India, Japan eye direct yen-rupee trade settlement to cut reliance on US dollar: Report

At the 16th India‑Japan Annual Summit, Prime Ministers Narendra Modi and Sanae Takaichi are set to discuss a new local‑currency settlement framework that would enable direct yen‑rupee transactions for bilateral trade. The proposal would allow Japanese non‑residents to open accounts with Indian banks, permitting financial institutions in both countries to settle cross‑border payments directly in yen and rupees without routing through the US dollar, thereby improving payment efficiency for Japanese firms operating in India.

This initiative represents the first formal inclusion of currency cooperation in a joint statement between the two leaders, signalling a deepening of financial ties that complements existing trade, investment, and defence agreements. Japan has already implemented similar arrangements with Indonesia and is exploring one with Malaysia, and the proposed framework builds on the 2025 Japan‑India Joint Vision.

Beyond the immediate trade benefits, the settlement mechanism aligns with broader strategic objectives, including the “Free and Open Indo‑Pacific” vision and a decade‑long investment target of 10 trillion yen in India. The move is expected to strengthen economic security, foster innovation, and reinforce the Special Strategic and Global Partnership that underpins the two countries’ cooperation across infrastructure, clean energy, and emerging technologies.

(Source：Mint)