Japan and India are two of the largest democracies in Asia, sharing a commitment to the rule of law and respect for human rights. Japan and India have continued to develop friendly relations founded on a long history of exchanges.

With a view to further enhance their friendly cooperative relations, both countries agreed to the Japan-India Global Partnership in August 2000 on the occasion of Prime Minister Yoshiro Mori’s visit to India. Furthermore, the two countries issued a joint statement called the “Japan-India Partnership in a New Asian Era” on the occasion of Prime Minister Junichiro Koizumi’s visit to India in 2005.

It is expected that Prime Minister Shinzo Abe will carry forward the agenda that his predecessors have laid. Nevertheless, the current state of economic relations between the two countries shows their potential has not been fully harnessed when compared to the role they are expected to play.

The total amount of trade between Japan and India has been rising since 2002, reaching approximately $5 billion in 2004. Bilateral trade figures have continued to remain positive and Japan is among India’s top five trading partners. Total trade between India and Japan was close to $6 billion in 2005-06.

India’s service exports of software to Japan have grown dramatically in recent years, marking a 65 percent increase in 2005 alone. At the same time, there have been no change in traditional major exports of commodities such as gems, marine products and iron ore. Manufactured goods such as automobile components still constitute a large proportion of India’s imports from Japan.

In this backdrop, the challenge is to diversify the trade structure. A robust economy always generates robust interest. India has now become a point of discussion in all forums across the world. Going by the number of Japanese delegation visits to India in the recent past, India now figures as a significant spot on the Japanese investment radar. Little wonder then that Japan has now been identified as the third-largest foreign direct investment (FDI) contributor to India from 1991 to July 2006. Japan’s cumulative FDI inflow in to India for this period has been $2.153 billion, which accounts for approximately 6 percent of total FDI inflows for the period.

As engagement between the two countries increases, the year 2007 has been declared the Indo-Japan friendship Year. The year has begun on a promising note with Japanese companies investing around $299.8 million in India over the past two months. Japanese FDI into India during 2005-07 has been to the tune of $1.8 billion. Not only Japanese FDI, equity investment from Japan into India is also on the rise, touching almost $4.9 billion. Thus there are high expectations for the future.

As the birthplace of Buddhism, India is home to Buddhist ruins with which Japanese people are familiar, as well as many famous world heritage sites. For this reason, India’s tourism development is a sector in which the potential for Japan-India cooperation is high. Japan, through official development assistance, is providing cooperation in the conservation of ruins and the development of tourism at various sites. It is expected that this assistance will serve to promote tourism cooperation between Japan and India and lead to the revival of the tourism industry in both countries.

Signs of closer Japan-India economic relations are everywhere. This is for the simple reason that, in the new Asian era, Japan and India need each other. This brings to the fore the role of China, a major economic player in the region. India favors a triangular relationship with China and Japan, but apparently it is hard to convince China of this viewpoint.

India understands that China-Japan relations are far more crucial to Japan than Japan-India relations. This is obvious as China has replaced the United States as Japan’s largest trading partner. This has been corroborated by Prime Minister Shinzo Abe’s visit to China after first coming to power — before his visit to the U.S. Japanese experts justify this on the grounds of China’s geographical proximity to Japan and the fact that Abe’s visit to China was more symbolic amid growing public sentiments to make an effort to normalize relations between the two countries.

India’s interest in Japan is also attributable to its “look East policy,” which includes Australia. China may construe this as an indirect U.S. nudge to Japan to strengthen ties with India. Undoubtedly, India aspires to a deeper partnership between the U.S., Japan, India and Australia, but this in no way undermines relations with other countries in the region.

In the changing international environment, China, Japan and India cannot afford to mistrust each other. It is imperative that we coexist peacefully and engage in strong economic ties to increase the prosperity of the region as a whole and project a united force to the Western powers, and simultaneously strengthen bilateral ties with each other.

To deepen economic relations between Japan and India, it is important to bolster comprehensive cooperative relations in a wide range of sectors besides trade and investment, such as information technology, science and engineering technology, energy, environmental protection, and people-to-people exchanges.

It cannot be overemphasized that stronger Indo-Japan ties could serve to counterbalance China’s growing power in the region; hence, a big “konnichi-wa” to India-Japan economic cooperation.

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