Currency Agreement for Japan and China

The following is an excerpt from an article in The New York Times that quotes Finance Professor Jeff Bergstrand about the currency agreement between Japan and China. To read the entire article visit: Currency Agreement for Japan and China


China and Japan have agreed to start direct trading of their currencies, officials announced during a visit here on Monday by Japan’s prime minister, Yoshihiko Noda.

Japan will also apply to buy Chinese bonds next year, allowing it to accumulate more renminbi in its foreign-exchange reserves. The moves were among several that emerged from Mr. Noda’s meetings with President Hu Jintao, which focused on how the two nations could work together to maintain peace on the Korean peninsula.

China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars. Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency.

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