China & Japan to convert currencies directly

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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. The plans were announced during a visit to China by Japanese Prime Minister Yoshihiko Noda.

The two nations 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. As well, Japan said it was looking to buy Chinese government bonds.