India, Japan eye direct yen-rupee trade settlement to cut reliance on US dollar: Report
India and Japan are set to advance plans for a local-currency settlement framework that would allow direct yen-rupee transactions for bilateral trade and reduce reliance
India and Japan are set to advance plans for a local-currency settlement framework that would allow direct yen-rupee transactions for bilateral trade and reduce reliance on the US dollar, according to a Nikkei Asia report ahead of Japanese Prime Minister Sanae Takaichi’s visit to New Delhi today. The proposal might as well be included in the Joint Statement to be issued after Prime Minister Narendra Modi and his Japanese counterpart Takaichi meet for the 16th India-Japan Annual Summit during the official trip, Nikkei reported. This would be the first-time currency cooperation has been formally incorporated into a leaders’ joint statement between the two countries, Nikkei reported. Prime Minister Takaichi will begin her three-day visit to India today to explore ways to expand bilateral ties in a range of areas, including trade, investment and defence. At the invitation of Prime Minister Narendra Modi, Takaichi will be on an official visit to New Delhi from 1 July to 3 July for the 16th India-Japan annual summit, the Ministry of External Affairs (MEA) said.
What is the proposal? Japanese non-residents would be allowed to open accounts with Indian banks, enabling financial institutions in both countries to settle cross-border payments directly in yen and rupees without routing transactions through the US dollar, under the proposed framework, the Nikkei report said. The plan aims to facilitate trade and investment by making cross-border payments more efficient, particularly for Japanese companies expanding their presence in India. The proposal builds on the 2025 Japan-India Joint Vision, which first referred to closer currency cooperation. Its inclusion in the upcoming summit statement would mark a significant upgrade in bilateral financial cooperation. Japan implemented a similar local-currency settlement arrangement with Indonesia in 2019. Bilateral transactions under that framework reached $7.7 billion in 2025, according to Nikkei. Tokyo is also evaluating a comparable mechanism with Malaysia. What's on PM Takaichi’s agenda? PM Takaichi will meet Prime Minister Narendra Modi during her India visit in order to strengthen relations with India, which is of utmost importance for the realization of a "Free and Open Indo-Pacific," the Japanese Foreign Ministry said in a statement.
“The two leaders will discuss the further strengthening of mutually complementary cooperation under the Japan-India Joint Vision for the Next Decade announced at Prime Minister Modi's visit to Japan last August, in the areas of economic security, including energy, as well as economic growth through investment and innovation,” the Japanese Foreign Ministry said. Takaichi's visit follows PM Modi's trip to Tokyo in August 2025, during which the two countries unveiled the Japan-India Joint Vision for the Next Decade and Japan announced a target of investing 10 trillion yen in India over the coming decade. Special Strategic and Global Partnership India and Japan share a Special Strategic and Global Partnership, with cooperation spanning trade and investment, infrastructure, defence and security, clean energy and emerging technologies. Bilateral trade reached $27.5 billion in fiscal year 2025/26, while Japanese investment in India totalled $3.2 billion between April and December 2025, according to Indian government data quoted by Reuters. Japan is among India's largest investors, backing major infrastructure projects including a high-speed rail corridor between the cities of Mumbai and Ahmedabad.
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