Deepen Japan India Ties: A Win-Win Proposition – I
by Ramtanu Maitra on 20 May 2020 1 Comment

Prior to and following the demise of the Soviet Union and the emergence of China as a world power in Asia there was no active effort in either New Delhi or Tokyo to build a mutually beneficial relationship. This was the case for a variety of reasons. Today, however, the ground situation has changed dramatically in the region. Now the historic requirement of security and economic growth, while coping with the pressure of fast-advancing technologies, calls for a close all-round relationship between the two most powerful nations besides China in Asia.


As we will discuss here, the two countries have much to offer each other in terms of addressing unique challenges that each faces. Indeed, it has become increasingly evident in recent years that developments beyond these two countries’ boundaries have created an environment that demands a strengthening and broadening of Japan-India ties. It is also evident that establishing a successful long-term relationship between the two would not only benefit both nations, but would also lay the foundation for longer-term pan-Asian security and stability.


How We Got Where We Are Today


Japan-India relations remained unremarkable throughout the Cold War in part because Japan was focused on rebuilding, with American assistance, following the defeat and devastation it had suffered in World War II. At that time Japan’s foreign policy was founded on “three guiding principles: diplomacy centered on the United Nations; collaboration with Free World nations; and adherence to Japan’s position as an Asian nation” (Japan-India Rapprochement and Its Future Issues: Takenori Horimoto: JIIA).


Since the mid-1960s, Japan focused intently on achieving technological excellence and high productivity growth. During those decades, South Asia, positioned as it is between Southeast Asia and the Middle East, became the equivalent of an “air pocket” in Japanese diplomacy, as a senior Japanese foreign affairs ministry official once put it. (Sekai Shuho, World Affairs Weekly, May 22, 1984). In other words, India, with its struggling economy and broken-down infrastructure, was not on the Japanese radar. Moreover, in tune with the geopolitical environment of the time, Japan’s foreign policy was wholly centered on the Japan-U.S. alliance, while India pursued first, nonalignment, and later sought a closer alliance with the Soviet Union. As a result, Japan-India relations, though always friendly, remained but benignly distant.


In the economic arena during those years, India’s pursuit of an insular public sector-dominated economic policy - by contrast with Japan’s open market economy - held the potential of closer economic ties in check. Even after the Soviet Union ceased to exist, which to some extent eliminated the geopolitical constraints that had kept India in the “air pocket,” no serious effort was made to move the relationship forward. The late Indian Premier P.V. Narasimha Rao and his finance minister, Manmohan Singh, began to unshackle the Indian economy at about that time (1991), putting in place a slew of policies that kick-started the liberalization and privatization of the economy. Yet even this did not generate any visible excitement in Japan, and Tokyo’s economic relations with New Delhi remained a low priority.


Today, however, given globalization and other international geopolitical developments, including the phenomenal rise of China, Japan and India each face a set of challenges which can be uniquely addressed through a deepened, constructive Indo-Japanese relationship. The imperative for a new relationship centers on India’s recognition of the necessity for real and dynamic economic growth and determination to become a world economic power, on the one hand, and Japan’s need to maintain its excellence in technological innovation and mastery in engineering: Japanese engagement in India’s underdeveloped industrial sector would be a win-win undertaking.


For India, with a population close to 1.3 billion, becoming a world economic power requires all-round technological applications to overhaul its production mechanism to significantly enhance efficiency. For instance, Indian manufacturing is hobbled by poor infrastructure, bureaucratic red tape, disconnectedness from global supply chains and restrictive labor laws that have held back the growth of business and limited economic dynamism (Can Indian Manufacturing Be the Next Chinese Manufacturing?: Alyssa Ayres: The Atlantic: Jan 4 2018). As significant, India has only a small pool of skilled personnel, and the country’s low-productivity agriculture has kept hundreds of millions of Indians with very little financial muscle tied to their farmland.


These problems provide Tokyo a great opportunity. Japan can contribute substantially to help India develop its engineering skill and strengthen its manufacturing muscle. And in doing so, Japan could simultaneously address some pressing problems of its own. First, Japan’s technological and engineering leadership today is threatened by the country’s demographic crisis: a steady decline in its population. Second, because Japan is heavily dependent on international trade, the status of its sea lanes is a continual concern, in which a deepening of economic and other cooperation with India can play a constructive role. Further and somewhat related, the nature of the U.S.-Japan security agreement prevents Japan from ensuring its own security in the region: here, too, engagement with India can be helpful.


One thing must be noted at the outset: Japan’s broader involvement with India cannot be based on enmity toward a third nation, namely China. There is a tendency among a host of geopolitical commentators in India, Japan and the West to make the case for improvement of Japan-India relations on the alleged need to build a power bloc to monitor and counter the growing power of China. India has a contentious relationship with China; but no government in New Delhi can expect to maintain peace and stability in the country - either economic or security-related - unless it also develops a strong working relationship with Beijing. This remains an imperative for New Delhi.


The same goes for Tokyo. Economic ties between Japan and China are strong, and they are growing to the benefit of both. The annual trade of goods between Japan and China has increased to some $317 billion over the past 45 years and now represents more than 20 percent of Japan’s total trade. Japan is also China’s third-largest trading partner. The total stock of Japanese foreign direct investment in China stood at some $124 billion at the end of 2018, with about 23,000 Japanese companies now operating in China. In other words, it is neither wise, nor meaningful, for Japan to develop closer broad-based relations with another nation because it considers China as a potential threat. For Japan, a one-to-one relationship with India will reach a mature level only when it is focused on genuine accomplishments and is designed to secure prosperity and stability for both its peoples. That said, there are compelling reasons why Tokyo, sooner than later, should work closely with New Delhi in developing all-round ties. We will proceed now to explore some of them in detail.


A Greying Japan


In the coming years, Japan’s economic, foreign and security-related policies will tend to evolve around a core problem: namely, the rapid shrinking of its population. This has already affected its industries because of a steady dwindling in the number of skilled and semi-skilled workers. Generally referred to as a “demographic crisis,” what the future holds for Japan is an acute labor shortage, for which ‘business as usual’ is no longer an option.


According to available demographic data, Japanese aged 65 years or older currently account for 28.5 percent of a total population of about 124 million as of Oct. 1, 2018. This segment has nearly quadrupled in the last 40 years, during which time the number of people over age 65 plus the number of deaths together outnumbered births year on year. On Dec. 24, 2018, Japan’s health ministry announced the number of babies born in 2019 fell by an estimated 5.9 percent, to 864,000. It was the first time since 1899, when the government began tracking this data, that the number has dipped below 900,000, according to The Asahi Shimbun.


Combined with the estimated number of deaths - a postwar high of 1.37 million - the aggregate decline of Japan’s population in 2018 by about 510,000 was the biggest ever. The data suggests the government will struggle to reach its goal of raising the birth rate to 1.8 by April 2026. The current birth rate stands at 1.43, well below the 2.07 required to keep the population stable (Japan shrinking as birthrate falls to lowest level in history: Justin McCurry: The Guardian: Dec. 27, 2018).


Japan has been trying to counter this drop in working population by bringing in immigrants. There are now 2,667,000 foreigners living in Japan, an increase of about 170,000 from 12 months earlier, according to annual statistics released in December 2019 by Japan’s Ministry of Internal Affairs and Communications. After five consecutive years of increases, these foreigners now account for 2.09 percent of Japan’s population. The newcomers are mostly from other parts of Asia: China accounts for the single largest immigrant population, followed by South Korea and Vietnam. In December 2019, Tokyo and Islamabad signed a memorandum of cooperation to allow Pakistanis to work in Japan. The limitations of this approach are apparent in the agreement that was signed between Japan and Pakistan. According to that agreement, “specified skilled workers” must pass a test and show basic comprehension of Japanese language to qualify for employment in Japan (Japan’s Births Decline to Lowest Number On Record: Laurel Wamsley: NPR: Dec. 24, 2019).


But Japanese-language familiarity is just one of the problems. Japan is an island nation whose culture, tradition and social system have remained virtually unchanged over the centuries. For the Japanese authorities, led by Prime Minister Shinzo Abe, it will be a Herculean task to absorb a large number of foreign workers with different cultures and traditions. The strain on Japan’s social order will likely draw the wrath of the Japanese people. Some rumblings have already been heard. Last April, reflecting on rural concerns about an influx of foreign labor, Yoshio Kimura, chair of the ruling Liberal Democratic Party lawmakers group dealing with the foreign worker issue, said: “It’s important to prevent the concentration (of foreign workers) in big cities. As the LDP turns its attention to rural constituents ahead of the upper house election, there may be more calls to expand the scope of the new immigration rules” (Japan bumps into challenges welcoming overseas workers: Yusuke Yokota and Yuki Fujita, Nikkei staff writers: April 29, 2019).


Having no land connection with other countries has furthered Japan’s isolation. As a result, very few individuals outside of Japan could attain mastery of Japanese language and culture. Moreover, since Japan is so much more technologically advanced than any Asian country in its neighborhood, finding skilled workers with adequate mastery of Japanese language will remain a daunting task. As a result, any large-scale influx of foreign workers into Japan is highly unlikely, at least in the short and medium term. And thus the weakening of Japan’s economy and loss of its technological edge remains a serious threat.


Japan’s Technological Advancement: What Is at Stake


It is no gainsaying that Japan’s technological mastery over the years has made it a top industrial nation. But the phenomenal success it achieved during the 1970s and 1980s has begun to wither. Japan’s productivity growth has steadily eroded in recent years, and that erosion has occurred in almost every sector, including Japan’s signature advanced manufacturing industries. Today there are substantial and widening labor and capital productivity gaps between Japan and other advanced economies. Japan has been unable to sustain consistent growth in value added, and the economy continues to operate below its potential (The Future of Japan: Reigniting Productivity and Growth: McKinsey Global Institute: March 2015).


Despite that, technological innovation in Japan has not stalled. While the rest of the world has moved toward a services-based economic model, even with the “demographic crisis” staring the country in its face, Japan is still pushing technological creativity in a way that the rest of the world struggles to emulate. One such well-established area of Japan’s technological innovation is robotics. This development is perhaps driven by the country’s urgency to counter the shrinking pool of workers. It is unlikely, however, that robotics and automation will be able to replace Japan’s large, highly skilled industrial workforce who are leaving the workplace.


Although robotics and automation are often cited as indicators of Japan’s technological innovativeness in recent years, what Japan has developed over the years in the areas of basic technology and associated engineering is of particular importance to India. It is in this area that Japan is perhaps the only nation that could meet India’s gaping requirement.


One of the most well-known aspects of technological innovation in Japan is its successful development of high-speed transportation infrastructure. The first high-speed train, the bullet train, was built in Japan between two massive hubs, Tokyo and Osaka, and inaugurated in 1964. The high-speed train has carried some 10 billion riders since its inauguration and has an incontestable safety record - no fatal derailments or collisions.


Another signature area of Japanese excellence is industrial machinery. Worldwide, the industrial machinery market is constantly growing. Between 2000 and 2014, the global production value of machine tools more than doubled from under $40 billion to more than $80 billion. Japan has around 200 machine tool manufacturers; and, as the largest manufacturer of computer numerical control machine tools, holds about 65 percent of that market globally. Some of the most famous brands include DMG Mori Seiki, Yamazaki Mazak, Okuma and Fanuc.


In 2014, six of the 11 largest machine tool manufacturers in terms of revenue came from Japan: Amada Co. Ltd., Komatsu Ltd., DMG Mori Co. Ltd., Makino Milling Machine Co. Ltd., Jtekt Corp. and Okuma Corp. Even if the Japanese machines are expensive compared to other suppliers, they are favorably recognized for their quality and reliability. Though the equipment can be very expensive, it becomes economical in the long run because, if adequately maintained, it lasts a very long time (The Japanese Machinery Industry: Japan Industry News: May 18, 2016).


Shipbuilding is another area of outstanding Japanese accomplishment. Kawasaki Shipbuilding in Nagasaki was once No. 1 in the world in shipbuilding, but the company is now struggling to stay afloat amidst stiff competition from China and South Korea. Japan had the highest shipbuilding tonnage in the world until the 1990s. But Japanese shipbuilders’ global market share has dropped sharply to 17.5 percent in 2018 from nearly 30 percent in 2008, far behind China’s 38 percent and South Korea’s 33 percent. The number of people employed in shipbuilding has fallen over time in Japan. Data on total employment in building and repairing ships and boats show that almost 185,000 people were employed in that activity in 1980. By 2000, this had dropped to a low of 65,500 people, although it increased again to almost 91,000 in 2008 (Peer Review of the Japanese Shipbuilding Industry: OECD: 2012).


To stay competitive, Japanese shipbuilders have been cutting costs, raising their technical expertise and developing fuel-efficient “eco-ships.” Nagasaki-based Mitsubishi Heavy Industries employs 3-D computer technology and cranes capable of carrying 1,200-ton loads to build ships from a few, larger pieces to cut costs. Mitsubishi and IHI Corporation have introduced container ships that use less fuel and give off less emission than comparable ships. Kawasaki and Mitsui have done the same with LNG carriers and bulk carriers.


In the aerospace sector, Japan developed the YS-11 60-seater transport aircraft in 1964 as the country’s first independently developed civil aircraft. The MU-2, FA-200, FA-300 and MU-300 business jets followed during the period until 1980. The Mitsubishi Regional Jet, a 70- to 90-seater which began full-fledged development in 2008, uses world-leading technologies such as aerodynamic design technologies and noise analysis technologies, as well as cutting-edge engines, to achieve excellent environmental performance, fuel efficiency and cabin comfort. The first flight was successfully completed in November 2015, and the first delivery is expected in 2020. As of October 2018, about 400 of these jets (including options and purchase rights) have been ordered (Japanese Aerospace Industry: The Society of Japanese Aerospace Companies: 2018-2019).


The list goes on. Noteworthy from India’s standpoint, however, is that despite the adversity it faces vis-à-vis its demographic crisis, Japan’s authorities have shown no intent to give up the country’s advanced research and development capabilities. And that is what makes its future involvement in India’s engineering development and skills training so very important and necessary. Japan can convey skills in heavy manufacturing and its leadership in key sectors, such as those addressed above, by manufacturing in India, thus overcoming the unstoppable erosion of its own skilled manpower and, at the same time, helping India build a modern industrial base, broaden its pool of skilled workers and become a long-term partner of Japan in Asia.


A clear indicator of Japan’s intent to maintain its proud manufacturing dynasty and accelerate growth in new advanced manufacturing sectors was the government’s 2010 “Rebirth Strategy for Japan” (updated and re-released in July 2012), which outlined the country’s economic goals for 2020. In this strategy, the government designated four key priority areas: innovative energy and environmental products, technologies and practices; the medical sector, including development of leading pharmaceuticals and medical equipment; agriculture; and small and medium-sized enterprises (Rebirth of Japan: A Comprehensive Strategy: National Policy Unit: Cabinet Secretariat, Japan: Aug. 8, 2012).


(To be concluded….)

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