China’s Central Bank to Launch Yen-Yuan Trade

Japanese Finance Minister Jun Azumi said on Tuesday that Japan and China will launch direct yen-yuan trade on June 1. The move aims to promote trade between Asia’s two biggest economies.

[Jun Azumi, Japanese Finance Minister]:
“We will launch direct yen-yuan trade in the Tokyo and Shanghai markets from June 1.”

The step eliminates the use of the US dollar as an intermediary and follows an agreement between the leaders of the two countries in December.

[Jun Azumi, Japanese Finance Minister]:
“By conducting transactions without using a third country's currency, it gives the advantage of reducing transaction costs and lowering risks involved in settlements at financial institutions. It will also contribute to improving convenience of both countries' currencies and reinvigorate the Tokyo market.”

Until now, yen-yuan rates were calculated on the basis of their respective rates against the dollar, so the move is expected to narrow trading spreads, lower transaction costs and allow more trade deals to be settled directly.

Japanese media said it will be the first time that China has let a major currency other than the US dollar directly trade with the yuan.