Just days after signing economic cooperation agreements with China, Japan signed a currency swap deal with India, valued at $75 billion. According to Bloomberg-Quint, this new agreement will help bolster the rupee, which has seen a significant loss in value during the recent months. The deal should also help India access foreign capital and foreign investments, and allow both countries to trade their currency for USD.
“The currency swap agreement will have a positive impact on financing India’s current account deficit,” said India’s former Finance Minister Shaktikanta Das in a tweet. Das also served as the country’s Secretary of Economic Affairs.
This is not the first currency swap arrangement that India and Japan have signed, but it is significantly larger than the previous agreement.
Japan also signed a currency swap deal with China last week. According to a report from Al Jazeera, that agreement is worth an estimated $30 billion. However, the two countries also signed several other documents, which have brought the two countries closer together.
Although the two Asian neighbors have maintained diplomatic channels since 1972, the former adversaries have found themselves at odds with one another in recent times. Despite this, Japan’s Prime Minister Shinzo Abe and China’s Premier Li Keqiang stated that the two countries would be united in work to denuclearize the Korean peninsula.
In addition to warming diplomatic relationships, the countries also inked close to $18 billion worth of new business deals.
“From competition to co-existence, Japan and China bilateral relations have entered a new phase,” said Prime Minister Abe while briefing reporters, according to Al Jazeera. “Hand in hand with Premier Li, I would like to advance our ties forward.”
While Japan and China celebrate a new era of cooperation, India continues to fight internal political battles. According to Reuters, the country’s leadership is currently in a dispute with the central bank, after the bank’s deputy governor publicized his disapproval of the government’s plan to exercise more control over the group. Viral Acharyam, the Deputy Governor of the Reserve Bank of India issued a strong condemnation of what he believes is intrusive government oversight.
“Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution,” said Acharyam recently while speaking to Indian industrial leaders.
However, with renewed ties with Japan, India now has a robust financial ally, which could become more critical than ever if New Delhi chooses to continue to purchase Iranian oil after the US sanctions on the Gulf state take effect. According to Reuters, both India and China are still committed to buying Iranian oil despite threats from the US, and may be hoping that the Japanese will shield them from any retaliatory action taken by the US.