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