Why is Japan pumping so much money into India for its infrastructure projects?
来源：三泰虎 http://www.santaihu.com/46134.html 译者：Jessica.Wu
Sunny Mewati, Predictably Irrational
Japan's investment spree in India should be seen within the broader context of what Japan did and still does for east Asia.
Firstly, Japan has always been a resource and labor starved but capital rich country. For example, Japanese firms alone have a cash stockpile of over $2 trillion. It has been a long standing Japanese economic policy to invest this capital in emerging economies to generate businesses for Japanese firms. Japan is a highly developed (low returns to capital) but aging country (labor shortage). It's economy has been stagnant for over two decades but if you visit Japan, it does not seem if the country has been in recession for so long. Unemployment is low and living standards are high. It is because Japanese capital has one of the best returns of any other country through Japan's aggressive investments in high risk but high return emerging markets. During the 1960's, they invested heavily on Korea and Taiwan and Hong Kong through both direct investment and institutionalized lending through the Asian Development Bank. In the 1980's and 90's, Japan along with Taiwan led foreign investment into China with a lot of resource for infrastructure deals.
Furthermore, Japan's international influence has taken a hit especially in Africa and East Asia with the emergence of China. China executed to perfection, the textbook on gaining economic influence written by Japan. It aggressively invested Africa and has largely been successful in filling Japan's shoes in east Asia. It established parallel financial institutions such as the Asian Infrastructure Investment Bank. Chinese firms have regularly outmaneuvered their Japanese counterparts in east Asia in bagging infrastructure contracts such as building rail projects in Thailand and Indonesia. In business jargon, China has disrupted Japan's otherwise perfect business model of gaining high returns on capital abroad to maintain the domestic economy.
Against this backdrop, India is the best destination. The only country where Japan still has an upper hand and which has a desire for, but also a near visceral aversion to Chinese investments. Chinese investments are viewed with an undercurrent of hostility by India. The Chinese are not very keen on investing in India either. 'Hot money flows' from western nations that fueled most of India's growth for the past 15 years are slowly drying up. Multilateral financing has a lot of strings attached. For India, the easiest source of capital is Japan, a country viewed favorably by most Indians. A large scale investment from China will always raise the banter of 'compromising national security', concessions granted to say the United States or Europe would likely be dubbed 'exploitation' because of our socialist past but Japan is different. Because it is perceived as an old friend and ally, the government faces the least political resistance in granting Japan concessions in return for capital and expertise.
Last, interest on Japanese soft loans is very low, in the range of 0.25% that even 30% offset for Japanese firms does not equal the return of simple American T-bills. There is a clear geopolitical dimension to Japan's investment as well but unlike most commentators, I don't think it has anything to do with the 'dominant narrative' of containing China. Japan and India are natural allies in that India's need for military modernization is aligned with Shinzo Abe's plan to revive Japanese economy with arms exports. Even with Narendra Modi's defense indegenization push, India will remain a major importer of weapons for a long time and hence a large prospective market for Japanese defense exports.
In conclusion, Japan's investment in India is a function of push and pull. Japan is facing stiff competition from Chinese capital in East Asia and Africa but not in India enhancing India's attractiveness. For India, conventional sources of capital are slowly drying up.
A few reasons that I can think of:
ŸJapanese economy is stagnating since 1990’s and that is not a good thing. To add to the problems, it shrank in 2015 (Why is Japan's economy shrinking? (Why is Japan's economy shrinking?)) and in not very good conditions since then.
ŸJapanese Prime Minister Shinzo Abe has promised Japanese population that he’ll bring inflation back in Japan. And a very good option to do that is to boost the growth and print more money (and they are doing that too)
ŸAnd how can they boost the growth? As the famous principle says, money attracts money. Or to say it simply, if you need returns, you should first invest. And what is a better destination to invest than a rapidly growing Indian Economy?
ŸMore to that, some of the clauses in this investment suggest that the machinery and other things required for the construction of these projects should be procured from the Japanese companies, thus helping them to grow.
ŸAlso, since the emergence of China, Japan has lost its influence in most of the African and a few Asian countries too. It is now fiercely competing with China to win India.
Vivek Chaudhary, Student at Lovely Professional University- LPU (2018-present)
Japan is seeking a place to invest From where they can get much profit.
Japan want to open Its manufacturing Units in India as their working Age population is decreasing dramatically in Japan So they do need to go to somewhere they get more profit and India is best place because labour cost in India is very cheap and also have Largest working age population.
Talking about Bullet trains,
According to IMF, Income per capita will be rise to about 3000USD by 2023(i.e. when Bullet will be operational) So, I think in 2023 3000INR will be not a huge amount of money for getting bullet experience and also feeling same as developed country do and also talking about external debt India is far better than other countries as it has only debt equal to 24% of it's GDP and also who repay the debt at all.
And not to forget, they also investing in DMIC project.
Rajeev Ranjan, Mystic India
Japan has a natural ally in India. Both share a shared history owing to Buddhism. Apart from that, India is known to be one nation devoid of hegemonic attitude. Japan has a huge ageing population, while India has a huge young population. In last two decades Indian economy has grown by over 200%, while Japan has grown by a little over 50%.
Japan always has a tiff with China over land issues and other issues, and so has India. It makes them a natural ally to contain China.
Moreover Japan needs rare earth for defence production, for which it depends onb unreliable China which had stopped export to Japan a few years ago. India can easily supply to them.
Japan has a lot of technological developments and innovations which it can sell to India, a huge market. For e.g. Bullet trains, Nuclear technologies. Huge economies like China, US already have it. So it makes sense for Japan to invest in India.
Beside all the economic reason that people have pointed out, there is strategic dimension, as to why Japan is pumping so much money. The reasons are:
1stChanging scenario of Asia pacific region, with the erstwhile dominance of US, is slowly being challenged by China
2ndChina has become strong regional power. Japan shares territorial disputes with the China. So does India
3rdThe rebalancing and pivot to Asia policy of US, is basically a response to the China's growing dominance. US is trying to forge a alliance of countries like Australia, Japan, south Korea,India to balance China's rise.
4thSo, Japans views India as a ally.
Also, remember Japan over-dependence on US for security and nuclear cover(due to constitution and Article 9 of Japan).Japan wants to decrease its overdependence and rather become self reliant. In the process, it also wants to diversify its strategic partners.