China and Japan plan direct currency exchange agreement

China and Japan plan direct currency exchange agreement

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.

China is Japan's biggest trading partner. According to the Japan External Trade Organization, trade between the two countries stood at 26.5tn yen ($339bn; £218bn) in 2010.