Japan and an Asian Economic Community

Masanori Kondo
JEL codes: 
RIS-DP # 106

Until recently, most Japanese considered the gaining momentum of Asian economic integration in the frame of ASEAN+3. With India maintaining
a high economic growth rate and its population being predicted to overtake China as the most populous country in Asia is leading many to rethink the importance of India to Asian economic integration. In order to find a political and economic counterbalance to China, the Japanese government has also put effort in vitalizing the Japan-India relationship. India following its Look East policy has been successful in improving its economic relations with Korea, China and Japan. However, with some exceptions, Japanese businesses are behind other countries (especially US, UK, and South Korea) towards investing in India. While there are indeed many unique difficulties involved in entering the Indian market, the massive consumer potential of the population combined with a skilled and numerous labour pool allows many South Korean and American firms to attain great success there. Japanese and Indian policymakers have great designs for the relationship between the two countries, but it is only when Japanese firms step up and make the needed large scale commitment in India that Indo-Japanese trade will start to grow.