Last year, several countries including India began taking measures to reduce their dependency on US currency to make foreign trade payments in the wake of the economic sanctions and trade conflicts triggered by Washington. The Indo-Japan move is part of this trend.

New Delhi (Sputnik): India and Japan on Thursday activated a $75 billion currency swap agreement with the signing of a new Agreement for Bilateral Swap Arrangement (BSA) between the Reserve Bank of India and Bank of Japan.

The new BSA enables India to access 75 billion in US dollars whereas the earlier BSA had provided for US $50 billion. The BSA as a foreign trade payment mechanism was negotiated between India and Japan during the visit of Prime Minister Narendra Modi to Tokyo on 29 October 2018.

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"The agreement for the BSA has become effective from today i.e. 28 February 2019. India can access the agreed-upon amount of $75 billion for its domestic currency, for the purpose of maintaining an appropriate level of balance of payments or short-term liquidity," a statement issued by the finance ministry read.

The agreement is flexible and enables India to access even partial BSA amounts as per its needs under the currency swap at any point of time.

Welcoming the agreement, the Indian government expressed gratitude to Japan.

"This is in the spirit of strong partnership and carries out its strategic partnership further. This financial cooperation would further enhance the strong economic ties between India and Japan," the official statement added.

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India, the world's sixth-largest economy, had been facing difficulties in making payments to its major trading partners such as Iran, Russia and Venezuela after the Trump administration had imposed economic sanctions on them. With Russia and Iran, the Indian government has been trying to establish a mechanism to make import payments via domestic currency.

Last December, India's Ministry of Finance had notified the rate of exchange for Turkish lira and Korean won to facilitate trade and business with these two countries and ease the process of conversion of their respective currencies into Indian Rupees and vice-versa.

Also on 4 December 2018, India and the UAE signed a currency swap agreement for 35 billion rupees or 1.8 AED ($496 million approx) to reduce dependency on the US dollar in bilateral trade.