India and Japan are advancing plans to introduce a local-currency settlement framework that would enable direct yen-rupee transactions for bilateral trade, reducing dependence on the US dollar. According to reports, the proposal could be included in the Joint Statement following the 16th India-Japan Annual Summit between Prime Minister Narendra Modi and Japanese Prime Minister Sanae Takaichi.
If approved, this would be the 1st time currency cooperation is formally included in a leaders’ joint statement between the 2 countries. Prime Minister Takaichi is on an official visit to New Delhi from July 1–3 at the invitation of Prime Minister Modi to strengthen cooperation in trade, investment, defence and other strategic sectors.
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 US dollar. The initiative aims to improve payment efficiency and support Japanese companies expanding their operations in India.
The proposal builds on the 2025 Japan-India Joint Vision, which first highlighted closer currency cooperation. Japan previously introduced a similar local-currency settlement mechanism with Indonesia in 2019, with bilateral transactions under the arrangement reaching $7.7 billion in 2025. The country is also exploring a comparable framework with Malaysia.
During the summit, the 2 leaders are expected to discuss strengthening cooperation under the Japan-India Joint Vision for the Next Decade, focusing on economic security, energy, investment and innovation. The visit follows Prime Minister Modi’s trip to Tokyo in August 2025, when Japan announced a target of investing 10 trillion yen in India over the next 10 years.
India and Japan maintain a Special Strategic and Global Partnership, with collaboration spanning trade, infrastructure, defence, clean energy and emerging technologies. Bilateral trade reached $27.5 billion in FY2025/26, while Japanese investment in India totalled $3.2 billion between April and December 2025. Around 1,400 Japanese companies currently operate in India, with nearly half engaged in manufacturing.
Japan is also supporting several major infrastructure projects in India, including the Mumbai–Ahmedabad high-speed rail corridor, while Japanese firms continue to expand investments in Indian businesses.
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