Since the start of 2020 till the end of July, the USD/JPY pair has lost value by 2.74 per cent while JPY/INR has depreciated by around 7.05 per cent

Since the start of 2020 till the end of July, the USD/JPY pair has lost value by 2.74 per cent while JPY/INR has depreciated by around 7.05 per cent. The appreciation in Yen is on account of safe haven demand still there among investors due to rising Covid-19 cases in major parts of the globe and possibility of a slower trajectory of global growth recovery going forward. Japan was the initial few countries to get the daily new cases of Covid-19 patients under control. However, a second wave of the virus emerged within the country by the end of June 2020 and now the daily new cases were back at its peak. Since 17 July, the country has been recording an average of 700 cases per day similar to its peak in April 2020. But the total number of cases in Japan is still less compared to other countries across the world.

Sources in the external affairs ministry point out that one of the reasons why Japan may not be agreeable to renegotiating the terms and conditions of the loan is because its economy is currently in its worst post-war recession on account of this health crisis which has taken on the country’s business activity and consumption. According to a Reuter’s poll, Japan’s economy is expected to shrink by 5.3 per cent in the current fiscal year and is expected to bounce back by 3.3 per cent only in 2021.

In an online media interaction recently, Railway Board chairman V.K. Yadav agreed that there will be a rise in the cost of the project but denied that there was any renegotiation on the loan with JICA. “Yes, there is cost escalation, but this is not the right time to review costs. That will be done when we finalise tenders. As in any project, we finalise the estimated cost based on historic cost. But the actual cost is known only when tenders are invited. That is the time when we come to know what the project cost is shaping up,” he said.

“As far as cost escalation is concerned, in any project whatever the estimated cost may be, when the work is being executed and when work is completed there is bound to be some increase in the cost either due to cost escalation, due to inflation or due to change in design,” he said.