China and Japan sign US$29 billion currency swap to forge closer ties
- Deal signed during Prime Minister Shinzo Abe’s visit to Beijing
- Asia’s largest economies join hands while trade war rages on
China and Japan have signed a currency swap deal worth 200 billion yuan (US$29 billion) – after five years without one – in a move that underlines their willingness to forge a closer financial relationship at a time when uncertainties in global markets are on the rise.
The deal was signed on Friday during Japanese Prime Minister Shinzo Abe’s visit to Beijing, underscoring the political significance of the world’s second and third largest economies joining hands while the trade war between China and the US rages on, analysts said.
The two countries also announced a slew of joint business deals during Abe’s visit.
Under the currency agreement, the People’s Bank of China and the Bank of Japan will be able to exchange up to 3.4 trillion yen for 200 billion yuan and vice versa over the next three years – a design that will help to ensure financial stability and facilitate financial ties, according to a statement from China’s central bank.
While the real value of the currency swap deal is limited – 200 billion yuan is a tiny amount for both China and Japan – it signals an improved relationship between the two countries.
Shen Jianguang, chief economist of JD Finance, said the scheme also injected some confidence in the Chinese market among Japanese companies at a time when the escalating US-China trade war was hurting business sentiment.