As
Prime Ministers Modi and Abe meet for the annual summit in Tokyo, the two
post-World War II leaders are expected to script a new paradigm of India-Japan
relations marked by a very special confluence of ideas and interests. By a
quirk of circumstances, having come to office after historic electoral
triumphs, both have shared a challenging agenda of people’s expectations. They
have much to share on how they grapple with the onerous task of “second
generation” reforms in financial, labour, bureaucratic and political spheres
amidst entrenched sectarian interests.

As
in the life of an individual, some abiding friendships endure occasional
travails and tribulations, sometimes even unexpected storms. So also the
countries that need to forge special relations with some nations. Among the countries
with which India needs to develop strong bonds of understanding and amity,
Japan for sure would appear to be a natural choice. The people of the two
countries represent a “confluence of the two most deep-rooted democracies”.

While
the India-Japan Comprehensive Economic Partnership Agreement launched on 1
August 2011 will define the broad contours of bilateral engagements for a
thrust in trade and investment, the 2008 Joint Declaration on Security
Cooperation with a scope for the expansion of strategic exchanges may, in due
course, be strengthened. It envisages that the navies of the two countries are
“seamlessly interconnected”, as Japan’s Prime Minister, Shinzo Abe, describes
it.

There
is an apparent similarity of views on many issues, economic and strategic,
between Japan and India . Both have pledged to cooperate in several
infrastructure projects of immense importance for India’s growth story. They
have also agreed to foster shared interests in the vital and sensitive
strategic domain, including maritime security, specially along the “confluence
of the two seas”. Both countries can carry forward the progress made for
accelerating “the development of the Indian aircraft industry through the US-21
aircraft cooperation”. The two leaders are likely to finalise India’s
acquisition of 12-15 Shin-Maywa US-21 amphibious aircraft, and explore
possibilities on its co-production in India.

Apart
from the Delhi-Mumbai Industrial Corridor, ancillary to the 1,483 km Dedicated
Freight Corridor -West, and the pioneering Rs 100,000-crore 500 km
Mumbai-Ahmedabad ‘bullet’ train corridor, the Indian side is likely to discuss
“Make in India” projects in civil and defence equipment, rail modernisation,
electricity technology, and civil nuclear cooperation agreement. There is
significant potential for the two countries to collaborate on joint production
of weapons systems such as anti-ballistic missiles and sea-denial naval
technologies.

Japan’s
advantages in terms of capital and technology are matched by India’s strength in
terms of of demography, a burgeoning market and the need for infrastructure.
Japan is a capital-rich country with an ageing and shrinking population. Its
working-age population by 2050 will be smaller than it was in 1950, seriously
aggravating its D words — debt, deficits and deflation. The difference in the
population dynamics of the two countries is an important factor that has made
the two economies complementary. Centenarians are the fastest-growing segment
of Japanese population; hundreds of towns and villages are threatened with
depopulation. With almost 40 per cent of India’s population below 18, an
estimated 550 million Indians would be under 20 years of age. With a workforce
that is committed to quality, Japan’s supaa ginosha (super technicians) can
help develop India’s human capital and leverage the same not only for the
personnel requirements of Japanese firms intending to invest in India, but also
to meet the inevitable needs of the Japanese labour market.

Japan
requires an influx of immigrants, which would mean a transformation from a
monolithic, mono-cultural society that it has been. From the Indian
perspective, Japan offers opportunities for absorption of technical and skilled
manpower. Already, Indians are employed in basic research in several high-tech
companies and government research institutes. To service the Japanese market,
software companies need to adopt a proactive investment strategy. The
appreciation of the complexity of the language and culture demands presence on
the ground, rather than off-shoring work to India.

There
is a lot that the two countries need to pursue for deepening their economic and
commercial cooperation. Whereas 45 per cent of Japan’s foreign trade is with
Asia, India’s share is rather paltry. China has received Japanese investments
30 times that of India. Today, there is a change, slow but steady. In
1993-94,with India’s exports of $1,748 m to Japan and imports of $1,514 m,
Japan was its third largest trading partner. By 2012-13, Japan slid to the
eleventh rank as India’s trading partner, accounting for $6,101 m of its
exports to Japan and $12,412 m of imports from Japan.

Any
analysis of bilateral relations between Japan and India has to be set in the
political context as well, taking advantage of each other’s economic and
strategic compulsions. Japan’s prowess in technology would make it the ideal
choice when India’s corporate and government sectors decide to upgrade their
capital stock, especially in the field of telecommunication, machinery and
equipment. The other sphere that needs attention is the potential of
biotechnology and the medical sector. Japan is the world’s second largest
market for pharmaceutical products. Under the Japanese health insurance system,
all citizens subscribe to medical insurance. On an average, Japanese spend
around $8,000 per year on medical expenses, with the total market size of
around $112 billion (in 2002). As a result of the increase in the population of
the elderly, these figures can only go up over the medium term.

A
great success story of economic miracle, Japan inspired the noted Nipponphile,
Herman Kahn, to proclaim the 21st century as the century of Japan. It was just
a decade ago that China’s economy, which has now overtaken Japan’s, was only
half as large as Japan’s. For the latter, which some two decades back had
aspired to be No. One, the slide to the level of the bronze medal — after
having been a silver medal winner in the scale of global economy for four
decades — was indeed a gloomy milestone. Japan had an unknown genetic
weakness, a strong economy embedded in a weak economic structure. The scenario
has been marked by too many banks, chronically weak and burdened with loans to
the extent of Yen 37 trillion — about 7 per cent of GDP — within which weak
and emaciated companies operated, in mutual defiance of reality.

Society
in Japan is conservative, but not static. Almost every aspect of Japanese life
has been changing. The private sector has shifted from manufacturing to
services, leading firms have opted for restructuring, established industries
are aspiring to be global leaders in hybrid cars, solar panels, ceramics and
fine materials, some leading behemoths are streamlining their outfits and
operations with new trends such as part-time employment.

India
and Japan need to improve people-to-people contact through tourism, cultural
festivals, scholarships, student exchange programmes, language courses, and
deeper interaction between entrepreneurs and intellectuals. It is imperative
that Indians make a sincere effort to understand and comprehend the Japanese
psyche, their traits and sensitivities, their deep emotions, intense
patriotism, penchant for details, punctuality and discipline. Its workforce is
almost robotic. India has a deeply stratified hierarchical society, in contrast
to Japan’s more egalitarian ethos. India is as heterogeneous as Japan is
homogeneous.

— Raghu
Dayal

(The
writer is Senior Fellow, Asian Institute of Transport Development, and former
CMD, Container Corporation of India. )