first time, scrapping the dollar as an intermediary unit to boost ties between the two Asian economic giants. The move, which will boost trade and investment between the traditional rivals, marks the first time Beijing has allowed a major currency other than the greenback to trade directly with the yuan.

“From June 1, the yen-yuan exchange rate will be constantly indicated in both markets, facilitating full-fledged direct exchange trading,” Japan's Finance Minister Jun Azumi told a regular press briefing.

By not using the dollar as an intermediate currency “we can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations' currencies more useful”, he added.

The announcement also comes as China introduces measures as part of a long-term goal of internationalising its currency to rival the dollar.

Beijing described Tuesday's move as an “important step” in “strengthening cooperation between China and Japan in developing financial markets and mutually promoting direct trading between the two currencies based on market principle.” “The People's Bank of China actively supports (the move),” said a statement issued by the China Foreign Exchange Trade System, the central bank's forex arm.

AFP