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Economy

First Japanese lender to be designated as yuan clearing bank

MUFG Bank considered strong candidate to work more closely with its Chinese unit

China's government, trying to internationalize its currency, is about to make it easier for a Japanese bank to conduct yuan-based transactions. (Photo by Akira Kodaka)

TOKYO -- China plans to designate its first Japanese bank as a yuan clearing bank, according to government sources.

MUFG Bank is considered a strong candidate.

The nations' governments are preparing to conclude an agreement on the matter when Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping meet on Thursday, the sources said.

The arrangement is part of efforts to improve Sino-Japanese relations.

China restricts cross-border yuan transactions. A designated clearing bank becomes eligible to receive a certain amount of yuan from its Chinese unit, making it easier for the overseas bank to conduct yuan-based transactions.

China usually designates overseas units of Chinese state-owned banks as yuan clearing banks as it pursues a more global currency. Apart from Chinese banks, JPMorgan Chase Bank has been named a clearing bank.

Japan and China agreed to set up a yuan clearing bank in Japan when Abe met Chinese Premier Li Keqiang in May 2018. China has already designated a Japanese unit of a Chinese bank as a clearing bank.

Sino-Japanese monetary cooperation stalled in 2012, when the two countries again locked horns over the Senkaku Islands. But recent efforts to improve bilateral relations are changing this.

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