East Asian Giants Strengthen Financial Ties

Japanese Prime Minister Yoshihiko Noda recently visited Beijing to meet with China’s leaders. The two governments revealed a surprising plan to use their own currencies in bilateral trade, instead of in U.S. dollars, as part of an effort to strengthen financial ties between the two economic giants. The pledges came as a shock; the countries are competitively the second and third largest economies in the world. They also struggle with political issues regarding territory and other disagreements.

The East Asian countries also agreed to encourage the sale of bonds denominated in China’s yuan by foreign markets, Japanese companies as well as the Japan Bank of International Cooperation in China’s markets. Until now, these markets have been mostly closed to investors from outside.

“To support the growing economic and financial ties between China and Japan, the leaders of China and Japan have agreed to enhance mutual cooperation in financial markets of both countries and encourage fiscal transactions between the two countries,” the governments said.

East Asia is the fastest-growing region in the world today. This recent development is likely to significantly reduce the U.S. dollar’s dominance in the area.

Asian Shares Increase as Eurozone Meetings Continue

Asian shares saw a dramatic increase following this weekend’s meetings in Europe, which resulted in “good progress.” According to European finance ministers, the Eurozone plans to boost its $610 billion rescue fund in an effort to draw investors and convince markets that it is indeed capable of protecting floundering countries such as Italy and Greece.

Few real details were released after the meetings, though. Investors have continued to focus on the yen, which has reached a record post-war high of 75.78 against the dollar. As a result, Japanese finance minister Jun Azumi has called for “decisive steps” to slow the currency’s dramatic rise, amid concerns that the yen will hinder the country’s export market.

Hong Kong and Shanghai both climbed this week as well, as improved manufacturing data was released from China, but Europe’s crisis does not seem to have slowed. Debates are still common as the Eurozone struggles to find a solution for the economic issue without further provoking its richer nations, such as Germany, who have placed their limit after repeatedly bailing out the region’s weaker members.

“The mood of trading is generally optimistic that Eurozone policy makers will announce significant measures on Wednesday to bolster the bailout fund and resolve Greece’s debt crisis, while also supporting the region’s banks,” explained Stan Shamu of IG Markets.