Japan is preparing to buy yuan-denominated bonds issued by the Chinese government under a proposed bilateral currency and financial agreement, the Nikkei business daily said Tuesday.

Japanese and Chinese officials are working out plans to have the pact signed when their premiers hold summit talks in Beijing on Sunday, the brief dispatch said.

The agreement will see money used from Japan's foreign exchange fund special account, along with the joint establishment of a green investment fund, the Nikkei said.

Japan is looking to diversify its forex fund special account, which currently focuses on dollar investments, the paper said.

It is also hoping to strengthen economic cooperation with China by supporting Beijing's efforts to turn the yuan into a more international currency, the Nikkei said.

The bond purchases may total up to 10 billion dollars, with buying carried out in stages through the special account.

The Chinese government already counts Japanese government bonds among its foreign-currency reserves.