Japan and China will start direct trading between the yen and the yuan on the inter-bank foreign exchange markets in Tokyo and Shanghai tomorrow, says Japanese Finance Minister Jun Azumi.
The Japanese and Chinese currencies now are mainly exchanged using the US dollar.
The yen-yuan direct exchange system could benefit private companies as it is expected to cut exchange transaction fees and simplify procedures, likely leading to the expansion of bilateral trade.
"The direct yen-yuan trading will contribute toward improving the convenience of both currencies and revitalising the Tokyo market," Azumi said.
Participating banks will trade the yen and the yuan at an exchange rate calculated on the basis of actual supply and demand, as well as other conditions.
There will be no limit to the fluctuation range in the Tokyo market.
In Japan, the Bank of Tokyo Mitsubishi, Sumitomo Mitsui Banking, Mizuho Corporate Bank and Mizuho Bank will join the direct exchange system.
In Shanghai, the China Foreign Exchange Trade System, which handles foreign exchange trading in China, will announce every morning a mid-point rate, which is the average of yen-yuan exchange rates used by several designated banks.
Unlike the Tokyo market, daily fluctuations will be limited to 3 per cent above or below the mid-point rate.
Japan and China agreed to establish foreign exchange markets at a summit meeting held in Beijing in December last year and relevant government officials from both countries have been discussing the issue at a working panel since February.
- AAP
