Malaysia and Japan are stepping up financial cooperation through a twin-track move to promote local-currency settlement for trade and investment while reinforcing a US$6 billion bilateral swap arrangement aimed at strengthening financial stability.
Bank Negara Malaysia (BNM) and Japan’s Ministry of Finance have signed a memorandum of cooperation to establish a framework promoting the use of local currencies in eligible cross-border trade and investment transactions.
The initiative is intended to deepen bilateral financial cooperation while supporting closer trade and investment links between the two countries.
Under the memorandum, both sides agreed to work on initiatives encouraging greater use of local currencies in eligible cross-border transactions.
The cooperation will also include information sharing and periodic discussions between Malaysian and Japanese authorities, creating a more structured platform to advance local-currency settlement.
The move adds another layer to Malaysia-Japan economic ties by supporting direct settlement in local currencies for trade and investment activities, rather than relying solely on third-country currencies.
Separately, Japan and Malaysia have signed their third Bilateral Swap Arrangement, with a maximum swap amount of up to US$6 billion.
The agreement was signed between the Bank of Japan (BOJ), acting as agent for Japan’s Minister of Finance, and BNM, and will take effect on Sept 18, 2026.
The arrangement allows both sides to exchange their respective local currencies for US dollars. It also allows BNM to exchange Malaysian ringgit for Japanese yen.
BNM and BOJ said the swap arrangement would further deepen financial cooperation between the two countries and enhance regional financial stability.
Taken together, the two agreements strengthen Malaysia-Japan financial ties from both a commercial and stability perspective.
The local-currency settlement framework is aimed at supporting cross-border trade and investment flows, while the US$6 billion swap arrangement provides a mechanism for currency liquidity during periods of financial stress.
The combination gives both countries a broader framework for deepening financial integration while supporting bilateral commerce and regional market stability.
