China and Japan plan direct currency exchange agreement
Baku, December 26 (AZERTAC). China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade. The deal will allow firms to convert the Chinese and Japanese currencies directly into each other. Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs. It is the latest step by China as it seeks a more global role for the yuan. "Given the huge size of the trade volume between Asia`s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," Ren Xianfang of IHS Global Insight was quoted as saying by the Bloomberg news agency.
The plans were announced during a visit to China by Japan`s Prime Minister Yoshihiko Noda and after a meeting with Chinese Premier Wen Jiabao. The two leaders also agreed to allow the Japan Bank for International Cooperation to issue yuan-denominated bonds in China, the first time a foreign government body has been allowed to do so. At the same time, Japan said it was also looking to buy Chinese government bonds, a move that analysts believe may prove to be mutually beneficial to both nations.
"By adopting Chinese bonds as a part of official foreign exchange reserves, Japan is labelling Chinese bonds as an investable asset," according to Takuji Okubo of Societe Generale Tokyo. As for China, Mr Okubo explained that the move will help China further open up its financial markets. The deal "is a manifest of a higher level of commitment from China to the open-up reform, which would add credibility to the ongoing offshore yuan experiment", he said.
Along with promoting bilateral business ties, China and Japan said they had also made progress on a free trade agreement between China, Japan and South Korea. China has been pushing for the three parties to speed up talks and proceedings on the deal, especially after Japan showed a keen interest to participate in the Trans-Pacific Partnership Agreement
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