Indo - Japan for Future

Asian geopolitics will be shaped by the inexorable tightening of bonds between India and its largest source of foreign direct investment and aid, Japan. Underscoring the fast-multiplying ties between Asia’s second and third - largest economies, Prime Minister Shinzo Abe is arriving to be the guest of honour at India’s Republic Day parade, just weeks after the landmark Indian tour of Japan’s venerated Emperor Akihito and Empress Michiko. The two countries are Ramping up Defence Cooperation, as highlighted by Japanese defence minister Itsunori Onodera’s visit earlier this month.

    In modern history, Japan has had the distinction of consistently staying ahead of the rest of Asia. During the 1868-1912 Meiji era, it became the first Asian country to modernise. It was also the first Asian country to emerge as a world power, defeating Manchu-ruled China and Czarist Russia in separate wars. After its crushing defeat in World War II, Japan rose from the ashes rapidly to become Asia’s first global economic powerhouse.

    Specialising in the highest value links of global supply chains, Japan ranks among the world’s richest countries. With its Gini coefficient of 0.25, it boasts the lowest income inequality in Asia. By contrast, prosperous Singapore, with a high Gini coefficient of 0.48, ranks as one of Asia’s most-unequal societies. Japan’s per capita GDP of $37,000 means that its citizens, on purchasing power parity basis, are more than four times wealthier than the Chinese and nearly 10 times richer than Indians today.

    To be sure, Japan’s geopolitical clout has taken a beating due to its almost two decades of economic stagnation, a period in which China rose dramatically. But despite the media depicting Japan’s decline in almost funereal terms, the truth is that its real per-capita income has increased faster than the US and Britain in this century, while its unemployment rate has long remained one of the lowest among important economies. JAPAN enjoys the highest life expectancy of any large country in the world.

    Japan’s trailblazing role in modern history raises the question of whether its current challenges, including population aging and sluggish economic growth, presage a similar trend across East Asia. Similar problems are now beginning to trouble South Korea, Taiwan and Hong Kong, while China has been driven to loosen its one-child policy and unveil plans to reverse slowing economic growth.

    Indeed, the most far-reaching but least-noticed development in Asia has been Japan’s political resurgence. Japan’s political rise should not be a surprise: In contrast to India’s ignominious history of subjugation by foreign invaders for eight centuries until 1947, Japan, with its martial traditions, has historically punched above its weight – a record punctured only by its World War II defeat and occupation by the US. With Japan’s pride and assertiveness now rising, its nationalist impulse and intent to influence Asia’s power balance have become conspicuous.

    Still, Japan faces stark choices today: Grow or bust; import labour or decline irreversibly; and bolster its security or come under siege. Abe’s return to power in late 2012 marked a watershed in Japan’s determination to reinvent itself as a more competitive and secure state. It has no option but to reflate, import labour, become more competitive and rearm.

    History will repeat itself when Japan rearms – a profound development likely to gain traction in this decade. Japan can no longer rely on America’s security guarantee, given Washington’s neutrality on Asia’s territorial disputes, including over the Senkaku Islands, and its failure to come to the defence of Philippines, despite a mutual defence treaty, when China captured the Scarborough Shoal in 2012. Japan’s rearming – without abandoning the US security umbrella – will boost its GDP and yield major profits for American defence firms.

    For India, Japan is an indispensable economic partner, including as a leading source of capital and commercial technology. However, nothing has damaged corporate India’s image in the ‘Land of the Rising Sun’ more than the saga of Ranbaxy Laboratories, whose takeover by a gullible Daiichi Sankyo forced it to take a $3.9 billion write down within months.

    With the weakening yen set to spur greater Japanese capital outflows, India must seek to attract more funds from Japan so as to bridge its current-account gap. By making India the largest recipient of its overseas development assistance, Japan is playing a significant role to help improve India’s poor infrastructure.

    Japan, with shared interests and a world-class navy, is also a vital partner for India’s security, including for adding strategic bulk to its ‘Look East’ policy. Japan’s high-tech arms capability makes it an ideal partner for import-dependent India to build a domestic weapons-production base.

    Abe, as part of his Asian strategy of ‘proactive pacifism’ has pushed for close, enduring collaboration with India, traditionally respected in Japan as Tenjiku, or the heavenly country of Buddhism. If there is any potential pitfall to the India-Japan partnership, it is their messy domestic politics.

    Through deep strategic ties, Japan and India – as Asia’s natural-born allies – must lead the effort to build freedom, prosperity and stability in Asia. They have a central role to play in ensuring Asian power equilibrium and safeguarding vital sea lanes in the Indo-Pacific region, now the global trade and energy supply hub. The transformative India-Japan entente promises to positively influence Asia’s power dynamics and strategic future.