China Japan Currency Swap Agreement

The objectives of swap agreements vary from country to country, including stabilizing financial markets and controlling financial crises. With regard to the agreement with China, Japan foresees a situation in which Japanese companies will receive the Chinese yuan, which the Chinese Central Bank provides through Japanese banks, when systemic problems prevent them from trading with their Chinese cash holdings. The deal will allow the two sides to exchange a total of 200 billion yuan (about $28.78 billion) against 3,400 billion Japanese yen, and vice versa, the People`s Bank of China (PBOC) said on its website. Another agreement was signed for the creation of a renminbi clearance bank in Japan. China and Japan signed 10 more documents on Friday morning, under the eyes of Premier Li Keqiang and Abe, in the Great Hall of the People, to intensify cooperation in areas such as the securities market and senior care. The two sides will agree on a tenfold increase in the swap ceiling of about $3 billion in the previous agreement, reflecting the expansion of trade and investment between Japan and China. Premier Abe and Chinese Premier Li Keqiang agreed to begin discussions on the resumption of currency swaps at their Tokyo summit in May, and the monetary authorities of the two countries discussed swap amounts and other conditions. TOKYO (Reuters) – Japan and China signed a currency exchange agreement of up to $30 billion on Friday – von Tokyo`s biggest bilateral agreement – to boost financial stability and boost activity in both countries, according to Bank of Japan data. BEIJING, October 26 (Xinhua) — The Central Bank of China said Friday it has reached a bilateral sweatshirt-exchange agreement with its counterpart in Japan. TOKYO — The Japanese and Chinese governments have decided to reinstate a monetary sweapage agreement for the Japanese yen and the Chinese yuan, with a ceiling of about 3 trillion yen, as people familiar with the decision have said. The deal will be reached at a summit between Prime Minister Shinzo Abe, who will visit China from October 25, and Chinese President Xi Jinping in Beijing on October 26. An agreement ensued between the central banks of the two countries.

Swaps are implemented to provide the capital of the other currency during a currency crisis or other severe shortage of money in the event of a currency crisis. While the previous agreement was aimed at responding to the current account crisis and stabilizing foreign exchange markets in Asia, the new swap agreement aims to support each country`s economic and financial activities by strengthening financial stability. The BOJ would be prepared to provide liquidity in the yuan currency if Japanese financial institutions encounter unexpected difficulties in the settlement of the yuan and the bank believes that the liquidity provision is necessary to ensure the stability of the Japanese financial system, she added. China and Japan pledged closer ties on Friday as the two countries at a “historic turning point” and signed a wide range of agreements, including a $30 billion currency swap pact amid rising trade tensions with Washington. The two sides have signed a biszus-1000 dollar agreement for a swea-currency of up to $30.29 billion (3.4 trillion yen) that will apply until 2021. They also launched an agreement to create a yuan clearing bank. The resumption of foreign exchange has been demanded by many in the business world, as improved bilateral relations could boost Japanese business investment in China. A person close to the Japanese government said the recovery “will be a boost to economic activities,” adding that it would have symbolic significance for better relations between Tokyo and Beijing.

The previous currency exchange agreement between Japan and China, signed in 2002, expired in September 2013 after relations between Tokyo and Beijing bedated due to Japan`s nationalization of the Senkaku Islands in the East China Sea, which China also claims. The aim of the agreement is to ensure that