Indonesia and Japan Strengthen Local Currency Cooperation

Enhanced Bilateral Transaction Framework

Bank Indonesia (BI) has taken a significant step in strengthening financial cooperation with Japan by enhancing their Local Currency Transaction (LCT) framework. The renewed Memorandum of Understanding, signed by Japanese Finance Minister Satsuki Katayama and BI Governor Perry Warjiyo, marks a crucial development in bilateral financial relations between the two nations.

Key Features of the Updated Agreement

The updated LCT framework, effective from December 15, 2025, is designed to promote the use of local currencies in bilateral transactions. This move is expected to reduce dependency on USD in trade and investment activities between Indonesia and Japan. The agreement builds upon the previous understanding reached on December 5, 2019, demonstrating continued commitment from both countries to deepen their economic cooperation.

Implications for Bilateral Trade and Investment

The implementation of the LCT framework is anticipated to have several positive impacts on bilateral trade and investment between Indonesia and Japan. By reducing currency conversion costs and mitigating exchange rate risks, the agreement is likely to encourage more businesses to engage in cross-border transactions. This development aligns with both countries' efforts to strengthen economic ties and promote financial stability in the region.