TOKYO, Japan—Japanese Prime Minister Yoshihiko Noda left for India on Tuesday, where economic ties will be the order of the day as Tokyo looks to shore up a financial friendship.
Japanese Prime Minister Yoshihiko Noda. AP FILE PHOTO
The day after returning from Beijing where the focus was on geopolitical issues—particularly in the aftermath of the death of North Korean leader Kim Jong-Il—Noda’s trip to New Delhi will be heavy on business.
In a meeting Wednesday with Indian counterpart Manmohan Singh, the two are expected to sign a dollar swap accord worth up to $10 billion, through which Tokyo would provide capital when the rupee plunges against the US unit, local media said.
“Emerging economies overall are being shaken by the eurozone sovereign debt crisis,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute.
“Currencies in emerging economies get volatile when European banks pull out capital,” he said. “A dollar swap arrangement can help emerging economies as it promises a supply of dollars in an emergency.”
Japan, which already has a similar accord with South Korea, has seen its exports tumble for two straight months to November, with sales to the key European market floundering as the debt crisis grips.
Flooding in Thailand, which is a production hub for many leading Japanese firms, and a stronger yen have also weighed on Asia’s second-largest economy, which is still running to catch up from the effects of the March 11 quake and tsunami disaster.
Helping emerging economies such as India also supports Japan’s own export-reliant economy, Ueno said.
“India, as much as South Korea, is a very significant market for Japan. Such a dollar swap accord is ultimately aimed at stabilising Japan’s own economy,” he said.
Shortly before Noda’s departure, Finance Minister Jun Azumi told reporters that nothing was finalised on the currency swap yet.
“Talks are ongoing. I am hopeful that an agreement will be reached at the Japan-India summit talks,” he said.
Japan is trying to widen and deepen its trade and financial partnerships as it looks to catch up with export rival South Korea, and after China overtook it as the world’s second-largest economy in 2010.
Noda’s predecessor Naoto Kan met Singh in October last year and stressed the warm ties linking two of Asia’s biggest democracies at a time of high diplomatic tensions between Japan and communist China.
Relations between Tokyo and Beijing sharply deteriorated last year following Japan’s arrest of a Chinese fishing boat captain near a disputed island chain in the East China Sea.
Beijing reacted furiously, cancelling high-level talks and civilian exchanges while suspending exports of rare earth minerals, which are crucial for Japan’s high-tech products—from computer components to hybrid cars.
Japan has since tried to diversify rare earth supplies, more than 90 percent of which are controlled by China, and is looking to jointly develop rare earth mineral deposits in India.
Noda and Singh are also expected to discuss a Japanese loan for a mega project to build a freight railway between New Delhi and Mumbai and a key deal on civilian nuclear cooperation.
Japan and India launched talks in June 2010 on a nuclear cooperation pact that would allow Tokyo to export its cutting-edge technology to the energy-hungry South Asian nation, a hotly contested market for atomic plants.
Japan is worried that nuclear-armed India has not signed the Nuclear Non-Proliferation Treaty, while the Fukushima nuclear accident triggered by a huge earthquake and tsunami has clouded the future of the deal.
Nevertheless, Ueno said India would continue to be an important market and partner for Japan.
“India has a big population and great potential for growth in the next decade or two,” Ueno said. “It is a reasonable policy for Japan to further strengthen its ties with India.”