Japan: From an outsider to India’s key ally

18-Feb-2016 # ActEast Source: India Investment Journal

“Nations have no permanent friends or allies, they only have permanent interests.”

The India-Japan relationship has been almost a perfect example of the famous quote by the 19th century British Prime Minister Lord Palmerson on foreign policy.

A close bilateral relationship between the two countries has been non-existent since India’s independence in 1947. During the Cold War, while India was a champion of the Non-Aligned Movement, it was also a signatory to a strategic mutual defence treaty with the Soviet Union while Japan was very much in the US camp.

The relationship was limited to formal protocol diplomacy and part of the wider geo-strategic multilateral political process rather than a serious bilateral one. Despite some economic and aid activities, the interests of both countries were divergent and the relationship reflected that.

But with the turn of the century it was a different story. Suddenly, India and Japan had common strategic interests alongside the United States.

21st Century Global Partnership

With the advent of the multi-polar world in the early 2000s and the rise of China with not-so-hidden expansionist policies, it quickly dawned upon senior policy-makers in Delhi and Tokyo that it was in the best interest of both countries to have a strategic partnership.

Prime Ministers Vajpayee and Mori in 2000-2001 laid the foundation. The latter defined the bilateral relationship as a “global partnership” – a significant step as this was the first time Japan used that particular phrase to define a bilateral relationship other than with the US. Vajpayee’s successor, Dr Manmohan Singh, proactively built on the foundations of his predecessor and focused on developing trust between the two countries. All Japanese Prime Ministers during Dr Singh’s tenure were excellent partners but Prime Ministers Koizumi and Abe have been the most proactive and vocal.

Abe carried that relationship forward with Prime Minister Modi – both men share a close personal relationship and a similar view on Asia’s future.

The recent signing of the civil nuclear treaty and joint naval exercises reflect the trust that now exists between the two countries and the two incumbent leaders. In fact, both nations are part of the triumvirate strategic partnership with the US that provides the core of the coalition of nations standing together to counter the expansionist policies of China.

Economic Relationship

The economic relationship between the two countries though has not made anywhere near the progress that has been made in the strategic geo-political partnership.

Bilateral Trade between india and japan
Belateral trade between india and China

Source: Department of Commerce

This is despite Japan consistently being one of the largest foreign direct investment (FDI) contributors to India. Its total investment in India between 2007 and 2013 was a cumulative $21 billion, although between 2012 and 2014 more investments went to Vietnam and Indonesia than to India.

Prime Ministers Modi and Abe have made it a priority to rectify this and rightly so. Japan and India are the second and third largest economies in Asia and yet bilateral trade between the two countries is around $16 billion.

It is less than a quarter of the bilateral trade between China and India at $72 billion and only a very small fraction of $309 billion trade between Asia’s two largest economies.

India needs technology, investment and expertise to transform its economy. The country is looking to create a 21st century infrastructure, develop hundreds of inter-connected smart cities and develop a high end manufacturing base that adds value and delivers quality products with global standards.

In each of these areas, Japan has expertise, experience and ability to invest. The country needs new markets with lucrative returns to reboot its deflationary economy and India with its massive transformation offers just that.

The strategic and economic interests of both nations dovetail very well and with China’s looming presence on both fronts – it is not a surprise that India-Japan relations are evolving fast and would be one of the defining relationships in Asia, if not the world, in the 21st century.

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