Indonesia and Japan are rewriting the rules of cross-border finance. By settling over US$5.1 billion in trade and investment using rupiah and yen, the two nations are accelerating a shift away from dollar dominance. This bold move signals a new era of regional monetary cooperation, digital payment integration, and inclusive economic development.
Key Facts & Background
- Local Currency Transaction (LCT) Milestone:
- As of July 2025, Indonesia–Japan LCT volume reached US$5.1 billion (Rp82.9 trillion), nearly doubling from US$2.23 billion in the same period of 2024.
- Transactions are settled directly in rupiah and yen, bypassing the US dollar.
- LCT Framework & History:
- Bilateral LCT cooperation was formalized in 2019 and implemented in 2020.
- The initiative aims to reduce foreign exchange conversion costs and enhance transaction efficiency.
- User Adoption:
- Average monthly LCT users rose to 2,072 in 2025, up from 1,360 in 2024.
- QRIS Cross-Border Integration:
- Bank Indonesia launched QRIS (Quick Response Code Indonesian Standard) in Japan on August 17, 2025.
- Indonesian users can now make direct payments at Japanese merchants using domestic apps, with no currency exchange required.
- QRIS is initially available at 35 merchants, with plans for expansion.
- Strategic Vision:
- BI Governor Perry Warjiyo emphasized the integration of LCT with digital payments, financial markets, and MSME empowerment.
- Japan’s Ministry of Finance reaffirmed its commitment to deepening bilateral financial cooperation.
Strategic Insights
Indonesia and Japan’s deepening use of Local Currency Transactions marks a strategic pivot in Asia’s financial architecture. By bypassing the US dollar in bilateral trade and investment, both countries are asserting greater monetary sovereignty and insulating themselves from external currency volatility. This shift is especially timely amid global efforts to de-dollarize and diversify reserve currencies.
The rapid growth in LCT volume—more than doubling year-on-year—reflects strong momentum in bilateral trade and a maturing financial infrastructure. The direct use of rupiah and yen not only lowers transaction costs but also strengthens liquidity in local currency markets. For Indonesia, this supports the rupiah’s internationalization and aligns with broader ASEAN efforts to promote regional currency usage.
The integration of QRIS into the LCT framework is a game-changer. It transforms what was once a macro-level monetary initiative into a consumer-facing digital experience. Indonesian tourists, students, and MSMEs in Japan can now transact seamlessly using QR codes, eliminating the need for currency exchange or foreign bank accounts. This democratizes cross-border commerce and embeds financial inclusion into the heart of monetary cooperation.
Strategically, QRIS also enhances Indonesia’s digital payment ecosystem. With over 57 million users domestically, its expansion into Japan—and eventually other non-ASEAN markets—positions QRIS as a regional standard for interoperable payments. This supports Bank Indonesia’s vision of a digitally interconnected economy that empowers MSMEs and reduces reliance on cash.
Looking ahead, the LCT–QRIS synergy could extend into capital markets. BI has signaled interest in enabling yen-denominated purchases of Indonesian government bonds and securities. This would deepen financial integration and attract Japanese institutional investors, further anchoring the rupiah–yen corridor.
However, sustaining this momentum requires continued regulatory alignment, merchant onboarding, and public awareness. The success of QRIS in Japan will depend on its usability, merchant coverage, and integration with Japanese payment platforms. Likewise, expanding LCT to other sectors—such as tourism, education, and fintech—will be key to unlocking its full potential.
In sum, Indonesia and Japan’s LCT partnership is more than a monetary experiment—it’s a blueprint for resilient, inclusive, and digitally enabled economic cooperation. As geopolitical and financial landscapes evolve, this bilateral model offers a scalable path toward regional financial autonomy and shared prosperity.