The world's second and third-largest economies China and Japan have agreed to begin direct yen-yuan trading from 1 June scrapping the US dollar as intermediate currency, a move aimed at boosting the trade between the two countries and taking a further step in internationalising the Chinese currency.
"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 reporters in Tokyo on Tuesday.
"The direct trading will lower transaction costs and reduce settlement risks of the financial institutions and facilitate the using of both the Japanese and Chinese currencies," the minister said.
This is the first time that China has allowed a major currency other than the US dollar to swap with yuan. Japanese yen is freely traded against other major currencies on global financial markets.
The direct trading of the currencies will be held at the Tokyo and Shanghai markets, Azumi said.
The yen-yuan trade will allow a wider range compared to the narrow trading range in yuan-dollar.