JAKARTA -- The Indonesian government has terminated its contracts with investment bank JPMorgan Chase following its downgrade of the country in a November report. Finance Minister Sri Mulyani Indrawati calls the report "misleading."
JPMorgan named Indonesia one of the "losers from Trumponomics" in its Nov. 13 report, citing the spike in the volatility of the bond market following Donald Trump's win in the U.S. presidential election. The U.S. investment bank downgraded Indonesia from "overweight" to "underweight."
The Indonesian government in early December decided to terminate its contracts with JPMorgan in response to the report. On Tuesday, Indrawati explained the reason behind the government's decision.
"A nation's economy is affected by fundamental and psychological factors. The government is open to critics, but the JPMorgan cuts its recommendation ... without a credible assessment," the minister said.
She adds the "misleading" report does not reflect the true condition of Indonesia, and may scare away investors, despite the many reforms the government has introduced over the past couple of years.
"And [the reforms] have led to better economic fundamentals. We are guarding this republic professionally," said the former managing director of the World Bank, who was only re-appointed as the finance minister in July 2016.
JPMorgan has been removed from the Finance Ministry's latest list of primary bond dealers. Effective from Jan. 1, it also no longer serves as one of the so-called "perception banks," namely local and foreign banks appointed by the Indonesian government to receive payments of taxes and some other sources of income for the state.
A copy of a letter to JPMorgan, signed by the Indonesian director-general for treasury on Dec. 9, said the downgrade "has the potential to disrupt the stability of the national financial system," hence the Finance Ministry's decision to "cut all partnerships" with the investment bank.
Separately on Tuesday, Chief Economic Minister Darmin Nasution questioned paramaters used by JPMorgan in the research published in November. The downgrade, he said, is in contrast with Fitch Ratings, which last month upgraded its credit rating outlook of Indonesia from "stable" to "positive."
"Indonesia's economy is in a stable and good condition," the minister told reporters on Tuesday. "JPMorgan must prove the credibility of its research."
JPMorgan said in response to the government's decision that its business in Indonesia continues to operate "as usual."
"The impact on our clients is minimal and we continue to work with the Ministry of Finance to resolve the matter," it said in a statement.
Nikkei staff writer Wataru Suzuki contributed to the story.