Yen-yuan direct trading to start in June

26 May 2012
China overtook Japan to become the world's second-largest economy in 2010
This file photo shows a Chinese bank worker attends to a customer in Hefei, east China's Anhui, in 2010. Tokyo and Beijing will start direct trading of their currencies on Friday, Japan's Finance Minister Jun Azumi said on Tuesday, scrapping a system that sets yen-yuan rates via their US dollar values

Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, according to reports.

With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current "cross rate" system that involves the dollar in setting yen-yuan rates, Kyodo News said on Saturday.

The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.

The yen-yuan exchange system would help businesses in the world's second- and third-largest economies reduce risks associated with exchange rate fluctuations in the dollar and cut transaction costs, Kyodo said.

It will be the first time that China has allowed a major currency except the dollar to directly trade with the yuan, Kyodo said.