BEIJING, May 30 (Xinhuanet) -- Trade between Asia's two largest economies is about to get a whole lot easier. China's central bank confirmed Tuesday that the country will allow the direct trading of its currency against the Japanese yen starting Friday.
This makes the yen the first major currency besides the US dollar that can be directly traded with the RMB. The move is part of efforts made by China and Japan to strengthen cooperation in trade and financial markets. And it’s a huge step forward for the internationalization of the yuan.
After some excitement in the Asian markets yesterday. The People’s Bank of China confirmed on Tuesday that China and Japan will start to directly trade their currencies in Shanghai and Tokyo from June 1. The move will shore up trade and financial ties between Asia’s two biggest economies, and also marks another step to raise the yuan’s international role.
Japanese Finance Minister Jun Azumi, who announced the decision in Tokyo, stressed the cost benefits behind the move.
Azumi said, "By conducting transactions without using a third country’s currency, it will bring merits of reducing transaction costs and lowering risks involved in settlements at financial institutions. It will also contribute to improving convenience of both countries’ currencies and reinvigorate the Tokyo market."
The step eliminates the US dollar’s monopoly position to set the exchange rate between the two currencies, and follows a deal struck by the leaders of the two countries in December.
Experts say it’s an important move towards the internationalization of China’s yuan currency.
Professor Ding Zhijie, dean of School of Banking & Finance, UIBE, said, "It raises the convertibility of the yuan. And I believe the yuan trading will be accepted by more Asian economies as well as the international markets. It will also push forward the internationalization of the yuan."
Several banks in the two countries, including Bank of Tokyo-Mitsubishi UFJ and Bank of China, will start the direct trading.
Huang Jiaying, trade with Bank of China said, "The move will likely make the yuan accepted by more Japanese investors as well. It will also help boost the possibility of the yuan becoming an internationally-settled currency, which is an important move of propelling the yuan to become an international reserve currency."
And Japan, which in March pledged to buy about 10 billion US dollars of Chinese government debt, is the first economy to connect with China’s yuan. The move is likely to strengthen ties with its biggest trading partner.