Japanese yen is set to close up for the second week against the euro as shares retreat in Asia.The safe-haven currency also made gains against the dollar this morning (August 21st) after it emerged that China is set to tighten capital rules for the banking industry amid concern that lending is overstretched.Although the issue came to the fore earlier this month, sources close to the China Banking Regulatory Commission today told Bloomberg that the regulator had sent a draft of the new rules to banks.Banks are believed to have until August 25th to respond to the document, which requires financial institutions to to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital."A drop in China's stocks this week is prompting the government to take steps to tighten monetary policies, increasing demand for the yen. Everybody is talking about China these days" said Akira Hoshino, chief manager of the foreign-exchange trading department in Tokyo at Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's largest lender.