Japan and India agreed on Friday to set up a $6 billion bilateral currency swap facility to ward off any future financial crisis, Japanese media reported.
Japanese Finance Minister Fukushiro Nukaga and his Indian counterpart Palaniappan Chidambaram met in New Delhi on Friday to confirm the framework and the two nations would launch the facility in the spring, Kyodo news agency quoted Japanese officials as saying in New Delhi.
The idea is to allow a country that finds itself with short-term liquidity problems to borrow from its partners' foreign reserves to absorb heavy selling pressure on its currency. Under the framework, Japan would swap up to $3 billion for Indian rupee to prevent any currency crisis in India. India would swap up to $3 billion for yen if Japan were in trouble, Japanese media reported.
The two countries agreed on a basic framework for a currency swap deal in August, but the size of the facility and the timing of its launch were not finalised then. Nukaga and Chidambaram also agreed that the two countries will hold working-level talks twice a year to examine each other's macroeconomic conditions, Japanese media reported.