Indonesia Plans Higher Asset Yields to Boost Rupiah and Restore Investor Confidence

Indonesia’s central bank and finance ministry have agreed to increase yields on Indonesian financial assets in an effort to attract foreign portfolio inflows and strengthen the rupiah, which has recently fallen to record lows. The announcement was made by Bank Indonesia (BI) Governor Perry Warjiyo following a meeting with government officials and lawmakers.

Warjiyo stated that both Bank Indonesia and the Finance Ministry would work together to enhance the attractiveness of Indonesian asset yields to encourage investors to return to the market. However, he did not provide specific details regarding how the policy would be implemented.

Indonesia has experienced significant capital outflows in 2026, driven by investor concerns over President Prabowo Subianto’s expansive spending programs, rising fiscal pressures, and growing fuel subsidy costs linked to the ongoing Iran conflict. These concerns have weighed heavily on market sentiment, contributing to a more than 30% decline in the Jakarta Composite Index (JKSE) and a sharp depreciation of the rupiah.

Investor confidence has also been affected by concerns over central bank independence, transparency within Indonesia’s stock market, and government plans to centralize exports of key commodities. As a result, foreign ownership of Indonesian government bonds has dropped to its lowest level in nearly two decades.

To stabilize the currency, Bank Indonesia has intensified intervention efforts in the foreign exchange market while simultaneously purchasing long-term government bonds in the secondary market to maintain liquidity. The Finance Ministry has also conducted bond buyback operations to help contain rising bond yields.

Market participants remain uncertain about how the newly announced policy coordination will impact government bond auctions and monetary operations. Recent data showed that one-year BI securities (SRBI) were auctioned at a weighted average yield of 7.25%, exceeding the yield on Indonesia’s 10-year government bonds.

Warjiyo also revealed that Bank Indonesia would increase the interest paid on government deposits held at the central bank, a move intended to ease concerns among international credit rating agencies. Finance Minister Purbaya expressed confidence that stronger coordination between fiscal and monetary authorities would help rebuild investor trust and improve market stability.

The latest measures follow Bank Indonesia’s unexpected 50-basis-point interest rate increase in May, which was aimed at supporting the rupiah and maintaining financial stability amid challenging market conditions.