Japan, China to start full-fledged talks on new currency swap pact

May 3, 2018

Tokyo- The Bank of Japan and the People's Bank of China will start full-fledged talks to conclude a new currency swap agreement, informed sources told Jiji Press on Wednesday.

The Japanese and Chinese central banks are expected to look mainly at a 3-trillion-yen scheme to swap yen for yuan and vice versa, according to the sources.

The two countries are moving to strengthen their financial cooperation, on the back of the current momentum for improving bilateral ties, with Japanese Prime Minister Shinzo Abe and Chinese Premier Li Keqiang slated to hold a summit in Tokyo on May 9.

Under the envisioned swap pact, the BOJ would provide yen funds to the PBC, which would in turn supply yuan funds to Japanese banks if they face difficulties procuring yuan in times of financial crisis.

Japanese banks could face such difficulties, given China's immature money market.

The previous currency swap pact, concluded between the two central banks in 2002, expired in 2013, following a deterioration in the two countries' relations, due partly to escalating tension over the Japanese-administered Senkaku Islands in the East China Sea.

But the BOJ and the PBC have since continued behind-the-scenes talks on a new currency swap deal.

They aim to accelerate the negotiations as this year sees the 40th anniversary of the conclusion of the Japan-China peace and friendship treaty. Jiji Press