Indo Japanese Trade Potential in the Context of Bilateral Relations

India and Japan share a special relationship as fellow democracies seeking greater economic engagement in Asia. The major traded commodities changed from cotton-related products in the early 1900s to heavy machinery in the 1970s. During the same period heavy industrial products were the major export commodities from Japan besides metal and metal products like iron and steel and steel plates. The 1980s marked the beginning of a new phase in Indo-Japan relations with the establishment of the Maruti-Suzuki plant. There was a minor set back in relation in 1999 when India went through its nuclear test. In August 2000, however, Japanese Prime Minister Yoshiro Mori made a visit to India that helped propel ties forward. The relations have further been strengthened with the visit of Japanese Prime Minister Yukio Hatoyama in 2009. This paper attempts to analyze imports and exports of commodities and products to and fro these countries to see the effect of bilateral relations on trade, after India initiated trade reforms in 1991. Data under HSN systems has been gathered from UNCOMTRADE database and grouped under heads as Agricultural commodities, products from food industry, earth crest, manufactured products, electronics and others. The time series has been analysed using dummy variables for trade reforms and tie ups. Potential products shall be explored using market share - growth matrix. Series has been detrended to see how variables responsible for trade between two countries adjust themselves in short run.