Indo-Japan Trade and Commerce Relations : The Past, Present and the Road Ahead

India and Japan enjoy very cordial political and economic relations. Historically, Buddhism acted as the link between the two countries. In the post-Independence era, Japan has been providing financial assistance to India in the form of Official Development Assistance (ODA). In the last two decades it has emerged as the largest donor to India. Japan has also been at the forefront in providing technical and financial assistance for infrastructure development of the country. The Delhi and the Kolkata Metro Rail project stand as testimony to the same among many other projects.India in the meantime, has witnessed economic reforms along with liberalization and globalization of the economy. India has now emerged as the second fastest growing economy of the world behind China. Along with China it has been a major destination of foreign investment. Bilaterally, India considers Japan as a strategic partner in Asia. The year 2007 was nominated as the “Indo-Japanese Friendship Year” and “Japan-India Tourism Exchange Year”. The heads of the government of both the countries understand the significance of strengthening Indo-Japanese ties which is reflected in the eight fold-initiatives agreed upon by both the countries.The Japanese investment in India is far less compared to its investment in China. Foreign Direct Investment (FDI) outflow from Japan to China till 2004 was $4567 billion while FDI outflow to India was a meager $97 billion. However, Japan is still the third largest FDI contributor to India. The FDI in the last two financial years stood at $1.8 billion. The Indo-Japanese bilateral trade stood at $6.54 billion dollars during the fiscal 2005-06. In this context the paper aims to discuss the existing state of Indo-Japan trade and commerce relations, India's Look East policy, the potential sectors of investment for both India and Japan, Comprehensive Economic Partnership Agreement, the issues and challenges in the Indo-Japanese trade relations, case studies and the Road ahead