Japan and China will start direct trading of their currencies as part of a broad agreement on bilateral ties to strengthen financial cooperation between the two Asian economic giants.

Japan’s Finance Minister Jun Azumi said that by not using the dollar as an intermediate currency, “we can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations’ currencies more useful”.

The Yen-Yuan exchange rate will be indicated in both markets starting June 1. People’s Bank of China said that the move could help boost trade and investment in both markets.

The PBOC fixed the central parity at CNY7.9480 for every Y100. The daily yen-yuan central parity rate was derived from the weighted average of prices given by the market makers.