By Peter Wyckoff
Figure 1: Map locating select ports with recent Japanese financial assistance (made with zeemaps.com). 
Japanese ambassadors are suddenly finding themselves in a lot of ports. In a remarkable stretch of deals, Japan has recently joined eight major port construction or renovation projects, all in the Indian Ocean Region (IOR). From sprawling Mombasa to tiny Providence, these projects highlight dramatic investment by Japan in the region: from a measly 1.1% of Japanese FDI in 1999, IOR countries commanded 21.3% in 2014, a 1936% increase. But why? And why is that engagement likely to grow in coming years? In the context of the successful Third Japan-Indian Ocean Dialogue held in Tokyo in April, there are three core reasons behind the trend:
Trade: Complementarity and New Growth
Trade with the IOR remains the heart of Japan’s involvement, dating back at least to Tenjiku Tokubei’s trip to Maghada (India) in 1626. After World War II, trade with the IOR grew to be a decisive factor in Japan’s economy, helping it reboot after military defeat. The IOR’s richness in raw materials complemented effectively with Japan’s industrializing might, as demonstrated by post-war Pakistan-Japan relations. In the 40s and 50s, Pakistan became Japan’s second largest trading partner (after the U.S.), and the first country to conclude a postwar trade agreement with Japan. Pakistan produced cotton and jute which were eagerly purchased by Japan’s textile companies, one of few industries allowed to operate during the American Occupation. Japan operated a technology transfer (particularly of textile machinery) to aid in Pakistan’s development, and later commenced one of its first aid programs in Pakistan.
Since then, trade with the region has skyrocketed to $225 billion, a figure that dwarfs Japanese trade with the E.U., as the IOR grew into a bustling ring of growing economies, with a dense web of trade. Complementarity has grown into a form of dependence. In particular, imports for energy production leave Japan increasingly reliant on the region. In 2012, 83% of Japanese oil imports came from the Middle East (and through the Indian Ocean), up from 70% in the 80s. Between 2011 and 2014, even as overall raw material imports into Japan decreased, the portion coming from the IOR rose from 62.34% to 66.54% (see Figure 2).
Figure 2: Japanese raw material imports from the IOR, and rest of the world (World Bank).
Trade with the region is unlikely to decrease. The IMF predicts that 11 IOR countries will experience 5%+ GDP growth in 2017 with countries like Kenya, Bangladesh, and Myanmar, as well as half of the “BRIICS” countries. And as Anthony Bergin explains, Japan is also well placed to help IOR countries work on sustainably developing maritime resources (including traditional industries such as fisheries, shipping, or ports; as well as newer industries including aquaculture, renewable energy, bio-products, carbon sequestration, and desalination). Japan is a pioneer on many of these fronts. In 2014, the Kagoshima Nanatsujima Mega Solar Power Plant opened as the world’s largest offshore solar plant; in 2013, Japan and India carried out an ambitious joint survey for gas hydrates; and Japan holds the uncontested crown in designing creative uses for seaweed (among other sea products). FDI from Japan to the IOR, already some $30 billion in 2014, is trending upward (see Figure 3).
Figure 3: FDI out of Japan (Ministry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates).
Alignment with Peacebuilding Objectives
With an eye to preserving the channels that enable this trade volume, particularly against the threat of piracy, Japan has deployed MSDF to the Indian Ocean in OEF-MIO, and to Japan’s first overseas base in Djibouti. After a relative success fighting piracy in the Gulf of Aden (the number of incidents dropped from 192 in 2010 to 13 in 2013), the base is to be expanded. Sending SDF to the region, through a targeted relaxation of Article 9, allows the SDF to gain some combat experience – another incentive.As piracy rises in another IOR chokepoint in Southeast Asia, Japan should perhaps consider a new deployment.
Beyond securing trade channels, these deployments align with Abe administration goals for peacebuilding (JICA, ODA White Paper, MoD), including broader efforts to establish political and economic stability. Already 40% of all SDF missions have occurred in the IOR, and a stunning half of Japanese ODA goes to IOR countries, seven of the top ten recipients. With good reason — the IOR is at risk of natural disasters, and general political instability. The region suffered six of the ten biggest natural disasters in 1980-2015, with the Indian Ocean tsunami topping the list (220,000 fatalities). 70% of IOR states have above-average “Fragile State Index” ratings; Somalia, Yemen, and Pakistan are on “High” or “Very High Alert.”
Pushing back against China
Another incentive comes from the desire to push back on China. Chinese influence in the IOR has gradually been building. To the west, it has made considerable investments in East Africa, in countries like Kenya, Djibouti, and Tanzania. To the east, it has invested billions in Indonesia and named Australia a “key partner” in its pursuit of a new trade bloc. In the northern Indian Ocean, the “Belt” of the “One Belt, One Road” initiative cuts across strategic ports, both economically and militarily. China has also been exerting increasing pressure on Japan in the East/South China Seas — in 2015, Japan flew missions to intercept Chinese aircraft a record 571 times — with no sign of a let-up.
Japan can strengthen its hand by engaging in the IOR. While Japan has limited options in the East/South China Seas, it can push back on Chinese influence in the Indian Ocean. With a recent lifting of limitations on arms exports, Japan can bolster its defense industry with sales to IOR countries. It can reinforce historical alliances (Australia, India) while cultivating new ones (Kenya, Thailand). IOR MSDF operations entrench UNCLOS policies that can be applied in the East/South China Seas. And the IOR lends itself to joint military drills such as the Malabar Exercises.
IOR countries share many of the same challenges and opportunities — a strategic location for trade, access to relatively unexploited maritime resources, exposure to natural disasters, political instability, courting by China. While the Indian Ocean is vast, it is also uniting, and located at a strategic node — as the dictum goes, “Whoever controls the Indian Ocean dominates Asia.” As Japan faces uncertain American leadership in Asia, engagement in the region will provide clear dividends for both Japan and IOR countries. Japanese ambassadors can look forward to spending more time in Indian Ocean ports.
Peter Wyckoff is the Japan Program research intern.