1. What makes India a much bigger market for Japan
Cos?
Consider these three data together. First, compared to 100,000 Japanese expats in
China, India hosts just 4,000. Second, this week, Japan recorded its first trade deficit in
31 years; exports were short of imports by $30 billion. Third, in 2011, car sales in Japan
fell, yes, fell by 15%.
What do these numbers taken together mean, specifically what do they mean for India?
Japan Inc's presence in India is still small but Japan's current trade and economic
factors are set to change that. A strong yen that makes exports expensive, a weak
economy that means shrinking home demand and near-saturation presence of
Japanese business in China already are combining to make India a much bigger play
for Japan Inc.
Early Signs of Big Push
You can see the first big signs of Japanese businesses new big push in India. NTT
Communications acquired Netmagic Solutions and Nomura Research has acquired
Anshin Software and Market Xcel Data Matrix respectively. Panasonic has bought out
Indian brand Anchor Electricals.
Dentsu has raised its stake in its Indian venture to make it a wholly-owned subsidiary.
Companies like JTB are making their Indian debut by setting up offices here and some
like Nippon Life are buying minority stakes in Indian companies like Reliance Capital
AMC.
Not surprisingly, therefore, earlier this week, Federation of Indian Chambers of
Commerce and Industry (FICCI) received the biggest ever business delegation from
Japan. Some 80 Japanese business heads were here. And, yes, the 4,000 Japanese

2. expats in India does look a small number compared to the Japanese presence in China.
But the Japanese expat population in India has doubled in the past two years.
And the number of Japanese companies doing business in India has jumped. "In the
past two-three years the number of Japanese companies here has doubled," says
Gajendra Badgujar, deputy director, FICCI. There are now 1,000 Japanese companies
in India.
Post-Reforms Small Entry
Japan Inc had of course discovered India in the 1990s, after reforms began. Companies
like Sony, Toyota, Honda entered in the 1990s. But barring Suzuki, most of them made
what can only be called half-hearted India plans. The results were predictable.
Lack of focus, low investments and poor India connect meant most India operations of
Japanese companies remained small. Koreans, American and European MNCs in
various sectors outpaced Japan Inc in India. For example, today the consumer durables
business is dominated by the Koreans with Sony being a very small player. Ditto in cars
where Korean Hyundai and even a very late entrant like VW is making good gains in the
Indian market.
Japanese businesses' smaller presence is clear even from success stories. Nikon India
set up its India office in 2007. Its managing director, H Takashina, says Nikon has been
doubling its turnover every year. "This market is small but it is one of the most promising
for us," he says.
In 2011-12, Nikon sold 3.2 million camera and optical units, up 33% from the previous
year. The story is the same in the premium single-lens reflex (SLR) camera category.
But Nikon has no manufacturing facility, just 130 staff, including three Japanese
executives, and offices in the four metros. That's really small compared to the
Samsungs and LGs. Or take Sony. It retailed products in India but failed to invest in
after-sales service support.

3. But Nikon India is also a good example of how things might change. It has 22 service
centres and 50 collection centres, many in Tier II and III cities. And it is betting that India
will contribute 5% of its global sales by 2015; the current figure is just 1%. This kind of
scaled up ambition for India has a very sobering context, however.
The Yen for Change
The sharpest wake up call for Japan Inc in India, indeed for Japan Inc everywhere else
in the world, has been the strong yen. Last year the yen was at an historical high since
the World War II and it continues to remain strong against dollar. That makes Japanese
exports uncompetitive, making one of the foundational principles, make high-quality
products, sell them everywhere, of Japan Inc shaky. It puts enormous stress on the
business model of most Japanese companies in India.
With exceptions like Suzuki Motors, very few Japanese companies have invested in
manufacturing facilities here. Since they were selling imported products, their pricing
suffered a double whammy, a strong yen and a weak rupee, both increasing the cost of
imports substantially.
Take for example Canon India. It imports all its products from overseas, and at least
40% of its imports are from Japan. Between July and December 2011, the yen
appreciated against the dollar by 5%, and the rupee depreciated against the dollar by
21%. The math is simple, and terrible for Canon India. The landed cost of its products
went up by 26% in six months.
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