Japan And China To Begin Direct (Yen-Yuan) Currency Trading ...

Japanese-Yen Marries Chinese-Yuan Just Next Month, 1st June

Japan and China will begin direct yen- yuan trading on June 1, Japanese Finance Minister Jun Azumi said Tuesday, abandoning the existing system that determines yen-yuan rates via their U.S.dollar values. The move is broadly seen as a way to boost trade and investment between the world?s second and third largest economies, and as part of measures taken by China to internationalize its currency. The direct currency trading will be dealt at the Tokyo and Shanghai markets, however, the trade in the two markets will be slightly different, said the Japanese Finance Boss, Jun Azumi.

China will set a daily rate according to dealer quotes allowing trade to move within a 3% (percent )band above or below the line, said Japanese media, compared with a 1%(percent) band fixed to yuan-dollar trading. The Chinese central bank has introduced a rate of 7.9480 yuan for every 100 yen, according to media reports, but there will be no fixed rates in Tokyo trade. The two currencies would be trading freely in Tokyo markets.

According to the Japanese Finance Minister, 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 yen-yuan direct trading will also inject vitality into Tokyo?s financial market, he added. It is the first time China has allowed a major currency other than the U.S.dollar to trade directly with the yuan, Japanese media reported. China overtook Japan to become the world?s second largest economy in 2010, and the two countries are working actively together to forge closer business ties.

China is Japan?s largest trading partner, but large portion of their mutual trades are settled by the U.S.dollars. According to statistics of the Asian Development Bank, only 0.3 percent of exports and 1.7 percent of imports from China to Japan were settled in yuan in 2011. Mutual trades settled in yen are slightly higher, in 2009 for example, 18 percent of total exports from China to Japan were settled in yen.

The newly adopted direct yen-yuan trading will reduce foreign exchange risks in bilateral transactions, and will bring more growing potentials for both China and Japan?s financial institutions and trading partners, according to Doctor Xing Yuqing, economist from Asian Development Bank Institute. It is also said to be an important step for yuan?s internationalization, and it will also promote Asian currencies? entire standing in the global economy.

FRANCIS TAWIAH (Duisburg ? Germany)

Source: http://www.modernghana.com/news/398766/1/japan-and-china-to-begin-direct-yen-yuan-currency-.html

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