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Buddhism was introduced to Japan via the Korean Peninsula. However, Direct
exchange, began only in the Meiji era (1868-1912), when Japan started with its
process of modernization. From then on, bilateral relations developed around
Japanese purchases of cotton. India's friendship with Japan after the war helped a
great deal when Japan returned to the international arena.
Since 1952, Japan and India have maintained diplomatic relations and enjoyed
cordial relations based on trade and economic and technical cooperation. After
the WW II, the focus of Japan's economic relations with India switched from the
prewar import of cotton to the import of iron ore. Relations developed steadily as
Japan's imports of ore and exports of manufactured products increased.
Following Japanese Prime Minister Nobusuke Kishi's visit to India in 1957, yen
loans to India began in 1958, as the first loan aid extended by Japan.
Economic Cooperation between the two nations has been buoyant with Japan's
total loans to India amounting to $4,239.0 million in 2004, grant aid were of the
order of $ 399.2 million, while technical cooperation totalled to an amount of $
179.5 million.
Traditionally, Japan has been the second largest destination of Indian exports
(major exports include gems, marine products, iron ore, and cotton yarn). India is
also a major importer of goods from Japan, and its importance has been growing
in recent years (major imports include machinery, plant-related products,
transport equipment, and electronic machinery).
Agreement on Commerce Between Japan and India (1958) was one of the
remarkable treaties signed by the two nations to strengthen their trade relations.
Japan-India Trade Talks on overall bilateral trade and investment began in 1978.
Since then many such talks have taken place. Besides, private sector forum such
as 'Joint Meetings of the Japan-India Business Cooperation Committee', which
holds annual joint meetings, promotes private-sector bilateral cooperation in
various economic fields as well as mutual understanding.
India is a first country to which Japan extended the first Yen Loan and India has
been one of the largest recipients of Japan's ODA. Japan has long been actively
providing assistance to India, primarily in the form of Official Development
Assistance loans, for upgrading of economic infrastructure, alleviation of poverty
through public health and medical care, agricultural and rural development and
population and AIDS countermeasures, support for small business and for
environmental conservation.
India has actively pursued economic liberalization and market oriented economy
since 1991. With India's push towards greater economic liberalization policies,
Japanese corporations' interest in India has risen, and private-sector investment
has increased dramatically and it is expected to rise further in future.
Majority of the Japanese companies surveyed said that they are making profits
and are "positively considering further expansion of their operations". However,
to many of them, the inhibiting factors are differences in business practices,
environment and culture etc but at the same time they are aware of India's huge
market potential, especially in IT and IT-related.
For Indian investors, investing in Japan is pretty alluring. Japan, the business hub
of Asia's growing economies is rated as world's second largest market. Apart
from highly skilled human resources, Japan offers innovative technologies. So far
as infrastructure back-up is concerned, the transportation network is rated as
one world's bests. Other advantages to work with Japan include world-class
information and communication technology ICT) facility, a highly reliable logistic
infrastructure and other investor-friendly facilities. Responding to economic
globalization, commercial laws and major elements of country's economic legal
framework have been reformed by the Japanese government.
Japan wants to diversify its sources of natural gas as it currently relies on imports
for 97 percent of its needs with Indonesia, Malaysia and Australia being the
major suppliers. The natural gas deal is also aimed at strengthening bilateral ties
as Japan's ruling party hopes to use its strong partnership with India for checking
China's increasing presence in western Asia. The deal also reflects a tie-up
between Japan and India in their bids to become permanent members of the
United Nations Security Council.
Recently, Indian commerce minister Kamal Nath has pointed out that the
emphasis of India-Japan bilateral trade should be foreign direct investment-based
and not official development assistance (ODA)-based.
He said, "India is one of the largest ODA recipients from Japan. However, in the
changed context of our desire for seeking a new economic partnership, it is
important that we shift the emphasis of India-Japan relationship from ODA-based
to FDI-based," approvals of Japanese FDI in India during the period 1991-2004
have been in the order of $3.2 billion, which was around 4.8 per cent of total
Indian approvals for all FDI. But of this, the actual inflow of investment from
Japan was around $1.8 billion. He said Japanese investments in India are very low
despite a number of successful Indo-Japan ventures such as Suzuki-Maruti, Hero-
Honda, Toyota-Kirloskar.
Presently, Japan is the fifth major trading partner of India having a share of 3.1%
in India's total exports and imports2003-04 However, the figure is not very
encouraging; it was only $4 billion, which was traded between the two nations
during 2003-04, a growth of 18 per cent over what it was in 2002-03. there is an
immense scope for increasing the trade between the tow nations in the coming
years.
Another issue, which binds India and Japan together, is getting permanent
membership in the UN Security Council. In his visit to New Delhi, in late April this
year, Japanese Prime Minister Junichiro Koizumi may urge New Delhi to work out
a common bilateral approach for securing permanent membership in the UN
Security Council. With China clearly emerging as a stumbling block for Japan's
entry into the elite club, Japan feels it is important to make a concerted effort
with India.
The Japanese PM Junichiro Koizumi on his visit to India on 29th April 2005,
addressed the Indian business community to tap the tremendous opportunities
between the two countries. He charted a three-point agenda to strengthen
bilateral relations, regional cooperation and cooperation at global level.
The Indian and Japanese PM met on Friday and agreed to set up a joint Indo-
Japan study group to make economic relations stronger. The Japanese premier
said that India is third important destination for Japan in Asia after China and
Korea. He added, “ I hope other Japanese companies will share the success of
Suzuki and other companies that set up shop in India.” Indian commerce
minister, Kamal Nath, said India and Japan could easily reach a trade level of $
10 billion within three years, though trade has been stagnating at $ 4 billion
annually for the past 8 years.
Japan wants India to be a more prominent Asian player when china is expanding
rapidly.