Japan, India agree to trade deal to expand ties

Japan and India agreed on a free trade deal on Thursday which Tokyo said would lead to a 10-fold jump in trade flows as it eyes the fast-growing economy as a low-cost production centre and a market for exports. Trade and investment flows between the two countries have been unspectacular because Japanese companies have focused on business with China and Southeast Asia. Bilateral trade in 2009 was ¥940 billion ($11 billion), about 4 percent of Japan's trade with China, government figures show.

Japanese Foreign Minister Katsuya Okada said he expected the figure to jump significantly as the free trade agreement will eliminate tariffs on 94 per cent of two-way flows in 10 years. "With this agreement, we expect a dramatic strengthening in economic ties," he told reporters. "When I visited India, I said I wouldn't be surprised if trade grew by 10-fold. That is not an exaggeration." The pact, expected to be finalised when Indian Prime Minister Manmohan Singh visits Japan in the coming months, follows years of wrangling over issues such as tariffs on Japanese car parts and tough checks on Indian pharmaceutical goods.