Shinzo Abe, who gets sworn in today as the Prime Minister after a gap of over five years, has won a landslide victory primarily on the back of promising a rapid economic recovery. He and his party has talked of unlimited monetary easing, large scale fiscal stimulus and doubling the inflation rate. For considerable time now, Japan has been suffering from economic contraction, low grade deflation and a soaring currency which has squeezed its exports. Responding to the signals of the incoming government, the conservative Bank of Japan Governor has already vowed to significantly expand asset-purchases and pump in more money into the economy. Such measures with, no doubt, further pressurise the huge public debt of Japan but the LDP and its leadership consider these essential to lift the GDP growth to 3% per annum, raise inflation target to 2% and bring down the yen by some 20% against the major global currencies.
There is acceptance within the incoming ruling party that an economically-resilient Japan is a requisite for restoring Japans international pride. This was their electoral theme and the party leaders took a tough stance, with considerable subsequent electoral advantage, on the dispute with China on the sovereignty of the Senkaku Islands in the East China Sea. Abe had let it be known that the islands unmistakingly belong to Japan and there is no room for negotiations on this point. Equally explicitly he had opposed, across the board, shutting down of nuclear power reactors in Japan regardless of their safety status. Post elections, he has reiterated these positions and has made known that while he would strive to improve ties with China, deepening of relations, diplomatic as well as in fields of security and energy with the rest of Asia, particularly India, and Australia would remain his first priority.
Realisation of Indias geopolitical advantage and economic potential had dawned way back in 1951 when India became one of the first few countries with whom Japan decided to establish diplomatic relations. Prime Minister Nobusuke Kishi, the grandfather of Shinzo Abe, was the first post-War Japanese leader to visit India in 1953. Calling India a natural ally, Abe as Prime Minister raised the engagement with India in 2006 to a strategic partnership, i.e. to the same level as with the US, its closest political and economic partner. By initiating joint annual military exercises with the Indian and the US navies, despite the Chinese protests, he indicated his clear preference for the Indian model of growth with democracy as a counter to the dominant Beijing consensus. Addressing the Indian Parliament in 2007, he had carefully articulated that the Indian and Pacific countries were seamlessly connected and that when we build a community in Asia, maritime democracies should lead the pack. With his return to power, significant fleshing in of such meaningful indications of international relations can be expected.
With most of the pro-nuclear protagonists winning their seatsSenkei newspaper reported their number rising from 132 in the last Diet to 346 in the newthe fears and apprehensions emanating from the Fukushima disaster seem to have been laid to rest. Many of the nuclear power reactors are not likely to be permanently shut down, particularly in the industrial Kobe-Osaka belt, and nuclear energy as an option is not being given up. However, there would be need for a more professional approach to gainfully generating nuclear energy and deploying the Japanese industries fast developing capability to manufacture nuclear equipment. With economic revival rather than ideological dogmatism being the hallmark of his governance, Abe is likely to support more vociferously than any other Japanese leader the Indian ambitions to make nuclear power an important constituent of the Indian energy mix. Growing Japan-India civil cooperation in nuclear energy could provide India a worthwhile alternative to its hitherto pronounced dependence on the US, Russia and France, especially once the yen gets more realistically valued.
In his last tenure, Abe was instrumental in Japan providing support for the western dedicated freight rail corridor and the conceptualisation of the yet to effectively take off Delhi-Mumbai industrial corridor. Similar help can now be expected from Japan for developing an industrial corridor on the Chennai-Bangalore-Hyderabad route and the introduction of a high-speed Shinkansen train between Mumbai and Ahmedabad. Without significant international financial and technical assistance, neither of these capital-intensive projects is feasible. Eager to kick-start its own economy in the process, Japan seems Indias best bet for creating such infrastructure.
More importantly, with tension building up in relations with China where the somewhat over-heated economy is now cooling off, Japanese businesses are likely to look at India more aggressively than ever before. Already, over 1,800 Japanese establishments operate here with 382 having come up during the last year alone. Now that a comprehensive Economic Partnership Agreement between Japan and India has become operational, many more entities on either side are engaging between themselves. More and more hi-tech Japanese companies can be expected to come to India to leverage not merely the low-wage manufacturing capability but equally importantly to tap its vast market potential. Japanese business is known to take its cues from its government and with now clearer positive signals than ever before emanating from the new establishment, Japan can, in not too distant a future, replace China as Indias biggest trading partner in Asia and become its largest global investor.
The author, a former Union secretary in the ministry of industry and commerce, has for long been associated with promoting Indo-Japan business cooperation