Indonesia and Japan signed to extend a bilateral currency swap agreement on the sidelines of an annual meeting between the International Monetary Fund and the World Bank on October 9, Vietnam News reported from Jakarta.
Signatories were Governor of the Bank Indonesia Agus D.W. Martowardojo, Finance Minister Sri Mulyani Indrawati and Japanese Finance Minister Taro Aso, according to the Jakarta Global.
The 22.67 billion USD swap deal is almost double the size of the previous deal inked in 2013. Under the agreement, Indonesia can swap rupiah directly to yen at a predetermined exchange rate, instead of having to convert it first to other currencies, such as the US dollar.
The agreement could reduce the risk of fluctuating exchange rate which may pose to trade and investment between the two countries.
Indonesia also has swap agreements with China and the Republic of Korea, as well as multilateral swap facilities under the Chiang Mai Initiative involving the 10 members of the Association of Southeast Asian Nations (ASEAN).
These are designed to add additional layer of protection to the country's currency and were implemented following the 1998 Asia financial crisis, which forced it to borrow on unfavourable terms from the IMF.-