Japan and India are set to advance plans for a local-currency settlement framework that would allow direct yen-rupee transactions, reducing reliance on the US dollar for bilateral trade.
According to a report in Nikkei Asia, the proposal is expected to be included in the joint statement to be issued after Japanese Prime Minister Sanae Takaichi and Prime Minister Narendra Modi meet in New Delhi later this week.
According to the report, this would be the first time currency cooperation has been formally incorporated into a leaders’ joint statement between the two countries.
Takaichi will visit India from July 1 to 3 for the 16th India-Japan Annual Summit, her first official visit since taking office in late 2025.
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Under the proposed framework, 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 U.S. dollar.
The move is expected to reduce foreign-exchange conversion costs, lower remittance charges and shorten settlement times by eliminating the need for correspondent banks in third countries, the Nikkei report said.
Japan’s Ministry of Finance is targeting the signing of a memorandum of cooperation with the Reserve Bank of India during fiscal 2026 to promote the use of local currencies in bilateral transactions.
The initiative is aimed at facilitating trade and investment by making cross-border payments more efficient, particularly for Japanese companies expanding their presence in India.
Japan implemented a similar local-currency settlement arrangement with Indonesia in 2019. Bilateral transactions under that framework reached the equivalent of $7.7 billion in 2025, according to Nikkei. Tokyo is also evaluating a comparable mechanism with Malaysia.
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.
In a statement issued last week, India’s Ministry of External Affairs said the summit “will provide an opportunity for both sides to review and strengthen the full spectrum of bilateral cooperation as well as exchange views on regional and global issues of mutual interest.”
Talks are expected to focus on defence cooperation, resilient supply chains, semiconductor manufacturing, artificial intelligence and the automobile sector, amid shared strategic interests in the Indo-Pacific.
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A delegation of around 50 Japanese business executives, including representatives from Suzuki Motor, Itochu Corporation and Toyota Tsusho, will accompany Takaichi, underscoring the economic significance of the visit.
The visit follows Modi’s trip to Tokyo for the 15th India-Japan Annual Summit in August 2025 and his meeting with Takaichi on the sidelines of the G7 summit in France earlier this month, where both leaders reaffirmed their commitment to expanding trade and investment ties.
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