Japanese Automakers Question Local Content Rules
Japanese automakers have raised concerns over Indonesia’s plan to increase EV local-content requirements from 40% to 60% in 2027. Industry representatives questioned whether the policy would genuinely deepen local manufacturing or mainly encourage assembly using imported components. The government said it would continue refining the rules while addressing investment barriers. “The government welcomes all the feedback,” said Susiwijono Moegiarso. Officials maintain the higher threshold is intended to strengthen domestic supply chains and reduce reliance on imports. (Jakarta Post)
BI Holds Interest Rate Steady
Bank Indonesia kept its benchmark interest rate unchanged at 5.75% despite pressure from high energy prices and a recent US Federal Reserve hike. BI said the decision was aimed at supporting the rupiah while keeping inflation within target and sustaining economic growth. “This decision is consistent with the strategy to stabilize the rupiah exchange rate amid strong external pressure,” Governor Destry Damayanti said. Instead of raising rates, BI is increasing incentives for hedging and foreign-exchange transactions to attract capital inflows. Analysts said the move gives BI more flexibility, though persistent external pressure could still lead to future rate hikes. (Jakarta Post)
Agrarian Reform Bill Draws Mixed Reactions
Indonesia’s House passed the agrarian reform bill into law, drawing both support and criticism from civil society groups. The law aims to improve land redistribution, prioritize farmers and marginalized communities, and create a new agrarian reform body reporting to the president. “People fighting for agrarian reform should no longer face criminalization or any forms of injustice,” said Agrarian Reform Consortium secretary-general Dewi Kartika. Supporters hope the law will help address long-standing land inequality and conflicts. Critics, however, questioned the rushed deliberation process and whether the law will meaningfully redistribute land from large landholders. (Jakarta Post)
Government Repays Loans from 1997-1998 Crisis
The government has fully settled its outstanding debt related to the Bank Indonesia Liquidity Assistance (BLBI) program issued during the 1997-1998 Asian financial crisis, Finance Minister Suahasil Nazara said. The settlement was completed in August 2026 using Rp 55 trillion in surplus funds from Bank Indonesia (BI), bringing an end to the government’s remaining securities issued as part of its response to the crisis, Suahasil said at a press conference on the state budget (APBN KiTA) at the Finance Ministry on Friday. Suahasil said the government had issued various types of bonds totaling around Rp 640 trillion at the time to address the financial crisis. “The government issued total bonds reaching Rp 640 trillion at that time, and we have been paying them back. Some of the types of bonds issued at the time were already paid off in July 2020, while some were paid off recently,” Suahasil said. The obligations had different repayment schedules. Recapitalization bonds were fully settled in July 2020, while the remaining securities related to BLBI were settled in August 2026. Suahasil said the latest settlement used BI’s Rp 55 trillion surplus funds based on the central bank’s audited 2025 financial statements. Read also: Recentralization concerns in fiscal, education heighten Under prevailing regulations, BI’s surplus is transferred to the state treasury and recorded as separated state assets, or kekayaan negara dipisahkan (KND). (Jakarta Post)
Indonesia Unfazed by US Russian Oil Tariffs
Indonesia says it will continue importing Russian oil despite new US tariffs targeting major buyers of Russian energy. Coordinating Economy Minister Airlangga Hartarto said Jakarta saw no need to reassess the plan. “There’s no [reassessment],” he said, noting Indonesia bought Russian oil during a period when US sanctions were temporarily eased. Indonesia began importing Russian crude in April and has an agreement covering up to 150 million barrels. The government maintains its purchases are limited compared with major buyers such as China and India. (Jakarta Post)
Indonesia’s LCT Volume Hits Record $49.4B
Indonesia’s Local Currency Transaction volume reached a record US$49.4 billion through August 2026, nearly double the total for all of 2025. “By the end of 2026, the figure will certainly be more than double that of last year,” BI Deputy Governor Thomas Djiwandono said. Indonesia currently has LCT arrangements with seven countries and is seeking to expand the network further. Demand for the Chinese yuan has also surged, prompting BI to launch an official RMB Clearing Bank in October. BI said the growth of local-currency transactions could strengthen Indonesia’s long-term economic stability. (Jakarta Post)
New York Offers Jakarta Municipal Bond Support
New York City has offered to send financial experts to Jakarta to support its planned municipal bond issuance, which would help fund major infrastructure projects. Jakarta Governor Pramono Anung discussed the plan with New York Mayor Zohran Mamdani during the Urban 20 Mayors Summit in New York. “I fully support Jakarta’s plan for municipal bonds,” Mamdani said, adding that New York was ready to share its experience with Jakarta officials. Jakarta plans to issue up to Rp 5.6 trillion in bonds through 2027 and 2028 to help finance projects such as LRT expansion and a new hospital. The proposal is still under review by the Jakarta City Council and relevant ministries. (Jakarta Post) Editor’s Note: Beginning in 2012 AICC promoted municipal bond finance, specifically revenue backed bonds, to successive Finance Ministers. The World Bank subsequently advocated them through a program, the Civil Credit Worthiness Initiative. Indonesia responded by crafting regulations enabling regional projects to be financed through bond offerings but to date has not approved a municipality.
Rupiah Slips below 18,000 Again
The rupiah has again breached a psychological threshold against the United States dollar as fading hope for a swift settlement of the Iran war pushes up global energy prices and inflation in Indonesia, triggering fresh capital outflows from Indonesia. The rupiah was trading below Rp 18,000 per dollar for much of Tuesday, before bouncing back slightly around the spot market closing time but still trading about 1.6 percent lower than a month earlier. Bank Indonesia (BI) executive Erwin Gunawan Hutapea wrote in a press statement on Tuesday that the weakening was “affected by continued concerns on global inflationary pressure and fiscal risks”. He noted that oil prices had climbed beyond $108 per barrel, pushing up expectations of further monetary tightening by the US Federal Reserve (Fed).
(Jakarta Post)