India and Japan Sign Free Trade Pact

India and Japan signed a free trade pact in Tokyo today which will see the two major Asian economies do away with tariffs on 94 percent of goods over the next decade.

Representing their respective countries, India’s Minister of Commerce and Industry Anand Sharma and Japanese Foreign Minister Seiji Maehara were present in Tokyo today to finalize and sign the deal.

“It is wonderful for Japan to have been able to sign the bilateral agreement on a comprehensive economic partnership,” Maehara said at the signing ceremony, while Sharma referred to the pact as a “historic agreement.”

Japan is India’s fifth largest trading partner and bilateral trade between the two nations totaled roughly US$10.7 billion in 2009.

According to the Japanese government, the new trade agreement will make India and Japan each other’s biggest free-trade partners.

“The agreement is a result of the high level of confidence that the countries have with each other that we do not have with some other countries,” a senior Japanese trade official told the Economic Times. “In India, we are sure that slogan-shouting protesters will not surround the Japanese embassy.”

The deal comes on the heels of official data showing that Japan ceded its place as the world’s second-largest economy to China in 2010. Though China’s growing hunger for Japanese goods has refueled business in Japan, many leaders say the risk of diplomatic issues destabilizing business ties necessitates stronger partnerships with other nations in the region.

Closer ties to India could also create a possibility for Japanese investment into rare-earth minerals, used in a wide range of high-tech products. In October, India’s Prime Minister Manmohan Singh agreed with Japanese Prime Minister Naoto Kan that the two countries should explore the possibility of cooperation in developing rare-earth mining capabilities. The issue became especially pressing last year after China blocked rare-earth shipments during a territorial dispute with Japan.

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