Growing China-Japan ties

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China, Japan launch world's biggest online marketplace

The combined number of users on the new service is expected to eclipse the 90 million active users at US online marketplace eBay, which last year sold goods valued at 60 billion dollars.

by Staff Writers
Tokyo (AFP) June 1, 2010

China's largest retail website Taobao and Yahoo Japan launched a joint service Tuesday in a deal expected to create the world's biggest online marketplace by harnessing Asia's surging ranks of e-consumers. The service is expected to dwarf US rival eBay in terms of users and products on offer, attracting 250 million customers and offering 450 million products.

"This marks the birth of the world's largest e-commerce market," Masayoshi Son, chairman of Yahoo! Japan and CEO of mobile phone carrier Softbank, told a packed hall in a Tokyo hotel.

Online stores on Taobao will be able to offer products from China to Japanese consumers at Yahoo! Japan's China Mall, the companies said.
The new services will allow Internet users in both countries to buy and sell using systems and procedures that are familiar to them in their native languages, one of the biggest hurdles to doing business in either country.

The combined number of users on the new service is expected to eclipse the 90 million active users at US online marketplace eBay, which last year sold goods valued at 60 billion dollars.

Son is banking on Asia's exploding number of Internet users which he expects will account for 50 percent of the web in five years, compared to just 19 percent a decade ago.

He added that he expects the number of American users to fall to 12 percent of the global share.

Taobao is a subsidiary of Chinese e-commerce giant Alibaba Group. Both SoftBank and US Internet company Yahoo! are shareholders in Alibaba.

Alibaba Group's Hong Kong-listed subsidiary Alibaba.com already has a joint venture with SoftBank called Alibaba.com Japan.

The cooperation with Yahoo! Japan is the latest effort by the Alibaba Group to expand in overseas markets.

Last month, its wholesale website Alibaba.com announced a new platform, AliExpress, allowing payments from users of US online payment service PayPal.

Online shopping in China has boomed in recent years, as the nation's more than 400 million Internet users -- the world's biggest online population -- become increasingly web-savvy.

Baidu, China's top search engine in terms of market share, said in January it would set up a joint venture with Japanese retail website Rakuten to launch a shopping mall targeting domestic web users in the second half of 2010.

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Japan is now stuck at crossroads

Saturday, July 3, 2010

By Bunn Nagara, The Star/Aisa News Network

KUALA LUMPUR -- Japan has lately had to re-learn some sobering lessons of the modern world, in particular those in its post-1945 period.

Apart from how the sun can also rise elsewhere in the East, these include the limits of economic diplomacy in building global clout and the realities of a Western-dominated world.

The Yomiuri Shimbun on Monday (June 28) declared the country "must halt" the "decline of (its) diplomatic clout." Japan's two decades of economic stagnation and political moping have led to general lamenting over its ebbing influence abroad.

Many of the roots of Japan's current predicament may be traced to at least the early 20th century.

Its foreign policy then saw it joining the Allied powers in World War I, but by World War II, it had joined the Axis powers with a pact with Nazi Germany.

If that seemed a contradiction, in both cases, Japan was acting out of its perceived national interest. This centered on a set of expansionist policies colored by militarism.

Imperial Japan failed miserably, to the extent of having the 1947 Constitution drafted at the behest of U.S. Gen Douglas MacArthur and his victorious post-war team. Japanese conservatives have been pained by the implications ever since.

Several Japanese leaders, including former defense chief and Prime Minister Yasuhiro Nakasone, have flirted with the idea of constitutional reform. Sometimes that seeks to void Article 9, which limits Japan's military assertiveness, at other times, it pertains to going it alone by snubbing its U.S. security obligations and the sentiments of its Asian neighbors.

Still, the immediate post-war mood emphasized recovery and rebuilding. This meant economic growth, and Japan's low taxes, high savings rate and growing domestic investments proved crucial in its industrial development.

But by the 1960s, this success was coming to a head in domestic politics. Industrialization in the international sphere saw Western-style leftist activism, which in part aggravated extremist right-wing agitation.

Liberals and progressives had reconciled themselves to a modern Japan set within the norms of a globalized world that assured the country of its future. But conservatives regarded Japan's very survival as depending on a return to its traditional martial values.

The ultra-rightist writer Yukio Mishima and his 'Society of the Shield' declared that Japan had to change with remilitarization or perish. As a dramatic statement after a brief admonishment, he committed hara-kiri in front of a group of Japanese soldiers in 1970.

The 1970s saw Japan deepening its modernist position with more economic growth, relocation of its industries in lower-cost Southeast Asia and avoiding overt political plays by respecting Article 9.

But rightists continued to simmer in the background.

For most Japanese, however, the immediate task of the real world lay in securing a decent living amid rising daily costs in a once-soaring economy that had hit a plateau. Abroad, they had to live down Japan's villainy in a devastating war with Asian neighbors it once bullied.

Now some of those neighbors, notably China, South Korea and India, have economies rising faster than Japan's. The moribund state of Japan's own economy has only deepened its own sense of unease.

But when its economy was clearly on the ascendant, it could feel comfortable even when its strength was only economic, not political or diplomatic.

Japan's forte in providing foreign aid, partly seen as indirect restitution for war damages, has now also declined and seen as both symptom and problem.

Another Yomiuri commentary this week noted how, when new Prime Minister Naoto Kan met G-8 and G-20 leaders in recent days, he felt inhibited because of his deficiencies in the English language.

Despite every Japanese having to take English lessons at school, they know they have to do more to succeed in the modern world. Japan has also been missing out on probably the only strength of such summits, which is the personal relationships that develop among leaders.

Its frequent change of prime ministers has seen Shinzo Abe at the G-8 in 2007, Yasuo Fukuda in 2008, then Taro Aso last year, and now Naoto Kan this year.

This musical-chairs leadership has meant that former premier Yukio Hatoyama never even had a chance to present himself, with or without translators.

But as other issues like the relocation of the U.S. Futenma air base shows, Japan's plight abroad is shaped by its own domestic problems.

Copyright © 1999 – 2010 The China Post.

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Japanese newspaper calls for new approach toward Taiwan, China

2010/07/04 19:04:00

Tokyo, July 4 (CNA) Japan should consider reopening its stalled trade pact negotiations with both Taiwan and China now Taipei and Beijing have sealed their economic cooperation framework agreement (ECFA), a Japanese newspaper said Sunday.

In an editorial, the Nihon Keizai Shimbun said the cross-Taiwan ECFA is the first free trade agreement (FTA) between economies in north Asia, although it is not a treaty between two states as the two sides refuse to recognize each other as such.

The pact will give Taiwanese businessmen an advantage over their competitors from Japan and South Korea in the Chinese market. This became especially true when flat panels and completed automobiles were put on Taiwan's "early harvest" list of goods to be given preferential tariffs upon entry to China, the paper said.

In the wake of the ECFA, calls in South Korea for an economic partnership agreement with China are more vociferous than those for a similar pact with Japan, and Tokyo should also consider such a pact with Beijing, given the importance of the Chinese market.

A free trade pact with China should take into account various points of view, as it could have complicated ramifications for Japan's industry and job market due to China's manipulation of the value of its currency, the paper warned.

With its unprecedented trade pact with China under the belt, Taiwan is now eyeing free trade agreements with Japan and the United States, hopeful that Beijing's earlier opposition will be reduced, claiming that as a member of the World Trade Organization (WTO) , it is entitled to strike such deals with other states.

As a member of the WTO, Japan should consider following China's example by negotiating a free trade agreement with Taiwan, although Beijing is probably using the ECFA as a stepping stone toward a political pact with Taipei.

President Ma Ying-jeou is cautious about any political pact with China, while the opposition Democratic Progressive Party, which is pushing for Taiwan independence, is bitterly opposed to the trade pact.

How Taiwan copes with China's carrot-and-stick policy -- enticing Taiwan with economic benefits while threatening it with more than 1,000 missiles trained on it -- is worthy of close attention by Japan, as it could have a profound effect on Japan's security, too, the paper said.

(By Yang Ming-chu and Maubo Chang) ENDITEM/J

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China offers $4.6m emergency aid to Japan

(Xinhua)
Updated: 2011-03-14 13:27

Workers load relief supplies onto a plane for Japan tsunami relief at Shanghai Pudong International Airport on March 14, 2011.[Photo/Xinhua]

BEIJING - A chartered plane carrying the first batch of relief goods China committed to Japan's earthquake rescue operations took off from Shanghai late Monday afternoon.

Related readings: Chinese rescue team leaves for Japan Chinese associations send condolences to Japan Wen says China willing to help quake-hit Japan Tsunami waves to reach China; no serious damage expected

The first relief package sent to Japan is composed of 2,000 blankets, 900 cotton tents and 200 emergency lights, and valued at 7.2 million yuan ($1.1 million), said Yang Hongbin, a Shanghai-based official with China's Ministry of Commerce. Yang said the China Eastern Airlines aircraft, a Boeing 777-200, was scheduled to touch down at Tokyo Haneda International Airport at about 8 pm Monday.

The ministry announced Monday that China will provide 30 million yuan ($4.57 million)worth of emergency humanitarian assistance to Japan following the massive 9.0-magnitude earthquake and ensuing tsunami that have left thousands dead or missing.

China's military was responsible for collecting this first batch of aid, as required by related emergency response mechanism and several government agencies, the Defense Ministry said in a separate statement, adding that the mission was accompolished in the shortest period of time.

China sent a 15-member international rescue team to Japan on Sunday, while local governments and China's chapter of the Red Cross have announced separate donations to aid the quake relief actions.

The rescue team started search and rescue operations Monday morning in Ofunato city of Japan's northeastern Iwate Prefecture, according to the website of the Chinese Embassy in Tokyo.

Workers unload the first batch of relief goods from China at Tokyo Haneda International Airport on March 14, 2011.[Photo/Agencies]

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Japan's Disaster Brings Sino-Japanese Relations Closer

March 22, 2011

At times succour in adversity can open up fresh avenues to normalize strained relations between two countries locked in distrust and enmity. This seems to be happening between China and Japan in the wake of disaster that befell Japan recently.

Six months ago, the arrest by the Japanese coast guard of the captain of a Chinese fishing vessel, had created a fresh bout of tension between the two countries. In an exercise in ‘coercive diplomacy’, China threatened to stop supplies of rare earths, key ingredients in the manufacture of computer chips, to Japan if the Chinese national was not freed. In yet another incident, that was not widely publicised, on March 8, 2011, just before the earthquake and resulting tsunami in Japan, a dispute broke out between the two countries on exploration rights over Chunxia, an oil and gas field in the East China Sea.

The relationship between China and Japan took a positive turn, however, in the wake of the devastating earthquake and the accompanying tsunami that hit Eastern Japan. China acted swiftly to come to the rescue of Japan in a spirit of solidarity. Moreover, the Chinese Government also appealed to the international community to help Japan prevent the nuclear crisis from worsening. Beijing sent a 15-member international rescue team to Japan and provided 30 million Yuan worth of emergency humanitarian assistance. China has already delivered the first relief package consisting of 2,000 blankets, 900 cotton tents and 200 emergency lights. It has also pledged 20,000 tonnes of fuel, 10,000 tonnes of gasoline and 10,000 tonnes of diesel. In the latest round of relief, China moreover delivered ten tonnes of bottled drinking water to the earthquake-hit areas. At Tsinghua University, students set up two donation boxes, one for Yunan where 25 people died recently in an earthquake and the other for Japan’s quake and tsunami victims. All these are examples of how empathy brings people together.

The catastrophe in Japan has brought about a change in the attitude of the people of China towards their Japanese counterparts. According to polls conducted in 2010 by the Japanese newspaper Yamiuri Shimbun and the Chinese news agency Xinhua, 81 per cent of those polled in China said ties with Japan were bad and 79 per cent said that Japan cannot be trusted.

But this attitude changed for the better after Japan’s tragedy.

In a recent survey conducted by the news portal ifeng.com, nearly 80 per cent of Chinese respondents said that they support their government’s efforts to aid Japan despite friction between the two neighbours.

Out of 1.5 million respondents, the survey showed that 1.2 million backed the government’s humanitarian aid to Japan and agreed that China should offer help despite historical and existing disputes. One citizen commented on the website that “human beings are without borders when facing natural disasters.”[fn]China Daily, March 18, 2011.[/fn]

Sounding a note of empathy, an opinion piece in China Daily entitled, “Facing Disasters, We are All Human,” stated, “the tsunami in Japan is yet another, albeit different, test put before us. Bearing our recent history in mind, we often view each other with ambivalent attitudes, to say the least.

But the candles lit, the vigils held and the tears shed for the ordinary lives have told a totally different, yet not unexpected, story, which is particularly comforting.”[fn]China Daily, March 16, 2011.[/fn]

Taking the new-found warmth further, Chinese Foreign Minister Yang Jiechi, while participating at the fifth trilateral meeting of foreign ministers of Japan, China and South Korea held in Kyoto on March 19, 2011, said that China will extend maximum support to cooperate with Japan in the relief operations and construction work, and expressed the hope that Japan will overcome the nuclear crisis as soon as possible.

In his condolence message, Yang Jiechi noted that the Chinese people were deeply affected by the earthquake since China had experienced a devastating earthquake in Sichuan province three years earlier. Incidentally, it may be mentioned that many Chinese nationals living in Japan also took part in the relief work in Japan. In a bizarre incident, a Japanese official who helped 20 Chinese students escape from the Tsunami himself fell prey to the surging waves while attempting to save his wife and daughter.

Will kindred human spirit and neighbourly gestures have a lasting effect on the strained bilateral relations between China and Japan?

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Updated Friday, March 25, 2011 12:04 am TWN, Reuters
N. Korea sends US$500,000 to Japan

SEOUL -- North Korean leader Kim Jong-il has sent half a million U.S. dollars to aid Korean expatriates in Japan after the devastating earthquake and tsunami, Pyongyang's official news agency said on Thursday.

Decades of tightly controlled economic policy that has seen North Korea channel much of its scarce resources to arms development has left the country acutely short of cash although its leaders continue to live lavishly, according to South Korean news reports. Food is also reportedly scarce.

Japan, formerly Korea's colonial master, is frequently lambasted as a “warmonger” in North Korea's state-controlled media along with South Korea and the United States. “Leader Kim Jong-il sent (a) relief fund of US$500,000 to Korean residents in Japan who suffered from the killer quake and tsunami happened there,” KCNA news agency said.

Half a million U.S. dollars is equivalent to the annual average income earned by 520 North Koreans in all of 2009, according to Bank of Korea data.

U.N. sanctions in 2009 imposed for its nuclear and missile tests that defied international warnings have further cut into North Korea's finances, choking off much of its lucrative arms trade.

The North's Red Cross has separately sent US$100,000 in disaster relief to Japan, KCNA said.

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Chinese, Japanese leaders unveil deals on bond sales, currency to tighten finance ties

By Joe McDonald, The Associated Press | December 26, 2011

BEIJING, China - Chinese and Japanese leaders have unveiled initiatives to tighten financial links between East Asia's economic giants and sometime rivals — measures that could expand use of China's tightly controlled currency abroad.

During a visit to Beijing by Japanese Prime Minister Yoshihiko Noda, the two governments said in a surprise announcement Sunday they will encourage use of their own currencies in bilateral trade, which now is conducted mostly in U.S. dollars.

They also agreed to support the sale of bonds denominated in China's yuan by Japanese companies in Tokyo and foreign markets and by the state-owned Japan Bank of International Cooperation in mainland China's markets, which are closed to most foreign investors.

The pledges were a striking step for China and Japan, which are the world's second- and third-largest economies and are bound by billions of dollars in trade but whose political relations often are strained over conflicting territorial claims and other disputes.

"To support the growing economic and financial ties between China and Japan, the leaders of China and Japan have agreed to enhance mutual co-operation in financial markets of both countries and encourage financial transactions between the two countries," the governments said in identically worded statements.

They said Japan's government also planned to purchase Chinese government bonds, and an application process for official approval of that was under way.

The governments gave no timetable for practical steps to put the pledges into action or the size of possible bond offerings. Commercial banks still have to create yuan-denominated letters of credit and other tools before traders in Japan can use the currency.

The moves might reduce the dominance of the U.S. dollar in East Asia, the world's fastest-growing region. The Kyodo News agency cited a Japanese official who told reporters some 60 per cent of trade between Japan and China is now settled in dollars, which requires companies to convert money between yen, dollars and yuan, adding to their costs.

Beijing controls the yuan's exchange rate and the flow of money into and out of China's booming economy. But the government has begun allowing limited use of yuan for trade. It said this month that some companies that obtain Chinese currency abroad will be allowed to invest it in mainland financial markets.

Most trade in yuan is conducted through Hong Kong, where Beijing also has created a market for yuan-denominated bonds that McDonald's Corp. and some other foreign companies have used to raise money to invest in their mainland operations.

The easing of controls on bond sales could help to reduce costs for Japanese companies that need to raise money to invest in their China operations.

The communist government keeps China's bond and other financial markets sealed off from global financial flows. That helped the country avoid the turmoil of the 2008 global financial crisis but has slowed the development of markets that Chinese leaders want to support economic development.

The latest pledges also might help to promote moves to allow the yuan to trade more freely on currency markets.

The United States and other trading partners complain that Beijing's currency controls keep the yuan undervalued, giving China's exporters an unfair price advantage and hurting foreign competitors at a time when the global economy is struggling.

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Monday, Dec. 26, 2011
Japan to start purchasing Chinese government bonds

Kyodo

BEIJING — Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao agreed Sunday to step up cooperation in international finance, with Japan to begin purchases of Chinese government bonds and both to encourage the use of their own currencies instead of the dollar when settling bilateral trades, officials said.

The two leaders also decided during their talks in Beijing to set up a working group composed of officials from both countries to discuss private-sector requests on deregulation and other issues.

Chinese authorities control capital inflows and allow only designated countries to purchase limited amounts of their government bonds. Japan is now expected to join that process.

The amount of Chinese bonds Tokyo will purchase is unknown. A senior Japanese official only described the amount as "small."

The official also denied that the move reflected a desire by Tokyo to diversify how it invests its foreign-exchange reserves, a large part of which has been used to buy dollar- and euro-denominated assets.

Japan hopes that buying Chinese government bonds will lead the countries to exchange crucial economic information, the official added. China has recently expanded its buying of Japanese government bonds.

Some 60 percent of bilateral trades have been settled using the dollar, which has required Japanese and Chinese companies to first exchange yen or yuan into the U.S. currency. Encouraging settlements in their currencies would thus enable exporters and importers to cut foreign-exchange costs and risks.

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Yen-Yuan Trade Plan to Cut Dollar Dependence of China, Japan

December 26, 2011, 10:06 AM EST

By Toru Fujioka

(Adds Chinese foreign ministry comment in 7th paragraph.)

Dec. 26 (Bloomberg) -- Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.

“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,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

Currency Swap

China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.

Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

The move by China and Japan to strengthen market cooperation “benefits the ease of trade and investments between the two countries,” Chinese Foreign Ministry spokesman Hong Lei said today in Beijing. “It strengthens the region’s ability to protect against risks and deal with challenges.”

The yuan traded in Hong Kong’s offshore market gained 0.5 percent offshore last week and touched 6.3324 per dollar, the strongest level since trading started in July 2010. Its discount to the exchange rate in Shanghai narrowed to 0.1 percent, from a record 1.9 percent on Sept. 23.

Yuan Gains

The yuan gained 0.05 percent in Shanghai to 6.3330 per dollar today and was little changed at 6.3450 in Hong Kong. It strengthened 4.3 percent this year, the best-performing Asian currency excluding the yen. The currency is allowed to trade 0.5 percent on either side of that rate. The yuan is a denomination of the renminbi.

Japan exported 10.8 trillion yen to China in the year through November, and imported 12 trillion yen, according to Ministry of Finance data. The deficit with China widened to 1.2 trillion yen, from 418 billion yen in January-to-November 2010. About 60 percent of the trade transactions are settled in dollars, according to Japan’s Finance Ministry.

Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would help reveal more information about financial markets in China. Noda said in September 2010, when he was finance minister, that Japan should be able to invest in China given that its neighbor buys Japanese debt. Japan holds $1.3 trillion of foreign-currency reserves, the world’s second largest after China’s $3.2 trillion.

Chinese Debt

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore. Japan will start to buy “a small amount” of China’s bonds, a Japanese government official said on condition of anonymity because of the ministry’s policy, without elaborating.

China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen, Japan’s Ministry of Finance said on Dec. 8.

Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.

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Japan, China to launch direct yen-yuan trade on June 1

Mon May 28, 2012 8:41pm EDT

* Move aimed at facilitating trade, financial transactions
* Deal is part of agreement at bilateral summit in December

By Tetsushi Kajimoto

TOKYO, May 29 (Reuters) - Japan and China will launch direct yen-yuan trade in the Tokyo and Shanghai markets from June 1 to facilitate trade and financial transactions between Asia's two biggest economies, Japanese Finance Minister Jun Azumi said on Tuesday.

The step follows an agreement between the leaders of the two countries in December to promote direct trading of their currencies without the interim step of using dollars to set exchange rates.

"By conducting transactions without using the third country's currency, it will bring merits of reducing transaction costs and lowering risks involved in settlements at financial institutions," Azumi told reporters after a cabinet meeting.

"That will contribute to improve convenience of the both countries' currencies and reinvigorate the Tokyo market," he said.

The People's Bank of China said it will actively support development of the direct yuan/yen trading.

"Developing the direct yuan/yen trading will help form the direct yuan/yen exchange rate and reduce the trading cost for entities and promote the use of the yuan and yen in bilateral trade and investment as well as help strengthen financial cooperation between the two countries," it said in a statement.

A separate statement issued by the China Foreign Exchange Trade System said it will provide a market-making system for the direct yuan/yen trading.

Previously, the yuan/yen exchange rate was based on the yuan/dollar mid-point rate and dollar/yen rate.

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Companion Thread:

• Secret moves launched by China, Russia, Japan, France, Arab States to end the Dollar

Japan and China to start direct currency trading on Friday

May. 29, 2012 - 02:35PM JST

TOKYO —

Japan and China will start direct currency trading this week, Tokyo said Tuesday, the first time Beijing has let a major unit other than the dollar swap with the yuan.

The move, which will scrap the greenback as an intermediary unit, comes as China introduces measures as part of a long-term goal of internationalizing its currency to rival the dollar.

The two-way trade will also be allowed to move in a wider range than the narrow band at which the dollar and yuan change hands, Dow Jones Newswires and the Nikkei business daily reported.

China will set a daily rate based on dealer quotes with trade allowed to move within a 3% band above or below that rate, the reports said, compared with a 1% band fixed to yuan-dollar trading.

The Chinese central bank earlier Tuesday introduced a rate of 7.9480 yuan for every 100 yen, Dow Jones said.

However, there will be no fixed rates in Tokyo trade with the currencies trading freely, according to the same media reports which provided no further details.

The yen does trade freely against other major currencies on global foreign-exchange markets, including the greenback, with the dollar buying 79.50 yen in Asian afternoon trade on Tuesday.

“From June 1, the yen-yuan exchange rate will be constantly indicated in both markets, facilitating full-fledged direct exchange trading,” Finance Minister Jun Azumi told a regular press briefing.

By not using the dollar as an intermediate currency “we can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations’ currencies more useful”, he added.

The announcement comes as China introduces measures as part of a long-term goal of internationalizing the yuan to rival the dollar as the world’s benchmark currency.

Beijing’s tightly managed currency policy has triggered huge trade deficits in the United States, which accuses China of artificially undervaluing the yuan to boost exports, and has been a long-running source of friction between the world’s two largest economies.

On Tuesday, Beijing described yuan-yen trade as an “important step” in “strengthening cooperation between China and Japan in developing financial markets and mutually promoting direct trading between the two currencies based on market principle.”

China overtook Japan to become the world’s second-largest economy in 2010, and the neighbors are forging closer business ties despite frequent diplomatic spats over territorial claims and lingering historical animosities.

China is Japan’s largest trading partner, but about 60% of their mutual trade is denominated in U.S. dollars.

In March, Japan said it had won approval from Beijing to buy Chinese government bonds for the first time—Beijing does not allow investors to freely purchase its debt, requiring official approval instead.

Tokyo said it got the green light to buy Chinese government bond issues worth about 65 billion yuan ($10.25 billion), a relatively small amount that was seen as largely symbolic.

The economic powerhouses have also agreed to promote the use of their currencies in bilateral transactions—such as yuan-denominated foreign direct investment by Japanese companies in China—to reduce foreign exchange risks.

The yen, meanwhile, hit historic highs against the dollar last year, denting exporters whose products become less competitive overseas when the currency strengthens.

Japanese finance officials have vowed to step into foreign-exchange markets again to tame the value of the unit, which is increasingly seen as a safe-haven currency as the euro takes a hit owing to worries about the debt-hit eurozone.