Japan, China plan to expand currency swap

Japan and China intend to expand a currency swap scheme to help each other avoid shortfalls in foreign currency reserves. Japanese and Chinese leaders agreed last December to allow private firms in the 2 countries to settle their transactions by the yen or yuan. Last month, direct inter-banking exchange of the yen and yuan began at commercial banks in both countries. Stable supply of the 2 currencies is indispensable, as yen or yuan settlements are expected to increase along with the expansion in trade between the 2 nations. The Japanese and Chinese governments plan to discuss how to expand the current currency swap scheme, which is now valued at about 3 billion dollars, Japan's (NHK World) website reported. The scheme is designed to help the central banks of the 2 countries secure the yen and the yuan if they run short of reserves. The framework was created a decade ago in the wake of the currency crisis in Asia. Japan hopes the expansion of the swap scheme will bring further stability to markets and facilitate trade between the 2 countries. It also wants China to do more for currency reform by increasing the yuan's circulation.