Direct transactions between the yen and the rupiah
As announced on the website of Japan's Ministry of Finance today, a cooperation framework was announced based on the Memorandum of Cooperation signed last December to promote trade and direct investment between the two countries, which includes direct exchange rate indication between the Japanese yen and the Indonesian rupiah (to allow direct exchange between the yen and the rupiah without the use of the dollar in foreign exchange transactions) and various deregulations.
In the case of trade transactions, inter-company lending and borrowing, foreign direct investment, etc., the rupiah is transferred from the bank account of the bank selected as an Appointed Cross Currency Dealer (ACCD) at the head office in Japan to the bank account designated by the local subsidiary in Indonesia.
It will be converted straight from the original price, so the rate will be slightly better than usual.
ACCD on the Japanese side (as of August 31, 2020)
- Mizuho Bank
- Sumitomo Mitsui Banking Corporation
- Mitsubishi UFJ Bank
- Resona Bank, Ltd.
- BNI Tokyo Branch
ACCD on the Indonesian side (as of August 31, 2020)
- MUFG Bank, Ltd., Jakarta Branch
- PT. Bank BTPN, Tbk
- PT. Bank Central Asia (Persero), Tbk
- PT. Bank Mandiri (Persero), Tbk
- PT. Bank Mizuho Indonesia
- PT. Bank Negara Indonesia (Persero), Tbk
- PT. Bank Rakyat Indonesia (Persero), Tbk
Until now, there has been a lot of dissatisfaction with the poor rates and high fees for money transfers between Japan and Indonesia even on an individual basis, and there were many people who used other means of remittance such as TransferWise and Western Union.
There is a good chance that this ACCD-to-ACCD transfer will give you an advantage in terms of rates, fees and arrival times, which may cause some people to reconsider using the bank for international money transfers.
Deregulation to promote direct investment and trade
Indonesia's deregulation in 2016 of the obligation to denominate domestic transactions in rupiah and the obligation to hedge foreign currency borrowings from abroad with derivative assets, effectively restricting private sector borrowing in foreign currency from abroad,
So the deregulation included in the cooperation framework allows yen-denominated borrowing.
However, given the recent stability of Indonesia's foreign currency holdings and the rupiah's exchange rate, I think it is possible that this may be permitted under the condition that it is limited to group companies.
In addition, from the point of trade promotion, trade financing (trade finance) may be eased, but it is also possible for the Indonesian local subsidiary to have ACCD purchase its accounts receivable in rupiah (rupiah-denominated L/C settlement) without waiting for the payment of export proceeds to Japan, or to provide short-term bridge financing in rupiah.
This may be able to hedge your risk and improve your cash flow.
In addition, since the yen/rupiah rate is a relatively volatile currency pair, a foreign exchange hedge in which the yen/rupiah rate is pre-contracted on an ACCD inter-ACCD yen-denominated rupiah payment transaction may be permitted.