India spots a blueprint to pursue greater access to Japanese market
India is preparing to review its 2011 pact with Japan as India's exports to its long-time partner have stayed stagnant, while Japanese imports into the country have doubled. New Delhi seeks a pact modelled on the Japan-US deal, allowing American products greater duty-free access.
New Delhi: India is set to pursue a new trade deal with Japan seeking greater market access–modelled on the East Asian giant’s pact with the US–as New Delhi seeks to correct the trade gap with its long-time partner, said two people aware of the development.
“The review of the existing FTA (free-trade agreement) with Japan is on the agenda and is expected to start soon. The discussions will be comprehensive, covering trade imbalances, market access, and tariff structures to make the agreement more balanced," said one of the two people cited above.
The second person said New Delhi aims to secure opportunities to export rice to Japan and address the widening bilateral trade deficit. Both spoke on the condition of anonymity.
Japan has allowed duty-free access to American products, while the US has imposed a 15% fixed tariff on exports from the Asian giant under the recent trade deal. Under the deal, Japan increased its US rice procurements by 75%.
India is preparing to review its 2011 Comprehensive Economic Partnership Agreement (CEPA) with Japan, which granted duty-free and low-duty market access for most items from both countries. However, India has received a limited benefit. While Japan’s shipments to India have more than doubled—from $8.62 billion in 2010-11 to $18.92 billion in FY25—India’s exports to Japan have largely stagnated at $6.2 billion, widening the trade deficit from $3.53 billion in FY11 to $12.68 billion in FY25.
Queries emailed to the ministries of commerce and external affairs remained unanswered until press time. The Embassy of Japan said, ‘We will not make any comment on this."
“Japan has been a trusted partner of India for a long time. While the US is concluding its deal in a specific manner, India would not like to proceed in the same way," said Debendra Sahu, associate professor, OP Jindal Global University, and PhD in Japanese Studies from JNU. “The rising trade deficit is a concern, and securing more trade lines under the FTA review would definitely help in reducing it. If both sides agree to allow rice exports from India to Japan, it would be a significant step forward."
In July 2024, Union Commerce and Industry Minister Piyush Goyal said that negotiations to review FTAs with Japan, Korea and Asean are progressing slowly, but India remains committed to pursuing them. These agreements were originally signed during the UPA regime.
“Given the changes in the geopolitical situation, New Delhi is exploring options that would be mutually beneficial and help reduce India’s trade deficit with Japan," the second person said, noting that Japan’s US deal offers leverage for negotiating non-tariff barriers and expanding Indian rice exports.
Currently, India’s presence in Japan’s rice market remains minimal. Exports stood at $5.74 million in 2024, up from $2.08 million in 2023.
“Rice is a highly sensitive issue in Japan, as it is both a staple food and central to the country’s agricultural heritage," said Sahu of OP Jindal Global University. “Japan has historically protected its rice farmers to ensure self-sufficiency, support rural livelihoods, and maintain political stability, given the influence of farming communities in local and national politics."
Other key issues planned for discussion during the review would include investment flows and enhancing cooperation in sectors critical to India, such as agriculture, manufacturing, pharmaceuticals, IT services and renewable energy to make the agreement more balanced and mutually beneficial for both countries, the people quoted earlier said.
According to a White House document dated 4 September, the US will apply a baseline 15% tariff on most Japanese imports, with separate provisions for automobiles, aerospace products, generic pharmaceuticals, and selected natural resources. The framework, combined with expanded US exports and investment-driven production, aims to reduce the trade deficit and restore balance in overall US-Japan trade.
Japan, in turn, will grant American producers in manufacturing, aerospace, agriculture, food, energy, automobiles, and industrial goods enhanced market access. This includes a 75% increase in US rice procurements under the minimum access rice scheme and annual purchases of US agricultural goods, such as corn, soybeans, fertilizer, and bioethanol, worth $8 billion. Japan will also allow US-made, safety-certified passenger vehicles to be sold without additional testing and purchase US-manufactured commercial aircraft and defense equipment.
Under the WTO’s minimum access framework, Japan has committed to importing around 770,000 metric tonnes of rice annually without tariffs. Imports beyond this quota face a specific duty of ¥341 per kilogram (around $2.30/kg), effectively acting as a prohibitive tariff.
A 75% increase would raise the US quota to about 600,000 tonnes, likely reducing Japan’s rice imports from other nations including Thailand, Australia, and China.
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