India and Japan are expected to move forward with plans for a local-currency settlement framework that would enable direct yen-rupee transactions for bilateral trade, reducing dependence on the U.S. dollar, according to Nikkei Asia.
The report also noted that the proposal could be included in the joint statement to be released following the meeting between Indian Prime Minister Narendra Modi and Japanese Prime Minister Sanae Takaichi during the 16th India‑Japan Annual Summit.
This would mark the first time that currency cooperation is to be formally incorporated into a joint statement between the two nations’ leaders. Takaichi is on an official visit to New Delhi from July 1 to July 3 to discuss ways to deepen bilateral cooperation across various sectors, including trade, investment, and defense.
Under the proposed framework, Japanese non‑residents would be permitted to open accounts with Indian banks, allowing financial institutions in both countries to settle cross‑border transactions directly in yen and rupees without using the U.S. dollar as an intermediary.
The initiative is intended to support trade and investment by improving the efficiency of cross-border payments, particularly for Japanese firms expanding operations in India.
The proposal is based on the 2025 Japan-India Joint Vision, which initially outlined the goal of closer currency cooperation.
Japan introduced a similar local-currency settlement framework with Indonesia in 2019, with bilateral transactions under the arrangement reaching $7.7 billion in 2025, according to Nikkei. Tokyo is also considering a comparable arrangement with Malaysia.
During her visit, Takaichi is scheduled to meet Modi to further strengthen bilateral relations. In a statement, Japan’s Foreign Ministry said that reinforcing ties with India remains a key priority for advancing its vision of a ‘Free and Open Indo-Pacific.’
Takaichi’s visit follows Modi’s trip to Tokyo in August 2025, during which both countries unveiled the Japan-India Joint Vision for the Next Decade and Japan committed to investing 10 trillion yen in India over the next ten years.
India and Japan maintain a Special Strategic and Global Partnership, with cooperation spanning trade, infrastructure, defense, clean energy, and emerging technologies. Bilateral trade reached $27.5 billion in FY2025/26, while Japanese investment in India totaled $3.2 billion between April and December 2025, according to government data cited by Reuters.
Japan remains one of India’s largest investors, supporting major projects such as the Mumbai‑Ahmedabad high‑speed rail corridor and acquiring significant stakes in Indian firms, including a $1.6 billion deal for 20% of Yes Bank.
At last year’s summit, both sides also agreed on a defense cooperation framework and a 10‑year roadmap to strengthen economic ties.
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