People's Bank of China, the central bank, said on Tuesday it "actively" supports direct trading between the yuan and the Japanese yen because it would help to form a direct exchange rate between the two currencies and strengthen bilateral economic ties.

The China Foreign Exchange Trade System announced on Tuesday it would launch direct trading between yuan and the Japanese yen on the inter-bank foreign exchange market, to "improve the trading mode between the two currencies" with the authorization of PBOC.

"This is an important step in implementing the joint statement of the leaders of the two countries on strengthening cooperation between China and Japan in developing financial markets and mutually promoting direct trading between the two currencies based on the market principle," said the central bank in a statement posted on its official website.

Development of direct trading between the yuan and the yen will contribute to the formation of a direct exchange rate between the two currencies, it said.

"This will help lower currency conversion costs for economic entities, facilitate the use of the yuan and the Japanese yen in bilateral trade and investment, promote financial cooperation and enhance economic and financial ties between the two countries," it added.