The leaders of India and Japan signed a sweeping agreement Monday to boost trade and investment while the visiting Indian prime minister pushed for a nuclear energy deal — a touchy issue for Tokyo because of India's past atomic test blasts.
The economic partnership agreement slashes tariffs on a range of goods from auto parts to bonsai plants and introduces measures to promote investment and deal with intellectual property rights.
Forging this kind of pact is increasingly a priority for Japan, which sees itself falling behind regional rival South Korea in this area.
Japanese Prime Minister Naoto Kan and Indian Prime Minister Manmohan Singh signed papers signaling the end of trade negotiations that began in early 2007. The agreement needs ratification in Japan's parliament to take effect — which could come by the middle of next year.
Despite the size of their economies, Japan and India have had limited trade, which totaled 636 billion yen, or about $7.7 billion, for the first six months of the year, just 1 percent of Japan's global trade. Trade with China, Japan's top partner, totaled $176 billion over the same period.
The deal could be a step toward reducing Japan's heavy dependence on the Chinese market after a spat over disputed islands has strained ties between Beijing and Tokyo and led to anti-Japanese protests in China, some calling for boycotts of Japanese products.
Singh also came to Japan saying a civilian nuclear energy deal that would allow Japanese companies to export nuclear power generation technology and related equipment to India would be a "win-win proposition."
Japan began talks in June with New Delhi toward a possible nuclear energy cooperation agreement, but the subject is delicate in Japan because of India's refusal to sign the Nuclear Non-Proliferation Treaty. Anti-nuclear sentiment runs high in Japan, the only nation to suffer atomic bomb attacks.
When former Japanese Foreign Minister Katsuya Okada visited New Delhi in August, he cautioned India against any further testing of nuclear devices and said no timeline was set for the conclusion of a civil energy deal.
While India announced a moratorium on further nuclear testing, Japan wants New Delhi to be more explicit on its commitment. The two sides are also formulating what would be the consequences if India were to conduct a nuclear test.
An India-Japan nuclear agreement is crucial for international nuclear power plant companies to do business with India. While U.S.-based firms GE-Hitachi Nuclear Energy and Westinghouse Electric, a subsidiary of Japan's Toshiba Corp., are waiting to set up plants in India, some key components for the plants are supplied by Japanese companies.
New Delhi had faced a nuclear trade ban since conducting its first atomic test in 1974 and refusing to sign nonproliferation accords. It began emerging from the nuclear isolation in 2008 when it signed a civil nuclear cooperation agreement with the United States. The 45-nation Nuclear Suppliers Group then lifted a three-decade global ban on nuclear trade with India.