BEIJING - The People's Bank of China (PBOC), China's central bank, announced Sunday it encourages the direct use of Chinese currency RMB, or the yuan, and Japanese yen in cross-border transactions between the two countries.

This will help reduce risks stemming from fluctuations of foreign exchange rates and transaction cost during trade settlement, according to a statement on the PBOC's website.

The statement said the central bank also encourages Japan to make direct RMB investment in the Chinese mainland.