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The second India-Japan Finance Dialogue, held last week in Tokyo, brought together top government officials and regulators to discuss cooperation about international financial issues and to strengthen bilateral financial ties. According to the Ministry of Finance, the dialogue aimed to promote collaboration between the two countries, focusing on enhancing their strategic economic relationship.
The meeting was co-led by Atsushi Mimura, Japan’s Vice Minister of Finance for International Affairs, and Ajay Seth, Secretary of the Department of Economic Affairs, Government of India. Representatives from the Ministry of Finance and the Financial Services Agency of Japan, alongside Indian officials from the Ministry of Finance, Reserve Bank of India, Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority, Insurance Regulatory and Development Authority of India, and International Financial Services Centres Authority, participated in the discussions.
The ministry stated that participants exchanged views on the macroeconomic situations in both countries, third-country cooperation, bilateral ties, and various international issues. Discussions also covered topics related to the financial sector, such as regulation, supervision, digitalisation, and other policy initiatives. The dialogue featured a session with Japan’s financial services industry representatives, focusing on expanding investment in India through discussions on financial regulatory issues.
The next round of the India-Japan Finance Dialogue is scheduled to be held in New Delhi.
In a related development, the Bank of Japan raised its interest rate to 0.25%, marking only the second increase in 17 years, as it gradually moved away from its ultra-loose monetary policies. Despite this move, the Bank of Japan has downplayed the likelihood of a near-term rise in borrowing costs.
The recent interest rate changes have had implications for Indian companies and the government, which have increasingly relied on Japanese loans for fundraising due to Japan’s historically low rates. Indian companies like JSW Steel, Rural Electrification Corporation (REC), Power Finance Corporation (PFC), and Housing and Urban Development Corporation (HUDCO) collectively raised over ¥200 billion (approximately INR 11,000 crore) in yen-denominated debt over the past year. REC was the largest borrower among these, raising about ¥153 billion (around INR 8,390 crore) across three separate debt facilities since January 2024.
State governments have also tapped into Japanese financial resources. In April, Tamil Nadu secured a $300 million loan in Japanese yen from the World Bank to develop urban water and sanitation services. Last month, the state-run Power Finance Corporation obtained a long-term loan of ¥25.5 billion from the Japan Bank for International Cooperation (JBIC) to finance a 300.3 MW wind energy project in Karnataka. The Housing and Urban Development Corporation also recently arranged yen-denominated external commercial borrowing (ECB) worth US$400 million.
While India’s external debt-to-GDP ratio remains low at 20%, Japan constitutes around 11-12% of India’s external borrowing, making it one of India’s largest bilateral creditors.
Source: Mint