UPSC Mains 2019: India-Japan Relations

india and japan

 

Topic: India-Japan Relations

Topic in Syllabus : GS Paper 2 : International Affairs

india japan relations

Context:

India and Japan on recently  signed six agreements, including on a high-speed rail project and naval cooperation, and agreed to hold ‘2+2’ dialogue at the ministerial level after Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe held talks in Tokyo.

 

Introduction:

  • In the context of 21st Century, among all the bilateral relations, Indo-Japan relations have all the potential to transcend this era into an ‘Asian century’.
  • This relationship, which incorporates no dispute- ideological, cultural or territorial, was embarked upon in 6th century A.D. when Bhuddhism was introduced in Japan.
  • Direct exchange in modern times commenced only in Maiji era (1868-1912), when Japan set off the process of modernization. Japanese support and assistance to Netaji and INA continue to persist in popular imagination.
  • Although diplomatic relations between two countries were established in 1952, it was only in august 2000 when Japanese PM Yoshiro Mori and his Indian counterpart Atal Bihari Vajpeyi set in motion ‘Global partnership in 21st century’.
  • Commonalities such as shared democratic values, commitment to human rights, pluralism, open society and rule of law are foundation blocks of this global partnership.

 

More about on current relations:

  • Japan and India shares cordial relations since long
  • Japan is one of the closest and most reliable trading partners of India
  • Both countries bilateral ties were elevated to status of special strategic and global partnership during Prime Minister Narendra Modi visit to Japan in 2014
  • Democracy is the binding glue
  • Both see China as potential rival
  • Both has USA as their common friend
  • Huge investment coming to India from Japan
  • Japan participating in India’s infrastructure projects like Metro projects, Dedicated Freight corridor, High Speed Trains etc.
  • The CEPA between both countries is one of the most comprehensive agreements concluded by India and it had come into force in August, 2011
  • The bilateral trade between India and Japan pre-CEPA in 2010 was $10.4 billion and currently in 2016 stands at $14.5 billion.
  • However, India’s trade deficit with Japan increasing from $3.1 billion before the CEPA was inked in 2011 to $5.2 billion thereafter.

 

Modern relations:

  • At the International Military Tribunal for the Far East, Indian Justice Radhabinod Pal became famous for his dissenting judgement in favour of Japan. The judgement of Justice Radhabinod Pal is remembered even today in Japan. This became a symbol of the close ties between India and Japan.
  • A relatively well-known result of the two nations’ was in 1949, when India sent the Tokyo Zoo two elephants to cheer the spirits of the defeated Japanese empire.
  • India refused to attend the San Francisco Peace Conference in 1951 due to its concerns over limitations imposed upon Japanese sovereignty and national independence. After the restoration of Japan’s sovereignty, Japan and India signed a peace treaty, establishing official diplomatic relations on 28 April 1952, in which India waived all reparation claims against Japan.
  • This treaty was one of the first treaties Japan signed after World War II. Diplomatic, trade, economic, and technical relations between India and Japan were well established. India’s iron ore helped Japan’s recovery from World War II devastation, and following Japanese Prime MinisterNobusuke Kishi’s visit to India in 1957, Japan started providing yen loans to India in 1958, as the first yen loan aid extended by Japanese government. Relations between the two nations were constrained, however, by Cold War politics.
  • Japan, as a result of World War II reconstruction, was a U.S. ally, whereas India pursued a non-aligned foreign policy, often leaning towards the Soviet Union. Since the 1980s, however, efforts were made to strengthen bilateral ties.
  • India’s ‘Look East’ policy posited Japan as a key partner. Since 1986, Japan has become India’s largest aid donor, and remains so.
  • Relations between the two nations reached a brief low in 1998 as a result of Pokhran-II, an Indian nuclear weapons test that year. Japan imposed sanctions on India following the test, which included the suspension of all political exchanges and the cutting off of economic assistance. These sanctions were lifted three years later. Relations improved exponentially following this period, as bilateral ties between the two nations improved once again, to the point where the Japanese Prime Minister, Shinzo Abe was to be the chief guest at India’s 2014 Republic Day parade.

 

India-Japan Economic and Commercial Cooperation:

  • Complementarities between the two countries
  • Japan’s ageing population (23% above 65 years) and India’s youthful dynamism (over 50% below 25 years);
  • India’s rich natural and human resources and Japan’s advanced technology;
  • India’s prowess in services and Japan’s excellence in manufacturing;
  • Japan’s surplus capital for investments and India’s large and growing markets and the middle class.
  • The signing of the historic India-Japan Comprehensive Economic Partnership Agreement (CEPA) and its implementation from August 2011 is expected to further accelerate growth of trade, economic and commercial relations between the two countries.
  • Japan has been extending bilateral loan and grant assistance to India since 1958. Japan is the largest bilateral donor to India. Japanese ODA supports India’s efforts for accelerated economic development particularly in priority areas like power, transportation, environmental projects and projects related to basic human needs. For example New Delhi metro network. The Western Dedicated Freight Corridor (DFC), The Delhi-Mumbai Industrial Corridor with eight new industrial townships, The Chennai-Bengaluru Industrial Corridor (CBIC) India’s primary exports to Japan have been petroleum products, chemicals, elements, compounds, non-metallic mineral ware, fish & fish preparations, metalliferous ores & scrap, clothing & accessories, iron & steel products, textile yarn, fabrics and machinery etc.
  • Japanese FDI into India grew exponentially from US$ 139 million in 2004 to all time high of US$ 5551 million in 2008. Currently FDI from Japan to India was US$ 1.7 billion during January-December 2014. Japanese FDI has mainly been in automobile, electrical equipment, telecommunications, chemical and pharmaceutical sectors.
  • The number of Japanese affiliated companies in India has grown significantly over the years.
  • 13 big infrastructure projects to be financed by ODA loans such as Metro projects both in Chennai and Ahmedabad and road network connectivity in our Northeastern states.

 

13th India-Japan Summit:

  • Japan investors will invest around $2.5 Billion US dollars in India.
  • The two sides agreed for a 2+2 dialogue between our foreign ministers and defence ministers to further work towards world peace.
  • An India-Japan Business Platform will be established to enhance the development of industrial corridors and industrial network in the region
  • Both countries will cooperate for the first time in the areas of traditional medicinal systems such as Yoga and Ayurveda. This will facilitate a boost in the healthcare in both the countries.
  • Both the countries have agreed to synchronize upon sharing benefits of the Ayushman Bharat scheme and the Japanese healthcare programme.
  • There will be commencement of talks on a military logistics pact, the Acquisition and Cross Servicing Agreement, between the two nations that will ensure the access to each other’s military bases and naval bases.
  • Japan will invest more significantly in the up gradation of infrastructure in the Northeast which will also link India to Southeast Asia.
  • The two countries will work together to extend access to education, health and other amenities to the people of the Indo-Pacific, including Africa.
  • Japan-India Investment Promotion Roadmap enhanced the contribution of Japan in India’s Make in India initiative with establishment of Business Support Centre in Ahmedabad.

 

India japan currency swap agreement:

  • India and Japan have signed a currency swap agreement during the visit of Prime Minister Modi to Japan on 28th of October 2018. The currency swap agreement is for US $75 bn and is a great opportunity for India to obtain foreign currency by exchanging rupee to Japan.
  • According to the initial reports, the swap involves US Dollar besides Japanese Yen and Indian Rupee. As part of the agreement, the Bank of Japan (Japanese central bank) will accept rupees and give dollars to the Reserve Bank of India (RBI) and, similarly, the RBI will take the yen and give dollars to the Bank of Japan to stabilize each other’s currency.
  • Though the central part of the agreement is Japanese commitment to exchange US Dollar for rupee from India, the Japanese Yen is one of the five currencies included in the IMF’s SDR basket and is counted as global hard currency. The India-Japan currency swap agreement seems to be exchange of reserve currency (Dollar) for non-reserve currency (rupee).
  • The currency swap with Japan will help India to pacify the depreciating trend of rupee. In future, the RBI can execute swaps rupee for Dollars to ensure stability in exchange rate.
  • Real utility of the currency swap agreement is that it will give the RBI to access $75 bn foreign exchange at a time when there are strengthening of current account deficit factors for India. It will give psychological effect on the foreign exchange market as the traders in the forex market will get convinced about the ability of the country to tackle foreign currency scarcity problem.
  • Already, the foreign exchange reserve of India came down from its peak of $413 billion in April 2018 to below $395 dollars, as on second week of October 2018.

 

What is the purpose of currency swap?

  • As mentioned, the main purpose of currency swaps is to avoid turbulence and other risks in the foreign exchange market and exchange rate. Central banks and governments engage in currency swaps with foreign counterparts to ensure adequate foreign currency during the time of foreign currency scarcity. Both works with the same objective and through similar mechanism.
  • Often, the turbulence comes when a country faces scarcity of foreign currency which may led to currency crisis and steep depreciation of the domestic currency. In such a scenario, if the central bank/ government (read the RBI/Government) is able to get sizable foreign currency by exchanging domestic currency, it ensures availability of foreign currency. Hence the turbulence in the foreign exchange market or depreciation of the domestic currency/currency crisis can be avoided.
  • Besides currency or exchange rate stability, currency swaps between governments also have supplementary objectives like promotion of bilateral trade, maintaining the value of foreign exchange reserves with the central bank and ensuring financial stability (protecting the health of the banking system).
  • It is always desirable for a developing country like India to reach currency swap agreement with countries like USA/UK/EU/Japan whose currencies are hard currencies (used in international trade as medium of exchange).
  • Currency swap agreement can be bilateral or multilateral. The earliest currency swap was between U.S. Federal Reserve and the Central Bank of France signed on February 28, 1962.

 

Building stronger partnership for stable and safe world:

  • Emphasis on rising importance of Indo-Pacific region- stressed the core values of democracy, peace, therule of law, tolerance, and respect for the environment in realizing pluralistic and inclusive growth of the region.
  • Consolidation of security and defence cooperation- welcomed two Defence Framework Agreements concerning the Transfer of Defence Equipment and Technology and concerning Security Measures for the Protection of Classified Military Information.
  • Deepening bilateral security and defence dialogues, through the “2+2” Dialogue, Defence Policy Dialogue, Military-to-Military Talks and Coast Guard-to-Coast Guard co-operation.
  • Partnership for prosperity-∙ A dedicated task force to be set up comprising representatives of both countries to develop a concrete roadmap for phased transfer of technology and “Make in India.” Cooperation on the human resource development in the manufacturing sector in India through “Manufacturing Skill Transfer Promotion Programme.”
  • The two Prime Ministers noted the growing collaboration between India and Japan in the modernisation and expansion of conventional railway system in India.
  • To build upon cooperation in the field of smart cities to develop smart islands by initiating consultations to identify technologies, infrastructure, development strategies and management processes facilitating development of smart islands in an efficient and effective manner.

 

INDO-JAPAN NUCLEAR DEAL:

  • The annual strategic dialogue between India and Japan which began in 2009 has now come to fruition with the signing the nuclear cooperation agreement in Tokyo during Prime Minister Narendra Modi’s visit.
  • Japan has civil nuclear treaties with 13 countries, including the US, France and Russia, but this is the first with a nation that is not part of the Nuclear Nonproliferation Treaty (NPT).
  • India and Japan were at loggerheads since 1998 when India conducted its nuclear tests. Japan was the country that took it the hardest. It put all political exchanges with India on hold, froze aid and announced economic sanctions within hours. A thaw in ties didn’t come until 2001, when sanctions were lifted. And then, in 2009, the two countries began an annual strategic dialogue.

 

Recent Collaborations:

  • Cooperation in Sri Lanka, in the development of LNG-related infrastructure and in Africa, in the area of health service – developing a cancer hospital in Kenya.
  • Cooperation in Myanmar, to facilitate development efforts in the Rakhine State Cooperation in Bangladesh, for improving connectivity on the Ramgarh to Baraiyarhat stretch and constructing the Jamuna Railway Bridge over the Januma River.
  • The Act East Forum established last year has served as a driving force to improve India-Japan cooperation in the North-East.
  • The cooperation in the project for the construction of International Cooperation and Convention center in Varanasi.
  • India and Japan are cooperating to construct the Mumbai Ahmedabad High Speed Rail (MAHSR).

 

Conclusion:

Japan now follows eight other nations, including the US, France and Russia, in entering into a pact with India. It signals a wider acceptance of India’s status as a responsible actor.

Overall, given the economic, nonproliferation, and regional power balance issues examined above, it is clear that full-fledged Japan-India civil nuclear cooperation is fundamentally a development to be welcomed. The question remains regarding whether India is likely to conduct further testing of nuclear weapons and how such tests would impact the bilateral agreement.

 

Sample Question

Q) India and Japan share a commonality in the past and convergence of interests in the future. Comment. (200 Words)