JAKARTA - The central banks of Indonesia and Japan renewed their bilateral swap agreement (BSA) on Tuesday.

The BSA is a bilateral currency exchange agreement between the two countries, allowing for the exchange of Indonesian rupiah with US dollars and/or Japanese yen as a second line of defense in maintaining external resilience.

The BSA between Indonesia and Japan was first signed in February 2003 and has been extended several times. The latest renewal was signed by Bank Indonesia Governor Perry Warjiyo and Bank of Japan Governor Kazuo Ueda, effective from Oct 14, 2024, to Oct 13, 2027.

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"This renewed cooperation allows Indonesia to exchange rupiah for US dollars and/or Japanese yen up to $22.76 billion or the equivalent value in Japanese yen," said Bank Indonesia's Communication Department Executive Director Ramdan Denny Prakoso in Jakarta on Tuesday.

Indonesia and Japan view the extension of the BSA as a means to strengthen financial cooperation between the two countries by providing a financial safety net, which is expected to contribute to financial stability at both regional and global levels.

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"The extension of this cooperation also highlights the importance of international partnerships as part of Bank Indonesia's policy mix, which is expected to enhance the external resilience of Indonesia's economy," said Prakoso.