In the spirit of economy and progress, the Philippines and Japan are looking at the possibility of setting up a Peso-Yen-Direct-Trading framework that would allow broader use of each countries’ respective currency.
If the framework’s implementation becomes successful, companies and individuals transacting with Japanese counterparts can directly convert payments and remittances to them in big volumes, doing away with the need to first convert the amounts to dollars.
Sharing sentiments, BSP and JMoF added that the framework is also seen as a “good opportunity” to boost bilateral economic and commercial ties, as this will likely boost trading and investment volume between the two countries.
In a press release on Friday, the Bangko Sentral ng Pilipinas (BSP) and the Ministry of Finance of Japan (JMoF) said BSP Governor Benjamin E. Diokno and Japanese Finance Minister Taro Aso signed a letter of intent signifying mutual interest of both offices to explore creating a peso-yen exchange facility.
“Under the envisioned trading framework, the JPY can be directly priced against PHP, and vice versa, reducing foreign exchange risks and encouraging wider use of both currencies,” the BSP and JMOF said.
The plan to establish a peso-yen spot market comes after the Bank of China in October 2018 signed a memorandum of understanding with 13 other banks in the Philippines to establish a peso-renminbi spot trading facility.
Sought for comment, Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the plan is “good for both countries.”
“It will create easier access to each other’s currencies, therefore, economies,” Mr. Asuncion said in a mobile phone message. “It will be generally favorable to further development of trade between the two Asian countries.”
Philippine Statistics Authority data show Japan as the third-biggest foreign market for Philippine goods last year after the United States and Hong Kong, accounting for 14% of total merchandise exports at $9.474 billion, down 12.7% from 2017. Japan was also the third-biggest source of imports to the Philippines behind China and South Korea, accounting for 9.7% at $10,549 billion, down 3.3% from 2017.