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International Relations

Fostering ties:Prime Minister Narendra Modi with his Japanese counterpart Shinzo Abe (right) in Tokyo.AP  

India and Japan signed a currency swap agreement worth $75 billion during Prime Minister Narendra Modi’s visit to Japan, the government announced on Monday.

“The Prime Ministers of India and Japan, building on great friendship between the two countries and to further strengthen and widen the depth and diversity of economic cooperation, agreed during Prime Minister Modi’s visit to Japan, to conclude a Bilateral Currency Swap Agreement for an amount of $75 billion,” the Indian government said in a statement. A currency swap typically involves the exchange of interest and sometimes of principal in one currency for the same in another currency. Interest payments are exchanged at fixed dates through the life of the contract.

The currency swap agreement, the government said, was an important measure in improving the confidence in the Indian market and that it would not only enable the agreed amount of capital being available to India, but it will also bring down the cost of capital for Indian entities while accessing the foreign capital market.

‘More stability’

“The swap arrangement should aid in bringing greater stability to foreign exchange and capital markets in India,” the government said. With this arrangement in place, prospects of India would further improve in tapping foreign capital for country’s developmental needs.

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