Japan PM Sanae Takaichi's India visit and the state of free trade: Can more be expected under Indo-Pacific cooperation context?

Japanese Prime Minister Sanae Takaichi is visiting India from July 1 to 3 for the 16th India-Japan Annual Summit. Talks during her first visit to India as Japanese PM will cover defence, economic security, semiconductors, critical minerals and Indo-Pacific security. The visit is also likely to push an "Industrial Value Chain" linking the Bay of Bengal to Northeast India. A key area to examine in this context is the India-Japan free trade agreement, and how it sits inside frameworks like the Free and Open Indo-Pacific (FOIP). The meeting of the two energy-importer nations is taking place amid a perceived US thaw with China under President Trump. China was once central to Indo-Pacific calculations. That appeared to change in June, when the Pentagon renamed US Indo-Pacific Command back to US Pacific Command, dropping "Indo" from the title after eight years. US officials called it symbolic. The area of responsibility, stretching to India's western maritime boundary, stays unchanged. But the naming carries signal value in this region. Amid this backdrop, let us examine the trade relations of India and Japan.

Setting the context: Trade, FOIP, and shifting equations

FOIP has anchored India-Japan strategic and economic thinking for over a decade. Trade policy, maritime security, and China-related calculations move together for both nations. The specific free trade pact (FTA) is the India-Japan Comprehensive Economic Partnership Agreement, or CEPA. The stated aim of FOIP and CEPA are interconnected: supply chain resilience, digital cooperation, and larger Japanese investment into India. Japan's FOIP vision rests on free trade, rule of law, and freedom of navigation. This aligns with India's Act East policy, the Indo-Pacific Oceans' Initiative (IPOI), and SAGAR — Security and Growth for All in the Region. Japan leads the Maritime Trade, Transport, and Connectivity pillar under IPOI, aimed at keeping commerce rules-based across the region including India. Bilateral annual summits have steadily widened cooperation into semiconductors, critical minerals, and AI to secure trade routes.

India-Japan free trade pact: Prospects and problems

The CEPA, in force since August 2011, cut tariffs on roughly 94 per cent of goods traded between India and Japan over 10 years. Indian exports like textiles, gems, and marine products gained access to Japan, while Japanese exports like electronics and machinery went to India. But rice, wheat, and dairy — sectors where India has real export interest — stayed largely excluded. The trade imbalance shows in the numbers. Bilateral trade touched $25.17 billion in FY25. Japan's imports from India stood at $6.73 billion in 2025, while India's imports from Japan is higher, across machinery, electronics, copper and chemicals. The gap favours Japan structurally, not cyclically. The two nations are in the process of renegotiating CEPA. The 7th Joint Committee Meeting was held in Tokyo in March 2026. India pressed for better market access in textiles, pharmaceuticals, agriculture, and services, and for a more balanced trade relationship. Rice access remains a live issue, though no breakthrough is confirmed.

Where CEPA can expand in the larger context of free and open Indo-Pacific

Three areas stand out for widening India's exports to Japan and narrowing the trade deficit.

First is defence. Both countries have flagged defence-tech cooperation as a summit priority, but this sits outside CEPA's current scope. Bringing defence manufacturing and co-production into the trade framework could be a natural next step.

Services and skilled mobility is the second. India already has a Specified Skilled Worker MoC with Japan, and both sides agreed in 2025 to a five-year target of moving 50,000 skilled and semi-skilled Indian workers to Japan. Deepening services access under CEPA can build on this.

AI and emerging tech are the third. Takaichi's op-ed column for the Times of India mentioned AI cooperation. And the groundwork already exists. India and Japan launched a Japan-India AI Cooperation Initiative in August 2025, covering LLMs, joint research, and data centre development. The first India-Japan Strategic AI Dialogue was held in Mumbai in April this year. This is the most likely potential area to formalise inside the CEPA, alongside an Economic Security Initiative already covering semiconductors, clean energy, telecom, pharmaceuticals, and critical minerals.

Connecting the Northeast and beyond: An industrial value chain for India and Japan

Takaichi's op-ed for this visit also raises the Industrial Value Chain concept, connecting Assam through Northeast India and Bangladesh to the Indian Ocean. She named two projects funded through Japanese ODA: the Dhubri-Phulbari Bridge and Matarbari Port in Bangladesh. The stated goal is linking India's Northeast to ASEAN, with spillover gains for Nepal and Bhutan.

This sits outside CEPA's formal text. But it matters for the same reason CEPA does. Infrastructure funded through Japanese ODA could unlock the Northeast's geography, turning a landlocked region into a corridor between South and Southeast Asia. The context is that Japan remains India's largest bilateral official development assistance donor, with cumulative commitments above JPY 8.5 trillion. The summit's real test will be whether these strands — CEPA renegotiation, AI cooperation, and connectivity infrastructure — get folded into one coherent economic architecture under the larger framework of Free and Open Indo-Pacific.