Japanese Prime Minister Shinzo Abe, who says relations with India may become more important than Japan's links with the U.S. or China, leads his biggest corporate mission to the South Asian country tomorrow.
Abe travels to New Delhi with 243 executives from companies including Toyota Motor Corp. and Canon Inc., more than the 175 he took with him to the Middle East earlier this year. Japan has 4,757 companies in China and only 216 in India, according to Nomura Securities Co. Ltd.
Japan has been investing in China and other parts of Asia since the late 19th century and now wants to tap growth in the world's second fastest-growing major economy. Abe says India, as an Asian democracy, is a natural ally. Strengthening links may help both nations counter China's growing global influence.
``Japan has a hot economic relationship and a cold political relationship with China,'' said John Swenson-Wright, a Japan analyst at Chatham House, a London-based international affairs institute. ``A closer partnership with India also maximizes Japan's leverage on the security front.''
Japanese companies until now have shied away from investing in India because of the country's poor road, port and other infrastructure, according to a 2006 survey by the Japan Bank for International Cooperation.
That's changing. India plans to invest $475 billion by 2012 to improve its infrastructure. Since 2003, the economy has expanded at an average 8.6 percent, a pace surpassed only by China among the world's biggest economies.
``India's rapid growth and improving infrastructure has caught the attention of the Japanese,'' said H. S. Prabhakar, a professor at the Jawaharlal Nehru University in New Delhi. ``But Japan's move is in response to a larger reality -- a change in the balance of power in Asia with the rise of China.''
Abe, who lost control of Japan's Upper House in last month's elections, says he'll still pursue his platform of creating a ``Beautiful Japan'' that is more assertive internationally.
India was included in Japan's security dialogue with Australia and the U.S. at Abe's initiative, and defense ties between the two countries have strengthened. Indian naval ships visited Japan's Yokosuka base four months ago to hold joint exercises with Japanese and U.S. forces.
Japan and India are also both seeking, along with Germany and Brazil, permanent seats on an expanded United Nations Security Council.
``I won't be surprised if in another decade, Japan-India relations will overtake Japan-U.S. and Japan-China ties,'' Abe wrote in his book ``Toward a Beautiful Country'' that was published before he became prime minister last September.
Abe will arrive in New Delhi tomorrow from Jakarta, where he will sign a free-trade agreement with Indonesian President Susilo Bambang Yudhoyono today. Abe will end his two-day visit to India on Thursday with a trip to the eastern city of Kolkata, from where he will leave for Malaysia.
Japan's trade with India was worth $6.5 billion in 2006, less than four percent of its trade with China. Between 1991 and 2006, Japanese companies invested $2.15 billion, or just 6 percent of the total foreign direct investments into India, according to the Confederation of Indian Industry.
Japan is now taking the lead to build a $90 billion, 1,500-kilometer (2,400-mile) infrastructure corridor between India's capital New Delhi and Mumbai, the financial center. The project includes freight lines, power stations and improved access to ports and airports. Abe, during his visit, may pledge 400 billion yen ($3.38 billion) of loans for the cargo railway, the Tokyo-based Sankei newspaper reported Aug. 14.
``India is one of the most exciting emerging markets in the world today,'' said Masahiro Takedagawa, president of the local car unit of Honda Motor Co., Japan's second-biggest automaker. ``This is the best time to be part of India's growth.''
Mitsui & Co. Chairman Nobuo Ohashi said last month he plans to agree on investments in the industrial corridor during his visit to India with Abe. Marubeni Corp., Japan's fifth- largest trading company, said it is exploring investment opportunities in India's power business.
Japan's main competitor as an investor is South Korea, whose Posco, Asia's third-biggest steelmaker, is poised to become India's single biggest foreign direct investor. The company plans to build a $12 billion steel factory in India's eastern state of Orissa.
Almost all Korean consumer product companies including LG Electronics Inc. and Samsung Electronics Co. have factories in India to cater to growing demand from a middle class that numbers about 300 million, equal to the population of the U.S.
Japan's investments in India have been led mainly by automakers such as Suzuki Motor Corp. which sells one in two cars in India. Sony Corp., which had a factory in India for about a decade, shut it down about two years ago because inadequate power and transportation led to increased costs.
``The joint economic development plan between India and Japan could drastically change the map,'' said Tetsuji Sano, a senior economist at Nomura Securities in Tokyo.
Battered at home, Japan's PM Shinzo Abe could use a semi-vacation. Tomorrow, he is scheduled to lead a Japanese entourage on a tour of India to drum up business for Japan, Inc. Throw in the usual hyperbole here--India may eventually become a more important trade partner for Japan than the US or China, etc. Biggies like automaker Toyota and electronics maker Canon are tagging along. There are good reasons for being optimistic about Japanese firms establishing a larger market presence in India, but is seems they have to compete with Korean ones that may have already established an earlier beachhead in the country. Still, Japan has become increasingly wary of Chinese competition for regional influence in Asia and looks to consolidate its standing. From Bloomberg: