TOKYO (REUTERS) - Japan and China are working to create a new framework to bring together government and central bank officials to discuss economic policy coordination, such as steps to stabilise the yuan, the Nikkei newspaper said on Tuesday (Jan 26).

The move, which comes as concern over China's economic slowdown jolts financial markets, could help ease market strains by signalling that Asia's two largest economies are working together closely to stabilise global growth.

Japan hoped to assist China's efforts in reducing excess capacity and reorganising state-owned companies through the new framework, while China would aim to draw more direct investment from Japan, the Nikkei said.

The pair hoped to reach an agreement in March to create the new framework by the end of this year, which would also address issues like taxation, the paper said.

The Bank of Japan and the People's Bank of China could use the dialogue to discuss resuming their yen-yuan currency swap arrangement, it said.