TOKYO - Japan and China will begin direct yen- yuan trading on June 1, Japanese Finance Minister Jun Azumi said Tuesday, abandoning the existing system that determines yen-yuan rates via their US dollar values.

The yen-yuan trading will be dealt at the Tokyo and Shanghai markets, Azumi told a press conference in Tokyo. ?

Azumi said the direct trading will lower transaction costs and reduce settlement risks of the financial institutions and facilitate the using of both the Japanese and Chinese currencies.

The yen-yuan direct trading will also inject vitality into Tokyo's financial market, he said.

It is also the first time China has allowed a major currency other than the U.S.dollar to trade directly with the yuan, Japanese media reported. The move is broadly seen as a way to boost trade and investment between the world's second- and third- largest economies. ?

China overtook Japan to become the world's second-largest economy in 2010, and the two countries are working actively together to forge closer business ties.