China's Weight Pulls India and Japan Closer Together

10 MINS READJun 9, 2017 | 00:08 GMT
Led by premiers Narendra Modi (l) and Shinzo Abe, India and Japan have boosted their partnerships in several strategic areas, a process that is sure to continue in the future.

More than 2,000 years ago, a scholar at the king's court in northern India composed a seminal document known as the "Arthashastra." It was a lesson on statecraft and was subtle enough that the man himself, Kautilya, is sometimes referred to as the Indian Machiavelli. One of the document's key takeaways was this: "Your neighbor is your natural enemy and the neighbor's neighbor is your friend." Today, whether they have read his works or not, Kautilya's Indian descendants are still following his advice: As neighboring China's growing influence causes increasing concern, India is reaching out to forge new links with its neighbor's neighbor, Japan.

After various circumstances kept them apart in the wake of World War II,  India and Japan have become much closer over the past two decades. Economic ties have deepened and have been joined by strategic partnerships. China's rise has worried both, spurring the pair to jointly create an African venture to counter China's Belt and Road Initiative. Since China will not disappear anytime soon, and the two boast many areas of alignment and few of dispute, India and Japan's relationship is set to steadily strengthen in the years to come.

Natural Partners

In some ways it is odd that India and Japan haven't formed a closer alliance before. After all, they have many attributes that make them natural partners beyond their shared interest in containing China. For one, India is a continental power and Japan is a maritime archipelago. India is dominated by the inland population centers in its northern Indo-Gangetic Plain, and its long, straight coastline forms relatively few natural harbors to inspire a Francis Drake or a Michiel de Ruyter. Thus, India will need to increase its influence in the Indian Ocean as it develops to protect its long coastal borders and its oil imports from the Gulf region. (Indeed, it already floats one of the world's 10 largest navies.) But its true heart will always be the Ganges River.

By contrast, shipping is a core part of Japan's culture. With its home islands divided by seas, Japan has long needed to cross water for domestic communication, and with only 12 percent of its surface made up of arable land, fishing has historically played a key role in feeding the country's population. In addition, after Japan's economy opened up in 1854, it became increasingly clear that Japan had need of a powerful navy to guarantee its resource imports, and it announced its arrival into the world's naval arena by being the first eastern power to defeat a western adversary when it crushed the Russian navy at Tsushima in 1905. The upshot of these factors is that, at heart, India and Japan are somewhat complementary because of their different strengths.

They are also far enough apart to have allowed a cultural exchange of ideas without the threat of either country dominating the other. The farthest an India-based state's imperial reach ever stretched was into Southeast Asia during the southern Chola dynasty of the 10th to 14th centuries. In the opposite direction, the Japanese imperial thrust before and during World War II stopped just short of India, making the Indian population one of the few in Asia that does not harbor memories of Japanese occupation. In fact, in a crowded continent these two powerhouses are quite notable for never having come to serious blows. Buddhism, meanwhile, managed to reach Japan from India in the sixth century, giving the pair a degree of moral understanding formed and cemented over 15 centuries. Though India has a Hindu majority today, Hinduism and Buddhism are closely related.

Chola Empire Map, Japanese Empire Map

Separated by Circumstance

Buddhism aside, the historical links between India and Japan have been primarily economic. The two traded raw materials and textiles until the global protectionism of the 1930s and World War II inhibited the flow of goods. During and after the war, India and Japan may have been part of adversarial alliances, but there were signs of the potential for a closer relationship. For example, around 40,000 Indian troops fought alongside their Japanese peers in the war, with the shared goal of gaining independence from the British. When the war ended, an Indian judge distinguished himself from his counterparts in other countries by declaring that Japan had not committed war crimes. India was also one of the few countries to send food to the starving Japanese as they rebuilt their war-shattered economy.

India and Japan's paths diverged again when the Cold War began, just as India was achieving its independence. India naturally leaned toward the Soviet Union — another neighbor's neighbor — a fellow anti-imperialist that shared New Delhi's skepticism of the free market (also a theme in the "Arthashastra"). Japan, meanwhile, was first occupied by and then closely allied with the United States. Yet even with these geopolitical divides, when Japan began implementing its foreign aid initiative in 1958, it was India that received the first payout. Then, when India began to open up its economy in the 1980s, it was in Japan that it found a partner for its struggling state automotive company; Maruti Suzuki has since become one of the few clear successes of the Indian manufacturing sector, and India is now Suzuki's primary source of income. (The company has grown to enjoy a 50 percent share in India's domestic market.) Goodwill ruled once again when Japan became one of only two countries willing to help India with its balance-of-payments crisis in 1991.

Circumstances Change

The relationship began to truly flourish when the Soviet Union collapsed. Shorn of its traditional ally and facing economic crisis, India rapidly opened its economy. Japanese firms took full advantage of the opportunity, and Japan accounted for 7 percent of India's rising inflows of foreign direct investment between 1991 and 1998. The relationship temporarily faltered from 1998 to 2000, when Japan objected to an Indian nuclear test and cut diplomatic ties, but the dispute lasted only two years before their previous momentum was restored. It was through the rise of China that the two truly found common ground. Deng Xiaoping's 1978 reforms produced an economic miracle in the country, shifting it from the world's 10th-largest economy to its second largest over the next three decades. Recognizing that they lived next to a burgeoning superpower, Japan and India reached around it to improve their relationship and provide mutual support.

To that end, the two states have begun working to develop their strategic ties. In 2003-04, India became the primary destination of Japanese foreign aid — and it isn't just the quantity of money that is notable. Japan has been the only foreign government willing to invest in India's northeastern province of Arunachal Pradesh, a disputed territory on the Chinese border that other countries are wary of getting involved in for fear of offending the northern giant. Then, in 2015, Japanese investment extended to the Andaman and Nicobar islands, strategically placed Indian territories that, if developed, would boost India's ability to project its maritime power in the Indian Ocean, including toward key shipping lanes entering the Strait of Malacca (through which 55 percent of Indian trade, 75 percent of Japanese, South Korean and Taiwanese oil supplies, and 37 percent of Chinese imports travel). These strategic developments also have stretched beyond investments: The states signed bilateral strategic partnerships in 2006, and in 2015 Japan joined the annual U.S.-India Malabar naval exercises. Various moves by China, such as its attempts to expand its maritime influence in the South China Sea, have only accelerated this warming of ties.

Japanese investment in India, meanwhile, represents another area in which the nations have naturally convergent imperatives. Japan is capital-rich and has a shrinking population, while India is looking to cope with a growing population but is low on capital. India has thus found in Japan a source of investment for its ambitious infrastructure projects: Japan has used its technical ability to help deliver a new metro for New Delhi, and has gotten involved with current megaprojects such as building India's first high-speed railway for the Delhi-Mumbai Industrial Corridor and developing plans for gleaming new smart cities. From Japan's perspective, India provides an outlet for its excess capital that will also lead to much better returns than are possible in its own moribund economy.

Of course, there are constraints to the budding relationship, too. India's geographic, political and legal barriers create problems for any investor, and all of its ambitious projects are unlikely to fully come to fruition as planned — the "100 new smart cities" project, for example, already has partly morphed into improvements to existing cities. Nevertheless, Japan is better equipped than most to deliver on these promises.

A final basis for cooperation is the lack of direct competition between India and Japan in trade. India's strength is in services and Japan's is in manufacturing. That said, trade between the two remains extremely low.

Investments of Their Own

It is against this backdrop that recent developments around China's Belt and Road Initiative can be viewed. Over the past half-decade, China has attempted to increase its economic and strategic influence across Southeast Asia, South Asia and Eurasia. From the perspective of Japan and India, the massive project is a threat. New Delhi, in particular, is extremely wary of Beijing's cooperation with countries in the Indian Ocean, especially Pakistan. The proposed China-Pakistan Economic Corridor stretches from China to the coastal port of Gwadar and passes through Pakistan-occupied Kashmir, an area over which India and Pakistan have been skirmishing for decades. It came as no surprise, then, when India publicly snubbed China in May with its notable absence at Beijing's conference on the Belt and Road Initiative.

In fact, perhaps because of China's extensive project, India and Japan's partnership has taken another step forward. The pair have been working on strategic investments of their own, but this time, rather than Japan simply investing in India, they are making global investments together. To the west, Kautilya's wisdom has come into play again as India has looked beyond its hostile neighbor, Pakistan, to help develop a port in Chabahar, Iran, and a trade network to Afghanistan — its neighbor's neighbors — as a counter to the China-Pakistan Economic Corridor and Gwadar port. This year, Japan announced it would join the Chabahar project.

In May, India and Japan also published a vision document for a new "Freedom Corridor" that centers on Africa. Details are scant, though more information is due to be revealed by September, but the timing of and language surrounding the project seem designed to frame it as a direct alternative and competitor to the Belt and Road Initiative. Once again, India and Japan have complementary attributes for the venture: Japan is able to provide capital and technical skills, while India's diaspora and trade relationships give it a strong existing platform in key countries on Africa's East Coast, such as Kenya (in which 100,000 people of Indian descent reside) and Tanzania (in which 90,000 people of Indian descent reside).

Many factors are drawing India and Japan closer together. Their geography, investment and demographic outlooks are highly compatible, and the weight of China between them is bringing their goals further into alignment. With the challenges presented by China likely to keep growing in the years ahead, India and Japan's relationship will become an increasingly important one in the region. And two and a half millennia after the Indian Machiavelli wrote that "your neighbor's neighbor is your friend," India is again proving that the ancient geopolitical dictum remains just as relevant today.

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