Asia’s two biggest economies, Japan and China, are to start trading their currencies directly from the start of June.
Previously they have set exchange rates through relative dollar values.
The direct yen-yuan trade in the Tokyo and Shanghai markets is to smooth and cut the cost of trade and financial transactions between them.
It is also a small step towards boosting the yuan’s role as an international currency.
The move was announced by Japanese Finance Minister Jun Azumi.
“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.