China and Japan plan to launch direct trading of the
yen and the yuan as early as June, a step that could promote the two counties'
trade and financial transactions and push forward yuan internationalization,
analysts said Sunday. Several banks of the two countries, including Bank of
Tokyo-Mitsubishi UFJ and Bank of China, will start the direct trading in Tokyo
and Shanghai, and set exchange rates themselves, the Japanese newspaper Yomiuri
Shimbun reported over the weekend. People's Bank of China could not be reached
for comment on weekend. The step follows an agreement between the two countries
signed in December 2011, when Japanese Prime Minister Yoshihiko Noda visited
China, to push for trading of the currencies. The yen will become the first
major
foreign currency besides the US dollar that can be traded directly with
the yuan. "Rising bilateral trade volume would be the driving force for
the move," Zhang Yongjun, deputy director-general of the Research
Department at the China Center for International Economics Exchange, a
Beijing-based government think tank, told the Global Times Sunday. The two
countries' total trade volume last year amounted to 27.54 trillion yen ($358
billion), up 3.9 percent from the previous year, according to Japan's Ministry
of Finance. Top leaders of China, Japan and South Korea reached an agreement
during a summit this month to begin free-trade negotiations later this year,
amid an expected drop in transactions with key markets like the US and Europe. Direct
trading between the two currencies could lower financial risks caused by
fluctuations in the dollar, as well as reducing trade transaction costs, the
Japanese media reported. Currently, trading of the two countries' currencies
can only be completed via the interim step of being exchanged into dollars. The
commission charge for this that must be paid to the US Federal Reserve Board
every year is estimated to be around $3 billion. "It is a necessary step
for yuan internationalization," Guo Tianyong, director of the Research
Center of China Banking at the Beijing-based Central University of Finance and
Economics, told the Global Times Sunday.
"Direct trading of the yuan with other currencies
like the euro and the pound may also be realized in the future, driven by
demand for bilateral trade and investment with other economies," Xiang
Songzuo, deputy director of the International Monetary Institute with the
Renmin University of China, told the Global Times Sunday.
But Xiang warned of financial risks caused by currency
fluctuation. "Each side of the trade transactions and investments needs to
pay attention to the possibility of speculation," Xiang said.
The People's Bank of China said in December 2011 that
it would not only promote cross-border transactions between the yuan and the
yen, but also support Japanese companies to issue renminbi bonds in Tokyo and
other overseas markets.
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