Japan & India: The China Variable
Harry Wilby exposes the real-existing China force shaping the Japan-India nexus
The Japan Optimist holds Japan & India are a “Match-made-in-Heaven” - both share a deep-rooted cultural anti-colonial heritage; offer an obvious economic arbitrage where abundant capital meets copious labor, where best-in-class manufacturing meets world-leading software skills. The potential for synergies and joint success is obvious…and has been thoughtfully presented to our readers by my friend and hands-on India investor Harry Wilby in two earlier articles. Now he adds another, more Machiavellian dimension: the powerful role played by China in shaping Japan-India ambitions and actions, and thus Asia’s future. Enjoy. As always, comments welcome — many cheers from under a steaming blue sky Tokyo ;-j
Like ❤️ this post to get inside the China-India-Japan power triangle…
The China Variable: India, Japan, and the decade ahead
By Harry Wilby
The first instalment of this series argued that the India-Japan relationship is a rare thing: a partnership with no original sin, no territorial quarrel, no historical grievance, and 1,400 years of contact without a single episode of major enmity. That is the romance of it. The second, The Japan-India Corridor Trade, turned to the money, arguing that the most compelling use of Japanese capital in the corridor is not another year of the carry trade into Washington and Canberra but a strategic equity position in India’s public sector banks, underwritten by a yen-rupee cross that has barely moved in thirteen years. That is the commerce of it. This piece concerns the realism. For the deeper foundation of the relationship is not what unites India and Japan to each other. It is what confronts them both from the same direction.
Each has, as its single most consequential neighbour, a country that has demonstrated its willingness to convert economic dependence into political leverage, to contest borders by force or by cartography, and to treat the sovereignty of its neighbours as provisional. Each has been on the receiving end of Chinese coercion within the past five years. And each has responded not by seeking open confrontation, which neither can afford, but by pursuing a quieter strategy of managed distance: reducing its exposure, diversifying its dependencies, and hardening its position while keeping the channels of dialogue conspicuously open.
Let me be clear about the spirit of what follows, because it is not a polemic. Nothing in this analysis proceeds from hostility to China, and the reader should resist any such framing. Judged purely as a practitioner of realist statecraft, Beijing has been consistently ahead of the curve: it identified the strategic value of supply-chain dominance decades before its trading partners understood their exposure, it built the world’s most formidable industrial base while its rivals debated the merits of doing so, and it has applied its leverage with a precision and patience that any student of power must acknowledge, whatever one thinks of the ends. The failures examined in this piece are not Chinese failures. They belong to New Delhi and Tokyo, and to the broader democratic world whose assumptions they shared. China played its hand well. The question this piece asks is whether India and Japan, having finally recognised the game, can now play theirs.
The argument, then, is that this shared posture of managed distance is the true load-bearing wall of the India-Japan relationship, and that the coming decade will determine whether it can be forged into something deliberate and joint. It is worth stating plainly at the outset what the relationship is not. India and Japan are not allies against China. They are two sovereign states pursuing parallel strategies of de-risking that happen, increasingly, to converge. The distinction is not pedantry. It defines precisely what the partnership can do, what it cannot, and where it will generate friction of its own.
Two Asymmetric Relationships
Let us begin with the numbers rather than the rhetoric, because the numbers are more honest. China is Japan’s largest trading partner. Bilateral trade reached roughly $322 billion in 2025, with China accounting for approximately 22 per cent of both Japanese exports and imports. This is not a relationship that can be exited. It can only be managed, hedged, and slowly rebalanced.
And yet, since November 2025, it has been in political freefall. Prime Minister Takaichi’s remarks on a possible Japanese military response to a Taiwan contingency triggered the sharpest deterioration in a decade. Beijing banned Japanese seafood imports, restricted flights and tourism, cancelled cultural exchanges, imposed dual-use export controls, and sanctioned some forty Japanese firms. Chinese coast guard vessels were present in the contiguous zone around the Senkaku Islands on 361 of 365 days in 2024, the highest frequency on record, and maintained near-continuous presence through 2025. Japan’s Defence White Paper has for four consecutive years described China as an “unprecedented and greatest strategic challenge.” A Yomiuri Shimbun poll in March 2026 found that 93 per cent of Japanese citizens regard China as a threat to national security. This is not a relationship in a difficult patch. It is one in which the strategic and the commercial have decoupled entirely, each pointing in an opposite direction.
India’s China problem is different in texture but identical in structure. The clash in the Galwan Valley in June 2020, the deadliest border incident in forty-five years, permanently altered the political and military foundations of the relationship. Five years on, what has emerged is not reconciliation but, in the apt phrase of one Indian commentator, management under pressure. The meeting between Prime Minister Modi and President Xi at the Shanghai Cooperation Organisation summit in Tianjin in August 2025, the first formal engagement of its kind since 2018, was widely described as a thaw. So it was. But the Line of Actual Control is now a permanently militarised front, patrolled and fortified along its length. China continues to rename locations in Arunachal Pradesh, a territory it claims in full. And during Operation Sindoor in May 2025, Beijing furnished Pakistan with military, intelligence, and political support against India, a fact the subsequent diplomatic warming has papered over but not erased.
A note of realism is required here, and it is one that Indian strategic commentary too often avoids. India and China are not like-for-like military competitors, and the pretence that they are serves nobody. China’s defence budget is roughly three times India’s. Its navy is the largest in the world by hull count. Its progress in what its own doctrine calls intelligentised warfare, the integration of artificial intelligence, cyber, space, and electronic warfare into a single operational system, has no Indian equivalent. Pravin Sawhney made precisely this argument in The Last War, published in 2022: that India’s military remains structured, trained, and procured to fight Pakistan, while China has moved to an entirely different way of war, and that an India-China conflict would therefore not be a contest between comparable forces but a collision between different generations of military thought. It is a measure of the problem that, four years on, very little in Sawhney’s assessment requires revision despites India’s economic growth of recent years. The honest yardstick for Indian military planning remains Pakistan, a dangerous, proximate, and Chinese-armed adversary against which India’s conventional superiority is real but bounded. Against China itself, India’s strategy is not parity but denial: to make the costs of any incursion exceed its value. This asymmetry is precisely why the Japanese defence-industrial relationship matters more to New Delhi than the headline figures suggest.
India’s thaw is genuine, but it is tactical rather than sentimental, driven by a mutual recognition that a frozen relationship is ruinously expensive for both parties. China is India’s largest trading partner, with bilateral goods trade running at roughly $118 billion a year, and the relationship is profoundly lopsided, with the deficit above $100 billion in China’s favour. The dependence, in other words, runs in one direction while the opportunity runs in the other. China, whose own growth has stalled and whose established export markets are closing behind tariff walls, needs the world’s fastest-growing major consumer market more with each passing year. India needs the technology, the rare earths, and the industrial components that it cannot yet source or make elsewhere. Each side knows precisely what the other holds. Japan’s relationship, by contrast, has deteriorated precisely because Takaichi’s government has chosen strategic clarity over the studied ambiguity of her predecessors, a choice with initially impeccable but short-termist domestic logic, given her cabinet’s approval rating of nearly 70 per cent in the weeks after the remarks, but one that leaves the commercial relationship dangling over a void. India is thawing what it froze. Japan is freezing what it long kept warm. The two countries are, in effect, passing each other in opposite directions on the same road, and finding that they recognise one another.
Recognition and Response
There is a charge, made often and not without merit, that India and Japan were both slow to grasp the nature of the challenge China posed, and that everything now being undertaken with such urgency is merely the belated correction of a failure of foresight. The charge deserves a proper hearing, because the honest answer sharpens rather than blunts the analysis. The distinction that matters, I would argue, is between recognition and response. On the first, both countries were late. On the second, both are arriving, if anything, at close to the right moment.
Let us consider the recognition failure first, because it is real. Japan received the clearest early warning of any advanced economy and received it early. In 2010, following the collision of a Chinese trawler with a Japanese coast guard vessel near the Senkakus, Beijing imposed an informal embargo on rare earth exports to Japan. This was the single most instructive event in the modern economic history of Chinese statecraft: a demonstration, fully fifteen years before most of the West absorbed the lesson, that China would weaponise supply-chain dependence for political ends. Japan responded well to the narrow problem. It cut its rare earth dependence on China from roughly 90 per cent toward 60 per cent through the Lynas partnership in Australia, stockpiling, and recycling. But it did not generalise the lesson. Japanese direct investment into China continued to climb through the 2010s, the broader manufacturing dependence deepened, and the old doctrine of seikei bunri (政経分離), the separation of politics from economics, persisted in corporate Japan long after the Japanese state had privately concluded that no such separation was any longer possible.
India’s recognition failure has a different character but the same shape. For two decades New Delhi ran a China policy built on the premise that leader-level rapport could substitute for a settled border and a balanced trade account. The premise had a name and a venue. After the Doklam standoff of 2017 brought the two armies eyeball to eyeball for seventy-three days, Modi and Xi met at Wuhan in April 2018 for the first of two so-called informal summits, an innovation in which the two leaders, without aides or agendas, would walk by the lake and reset the relationship through personal understanding. The second followed at Mamallapuram, near Chennai, in October 2019, and produced the language of the “Chennai Connect.” The Wuhan spirit, as the doctrine came to be known, held that strategic communication at the very top would filter downward and prevent incidents at the border. Eight months after Mamallapuram, Chinese troops moved into the Galwan Valley. The doctrine did not survive the contact. Meanwhile the border had been left under-fortified and under-built while China constructed roads, airstrips, and forward positions at a pace India did not match, and the trade deficit was permitted to swell past $100 billion. In both capitals, then, the intellectual error was the same, and it was the same error made across the entire democratic world: the assumption that a China growing richer would become a status-quo power rather than a revisionist one. India and Japan simply had less excuse than most, being closest to the problem in geography and in history, and having received the earliest and most explicit warnings.
But the charge of being behind the curve elides a harder truth about constraint. Neither country could have responded meaningfully much earlier than it did, because the capacity to respond did not yet exist. Japan spent the 2010s with China as its largest export market during a decade of chronic domestic stagnation. To have written off that exposure in 2013 would have meant accepting certain and severe near-term pain against a threat that had not yet fully materialised, a trade that few managements in any country would make. India’s constraint was starker still. One cannot de-risk from Chinese active pharmaceutical ingredients, electronics, and solar components when no domestic or allied substitute exists at the necessary scale and price. India’s dependence was less a policy failure than a fact of its stage of development. The ability to substitute is being built now, through precisely the Japanese and Western capital flows described in the previous piece, because it could not have been built before. A manufacturing base must precede the repatriation of a supply chain, and India is only now acquiring one.
This is why the more precise verdict is that both nations were behind the curve on recognition and roughly on time on response. The window for an effective India-Japan counter-strategy required three conditions to align: Japanese corporate willingness to redeploy capital, which arrived only with the governance reforms and the end of the lazy balance sheet after 2023; Indian capacity to absorb that capital, which arrived only with the post-Galwan manufacturing push; and Chinese conduct sufficiently assertive to sustain the political will for the shift in both electorates, which the events after Galwan and after Takaichi’s remarks have supplied in abundance. Those three conditions did not converge until somewhere between 2023 and 2025. Had the partnership been attempted earlier, the Japanese capital would not have moved, the Indian capacity would have been absent, and the political cover thinner. The two countries are not late to the meeting. The curve, at last, has bent toward them. The risk they now carry is not historical but prospective, and it is the subject of the remainder of this piece: that the timeline on which they can substitute away from China runs slower than the timeline on which Beijing may choose to act.
The Coercion Playbook
If we set the two experiences side by side, a single instrument comes into focus, applied with variations to each. Against Japan: the rare earth embargo of 2010, the seafood bans after the Fukushima wastewater release in 2023 and again after Takaichi’s remarks in 2025, the dual-use export controls and the sanctioning of forty firms in early 2026. Against India: the curbs on rare earth magnets and fertilisers, the near-total technological estrangement enforced through app bans and investment screening after 2020, the priority security clearances imposed on Chinese business visas. The method is consistent. Identify the dependency, then apply selective and reversible pressure calibrated to alter behaviour without provoking a rupture that would damage Beijing as much as its target.
The lesson both countries have drawn from this is structural rather than moral, and it is the same lesson: the coercive leverage available to China is a direct function of the depth of the dependence one permits. Reduce the dependence and one reduces the leverage. The policy responses have therefore converged on an identical logic, though they were designed independently and bear different names. For Japan it is de-risking and supply-chain diversification, expressed in the sevenfold rise in transport-sector investment into India and the conscious retreat from China-centric manufacturing described earlier in this series. For India it is Atmanirbhar Bharat, the Production Linked Incentive scheme, and the deliberate courtship of Japanese, American, and European capital as a substitute for Chinese technology and components. Neither country coordinated its response with the other. They arrived at the same conclusion because they were reasoning from the same premise about the same neighbour.
The Paradox of Decoupling
The most revealing fact about both relationships is that the political estrangement and the economic entanglement are moving, at this very moment, in opposite directions. The rhetoric of decoupling and the data of capital flows do not merely diverge. They contradict one another outright.
The investment data must be read on two clocks at once. On the longer one, Japanese capital has genuinely receded from China: JETRO’s own surveys single out the post-pandemic decline in Japanese direct investment as conspicuous among the major economies, its figures show Japanese greenfield investment into China roughly halving between 2020 and 2024, and the number of Japanese nationals resident in the country has fallen below 100,000 from a peak of some 150,000 in 2011. On the shorter clock, the direction reversed at the least convenient moment. On the Chinese commerce ministry’s measure, Japanese direct investment into China rose 55.5 per cent year on year in the first three quarters of 2025, off that depressed base, and within a total foreign-investment pool that shrank 9.5 per cent over the year, its third consecutive annual decline. A partial reflux inside a shrinking pond, in other words, but a reflux nonetheless, and one timed to the political nadir: the marginal yen was returning to China during the precise period in which the relationship was collapsing to its lowest point in a decade. The official data for 2026 have since gone quiet in an instructive way. China’s total utilised foreign investment was still contracting in early 2026, and where the ministry’s half-year release named its fast-growing source countries, Japan was conspicuously absent; the ministry offered instead a 5.3 per cent rise in newly established foreign-invested firms, a count of companies where a value of capital would normally sit.
The likelier explanation is not that the Japanese money has stopped moving, but that it has stopped being visible. What is emerging instead, as the Lowy Institute has observed, is not decoupling but its disguise, and the evidence for it is written in the investment statistics of third countries. In 2025, Swiss investment into China jumped 66.8 per cent. British investment rose 15.9 per cent. Investment from the United Arab Emirates grew 27.3 per cent. These are anomalous surges from economies with no obvious domestic reason to be accelerating into China at the very moment Western boards were being told to de-risk, and the explanation lies in what the capital is carrying. The template was established by American investors, who have already begun entering China’s pharmaceutical sector through structures domiciled in Saudi Arabia. The infrastructure for a Japanese equivalent is now in place along three routes. In Switzerland, the China-Switzerland free trade agreement is being upgraded to cover digital trade and artificial intelligence, positioning the country to become what analysts have called a technology custody centre, under which a firm may establish its Asian research and development headquarters as a Swiss entity before forming a joint venture with Chinese partners, so that the investment acquires the legal appearance of Swiss neutrality. In Riyadh, Japanese companies are among the more than 700 multinationals that have established regional headquarters under Saudi Arabia’s Vision 2030 programme, structures which, as Saudi investment into China grows, can provide indirect exposure to opportunities under Beijing’s new Five-Year Plan depending on how ownership is arranged. United Kingdom vehicles serve the same purpose along a third route. No Japanese company will confirm any of this on the record, and none needs to. That is the design. What matters is not where the capital originates but how it is legally and statistically classified, and in each case the underlying exposure persists beneath a flag of convenience. This is nintai (忍耐), the capacity to endure pressure while preserving flexibility, and it may well become a template for how much of the world learns to engage with China. It is also a candid admission that Japanese industry, for all the official language of de-risking, cannot yet survive a genuine separation.
India presents the same paradox inverted. It imports well over $100 billion in Chinese goods each year, active pharmaceutical ingredients, electronics, solar cells, rare earth materials, while pursuing a suite of policies explicitly intended to reduce that very dependence. The trade agreements concluded with the United Kingdom and the European Union in 2025 are, in part, an effort to construct alternative supply chains. The PLI scheme is, in part, an effort to reduce the reliance on Chinese intermediate goods. But the realistic timeline for meaningful substitution is measured in ten to fifteen years, not two or three. It is worth pausing on that figure, because it is not arbitrary. Ten to fifteen years is, by most conventional measures, roughly the development distance between India and China themselves: India’s per capita income today stands approximately where China’s stood in the late 2000s, its manufacturing share of GDP where China’s was a generation ago. The substitution timeline and the development gap are the same number because they are the same fact. And it is here that the character of Japanese capital becomes strategically significant rather than merely convenient. Japanese investment is patient by constitution, deployed on decade-long horizons with engineers and supplier networks attached, and it is therefore the single form of foreign capital whose natural tempo aligns with the fifteen-year task India has set itself. American private equity wants its exit in five years. Japanese industrial capital, as Suzuki has demonstrated across four decades in India, is content to wait for the country to grow into it.
It is here that the argument of the first piece and the argument of this one join. The India-Japan economic relationship is, among its other functions, a mechanism for accelerating this substitution on both sides of it at once. India supplies the market, the labour, and the demographic runway. Japan supplies the capital, the process technology, and the quality discipline. The deeper the bilateral integration runs, the faster each partner can erode the Chinese leverage point that constrains it. The partnership is not merely commercial. It is, properly understood, the joint construction of an exit that neither country can yet afford to take alone.
Parallel Buildups, A Shared Horizon
The hardening is not only economic. Japan’s rearmament is the most consequential shift in its strategic posture since 1945. Defence spending rose from 5.4 trillion yen in 2022 to 8.7 trillion yen in 2025, an increase from roughly $35 billion to $56 billion in the space of three years. Type 12 long-range missiles, a counterstrike capability that directly constrains Chinese operational freedom in any Taiwan contingency, are being deployed to Kumamoto on Kyushu. The coast guard base at Ishigaki, the largest in Japan, patrols the Senkaku approaches with 600 personnel. The provocations that have driven this are relentless and escalating: two Chinese aircraft carriers operating simultaneously near Japan’s southwestern islands for the first time in mid-2025, Chinese fighter jets approaching Japanese military aircraft to within thirty metres, joint Chinese-Russian bomber patrols through the straits around Okinawa. The Takaichi cabinet’s decision to review the National Security Strategy in 2026 will accelerate all of it.
India’s military response to Galwan has followed a parallel logic, within the constraints described earlier. Border infrastructure has been built at a pace never before attempted, forward deployments have been made permanent, and the Line of Actual Control has been quietly deformalised from a line of restraint into a line of confrontation held by deterrence. Operation Sindoor in May 2025 demonstrated a new Indian willingness to use force against cross-border threats regardless of Chinese diplomatic displeasure. And Beijing’s decision to back Pakistan materially during that operation hardened Indian threat perceptions in a way that the diplomatic thaw of the following months has softened at the surface but not resolved beneath it.
It is against this backdrop that the decision of April 2026, examined in the previous piece, acquires its full significance. When Japan scrapped the blanket prohibition on lethal weapons exports and placed India among the seventeen trusted partner nations to which such transfers are now permitted, it was not simply opening a new market for its defence industry. It was inserting itself, deliberately, into India’s defence-industrial supply chain, in a strategic context where both governments understand without needing to say so that their threat calculus points in the same direction. The co-development of the UNICORN naval mast, completed in 2024, was the modest first instance, and at the Delhi summit this July the two countries signed their first joint defence co-development project as Quad partners. The new framework opens far larger possibilities: the co-production of anti-ship missiles, of surveillance and early-warning platforms, eventually of air defence systems, every one of them with an obvious application to the contingency both governments are quietly preparing for and neither will name in public.
The clearest map of where this collaboration is heading is Japan’s own new industrial strategy. In late 2025, the Takaichi government designated seventeen strategic sectors for prioritised investment under its Growth Strategy Headquarters, backing them with a combined public and private investment target of 370 trillion yen, some $2.3 trillion, by the mid-2030s, with each sector assigned to a responsible cabinet minister. Semiconductors alone are earmarked for 68 trillion yen, biopharmaceuticals and regenerative medicine for over 20 trillion yen. Set those seventeen sectors against India’s existing industrial landscape and something striking emerges: for almost every Japanese strategic priority there is an obvious Indian counterpart, an existing company, cluster, or region where the capability, the workforce, or the market already exists. The table below is illustrative rather than official, a first sketch of the match-making exercise that ministries and banks on both sides are now conducting in earnest. It is to show the sheer size of the potential in collaboration across the seventeen sectors and that if sufficient nous and will are exercised – Japan can forge a pan-Indian hedge strategy without getting itself into a formal strategic alliance.
The Questions Neither Country Can Avoid
Managed distance is a strategy, not a solution, and it leaves certain questions permanently open. Three of them will define the relationship over the coming decade, and honesty requires stating them without the false comfort of a resolution, because none is available.
The Taiwan asymmetry. Japan has moved from ambiguity to something close to clarity on Taiwan under Takaichi. India has not, and will not. New Delhi’s doctrine of strategic autonomy makes any explicit commitment to Taiwan’s security politically impossible, and India maintains the One China policy as formal doctrine. This produces a structural asymmetry at the heart of the partnership. Japan is now, by its own choosing, on one side of the defining question of Asian security. India is deliberately on no side of it. Yet it would be a mistake, and a characteristically Western one, to read this as Indian weakness. On the question of autonomy itself, India is arguably in the stronger position of the two. It has continued to buy Russian oil at scale through every phase of Western sanctions pressure and absorbed 50 per cent American tariffs rather than yield the point. It procured the Russian S-400 system in the teeth of US sanctions law and received a waiver rather than a penalty. It sits simultaneously in the Quad and the SCO, hosts Western leaders and Russian ones in the same season, and treats each relationship as severable from the rest. Japan, bound by treaty, hosting fifty thousand American troops, can do none of these things. And India believes it holds the moral high ground in the bargain when dealing with the West. As External Affairs Minister Jaishankar pointedly observed in conversation with the Financial Times’ Gideon Rachman, the weapons used to attack Indians over the decades have overwhelmingly been Western ones, supplied to Pakistan by the very powers now lecturing New Delhi on the company it keeps. The lesson India draws is not anti-Western. It is that dependence on any single guarantor is the vulnerability, and autonomy the insurance. The question for the decade is whether Japan’s clarity and India’s autonomy can coexist within one partnership, or whether the two countries must simply agree never to make Taiwan a bilateral matter, and confine their cooperation to the domains where their interests are already aligned.
The rare earth chokepoint.
Both countries remain acutely exposed to a dependency that China has already shown, against Japan in 2010 and against much of the world since, that it will exploit. China controls roughly 60 per cent of global rare earth mining and around 85 per cent of processing capacity, and since January 2026 has applied export controls on rare earths aimed squarely at Japan’s defence supply chain. Japan has made real progress in reducing its exposure through recycling, diversification, and research into deep-sea extraction. India holds reserves of some 6.9 million tonnes, among the largest in the world, that remain largely unexploited. The bilateral framework now includes cooperation on critical minerals, and the July 2026 Delhi summit placed a critical-minerals framework within its five-basket economic security package. The open question is whether that cooperation is moving quickly enough to matter on the compressed timescale on which the coercion playbook operates.
The substitution lag.
Both governments wish to reduce their dependence on China. Neither can do so at speed without incurring severe economic pain. The India-Japan relationship is, in part, a hedge against that pain, but it cannot replace China at current scale within a ten-year horizon. This must be stated plainly, because the alternative is to mistake aspiration for achievement. De-risking is the policy. Decoupling is the aspiration that both capitals privately know they cannot yet afford. The gap between the two is where the strategic risk of the coming decade actually lives.
Four Scenarios for the Decade
Prediction is a mug’s game, and the honest task is not to forecast an outcome but to map the decision points along which the relationship will travel. Four broad paths present themselves, summarised below, together with the wildcards that could redraw the map entirely. The four are exhaustive by construction and their probabilities sum to one; the wildcards are not scenarios but shocks, any of which would redistribute the mass across all four at once.
1) Convergence, or full speed ahead.
In the optimistic case the bilateral does the work itself, and the fate of the Quad is close to irrelevant to it. The Quad is a consultative convenience subject to the electoral weather in four capitals at once; nothing that requires all four to move can be the engine of anything. Convergence, if it comes, will be bilateral and unglamorous. It looks like the seventeen strategic sectors being worked through one by one rather than admired as a table, the defence co-development framework producing a second, third and tenth project in the wake of the first, critical-mineral processing joint ventures reaching commercial scale in Indian states rather than in communiqués, and Japanese industrial capital arriving in the size and at the tempo the fifteen-year substitution task actually requires. External pressure on both countries continues, and paradoxically supplies the political cover each government needs to deepen the relationship beyond what its domestic constituencies would otherwise tolerate. By 2035, on this path, the partnership has acquired a security architecture to match its economic one, critical-mineral supply chains have been substantially diversified, and India has emerged as a credible alternative destination for a decade of Japanese manufacturing capital — and it will have acquired all of it whether or not the Quad ever becomes more than a photograph.
2) Steady, planning on time.
In the base case, and the most probable one, the relationship deepens along the trajectory it is already on, at broadly the pace its planners currently assume. The integration of small and medium enterprises described in the previous piece proceeds steadily. Defence co-production advances slowly, unevenly, and roughly on schedule. What does not arrive is depth: strategic divergence, over Taiwan, over the handling of China, over India’s insistence on autonomy, prevents the partnership from acquiring the security architecture that Convergence would give it, and both countries continue to manage their Chinese relationships independently, treating the bilateral as a valuable backstop rather than a primary strategic framework. This is not failure. It is the quiet, incremental thickening of ties that never quite becomes an alliance, delivered on time, and it may be entirely sufficient.
3) Sedation.
The malign twin of the base case deserves separation from it, because for several years the two are indistinguishable and they end in different places. Beijing does not need a border settlement to arrest India’s de-risking; it needs only a thaw warm enough to sap the urgency. The markers are already flashing: New Delhi’s amendment of Press Note 3 in March 2026 to relax the screening of Chinese investment, the first Indian business delegation to China in more than five years the following month, the resumed direct flights, the gradual licensing of rare earth magnets, and the full meeting granted to Jaishankar in Manila while Japan’s foreign minister was given a greeting in a corridor. None of this resolves anything at the border, and none of it needs to. On this path the substitution programme does not fail so much as decelerate, quietly, as the domestic constituency for bearing its costs thins and each individual relaxation looks eminently reasonable on its own terms. India arrives at 2035 more dependent on Chinese inputs than its own plans assumed, having never taken a decision anyone would recognise at the time as a mistake, and Japanese capital finds the corridor it was promised narrower than advertised. Sedation would erode this partnership more surely than any confrontation, precisely because nobody would notice it happening. It is separated out here, and given a quarter of the probability mass, because a scenario that is invisible while it operates is exactly the kind that a scenario table exists to make visible.
4) Rupture.
In the tail risk, a Taiwan contingency forces the choice that the entire architecture is designed to avoid. The headline probability below is better read as two stacked judgements than as one: the probability that a forcing contingency occurs at all within the decade, multiplied by the probability that India, under the combined leverage of a trade relationship worth more than $100 billion and a border that can be heated at will, is pulled from neutrality into something Tokyo experiences as defection. My own view is that the second, conditional judgement is the one doing the work, and it is the more defensible of the two: if the contingency comes, the pressure on New Delhi will be considerable. Ten per cent is the product of the two, and the reader is invited to vary either: roughly a one-in-five chance of a forcing contingency before 2035, and something close to even odds on Indian defection should it arrive. I have marked the figure down from an earlier estimate not because the conditional judgement has softened, but because a decade is a long time in which to keep a war from starting, and the first term deserves more humility than the tail risks of this sort usually receive. Yet a distinction is needed here that the word rupture obscures. If the partnership was never built on Taiwan alignment, as this piece has argued, then a contingency met with Indian neutrality and Japanese action is a stress the architecture might pass by design: Japanese disappointment, American pressure on India, but the economic and industrial core intact. The genuinely ruinous variant is narrower and more deliberate: a contingency in which Beijing simultaneously heats the Line of Actual Control, forcing India to turn inward at the precise moment Japan most needs the corridor open. That version fractures not merely expectations but the machinery itself. This is the scenario the Quad exists to foreclose, and the one that no volume of investment roadmaps or ministerial communiqués can wholly rule out. It is the reason the substitution lag matters, and the reason the pace of the coming decade is not an academic question. One further caution concerns the indicators, because the crude metrics have begun to mislead: PLA sortie counts around Taiwan reverted to their pre-2024 baseline in early 2026 even as the coercion migrated into greyer forms, the detention of Taiwanese nationals on the mainland, pressure on the Luzon Strait approaches, lawfare. The tell is no longer in the air-defence identification zone.
5) The fourth wildcard.
To the wildcards in the table a fourth must now be added, and its absence from an earlier draft of this piece was conspicuous given how much credit the analysis extends to Beijing’s competence: a Chinese internal shock. Every scenario above assumes a unitary and capable China. The removal of two Central Military Commission members in January 2026 and an ideological rectification campaign launched personally by Xi suggest churn inside the PLA that could cut either way, degrading the capacity to act abroad or strengthening the incentive to act before the house is fully in order. Add an economy whose stall this piece elsewhere treats as a premise, and a succession question that no Leninist system has yet answered gracefully, and the fourth wildcard writes itself: the map redrawn not by anything India or Japan does, but by China ceasing to be the steady actor the map assumes.
The Geometry of Partnership
India and Japan are not building an alliance. They are building the infrastructure, economic first, industrial and technological next, and slowly and cautiously military, that would make an alliance possible should the decade’s events come to demand one. The distinction between optionality and commitment is the key that unlocks what this relationship actually is. It is a hedge being constructed in daylight, by two countries that have learned, from direct and recent experience, what the alternative to hedging costs.
The paradox at the centre of it all is that China itself is the relationship’s most dependable architect, and Beijing’s own conduct makes clear that it understands this perfectly well. China has never been comfortable seeing India and Japan together, for the obvious reason: separately, each is a manageable relationship, one to be alternately warmed and pressured as circumstance requires; together, they are the two largest economies of non-Chinese Asia constructing a supply-chain, capital, and increasingly defence architecture that runs around rather than through the Middle Kingdom. The reaction to Prime Minister Takaichi’s visit to Delhi this July was instructive on precisely this point. As roughly $13 billion in fresh corporate commitments, some 120 agreements, and a first Quad defence co-development project were being signed at Hyderabad House, Beijing’s press studiedly declined to cover the summit as an India story at all, and the foreign ministry accused Tokyo of preaching openness while harbouring confrontation. The restraint toward India, coupled with the vitriol toward Japan, gave the game away: Beijing is working to keep the thaw with New Delhi alive precisely so that the Delhi-Tokyo axis does not harden. If confirmation were needed, the last week of July supplied it in a single building. At the ASEAN foreign ministers’ gathering in Manila, Wang Yi sat down with Jaishankar for a meeting parsed on both sides as a measured warming, India pressing its standing terms on market access, balanced trade, and predictable supply chains. In the same venue, in the same week, Japan’s foreign minister could obtain from Wang only a brief, unscheduled encounter inside the conference hall, the first contact between the two countries’ top diplomats since November, and by Motegi’s own careful account little more than an exchange of greetings; Beijing has rebuffed formal meetings at every senior level since Takaichi’s remarks, and Takaichi herself reportedly does not intend to seek out Xi at the APEC summit in Shenzhen this November. The two roads described earlier in this piece, along which India and Japan are passing each other in opposite directions, ran that week through a single conference centre in Manila, and Beijing stood at the junction directing the traffic: a meeting for the country it wishes to keep thawing, a corridor nod for the one it wishes to keep frozen. Which points to the deeper irony. Every escalation against either country drives them closer together, and a warming India-Japan relationship is therefore, from Beijing’s own perspective, counterproductive to manufacture. The more pressure it applies, the more it builds the very coalition it seeks to prevent. A strategist as capable as China cannot fail to see the trap. Whether it can stop walking into it is another matter, for the domestic incentives that reward assertiveness abroad show no sign of weakening.
Whether India and Japan were behind the curve is, in the end, the wrong question, or at least a question about the past. They were slow to recognise what China would become, as nearly everyone was. They have been roughly punctual in responding, once the means to respond came within reach. The question that now matters is entirely prospective. It is whether two nations that have arrived, at last and together, at the right strategy can execute it faster than the neighbour who gave them cause to adopt it. On the answer to that question a great deal more than the bilateral relationship will turn.
Thank for reading - Harry Wilby.
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Further Reading
For those who wish to go deeper on any of the threads above, a selection of the primary sources and data behind this piece are grouped by theme below.
On the coercion playbook and the rare earth chokepoint
● IEA – “Global Critical Minerals Outlook 2026” — the clearest published account of where the chokepoints actually sit. China’s share of rare earth refining has fallen from above 90 per cent in 2023 to 85 per cent in 2025, and is projected to reach 70 per cent by 2035; the IEA nonetheless estimates that full implementation of the October 2025 export controls would place some $6.5 trillion of annual downstream production outside China at risk.
On Japan’s industrial strategy
● Nikkei Asia – “Japan maps $2.3tn investment plan across 17 strategic sectors” — the source behind Table 1, including the ¥68 trillion earmarked for semiconductors and the fiscal 2040 horizon against which the whole programme should be read.
On the rotation of Japanese capital
● JBIC – “FY2025 (37th) Survey Report on Overseas Business Operations by Japanese Companies (GLOBE)”— the survey series behind Figure 3. India ranked first among promising medium-term destinations for a fourth consecutive year, named by more than 60 per cent of respondents, while the ASEAN vote share fell.
On the military picture
● Japan Ministry of Defense – “Defense of Japan” (annual white paper) — the primary text for the language on China as an unprecedented and greatest strategic challenge, and for the Senkaku incursion data cited above. Worth reading consecutive editions side by side; the drift in tone is the story.
● Pravin Sawhney – The Last War: How AI Will Shape India’s Final Showdown With China (Aleph, 2022) — the argument discussed above, that India is structured, trained and procured to fight the wrong adversary. Four years on, disconcertingly little of it requires revision.
see also Harry’s previous contributions
Japan & India - The oldest new partnership
The Japan-India Corridor Trade
and Harry Wilby’s new Harry's Substack
About Harry Wilby:
Harry Wilby is currently head International for a Japanese group covering healthcare, semiconductor research and investment management.
Prior to his move to Japan, he started his career with Coutts & Company before moving into politics as Chief of Staff to a Conservative member of Parliament in the House of Commons.
He is a non-executive director of one of India’s largest home healthcare companies and Vice Chairman of the Economics & Current Affairs group of the Reform Club in London.
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India has structural weaknesses that Lee Kuan Yew has mentioned many times. A few major hurdles I see are bureaucratic red tape, corruption, poor-quality education, a poor work ethic, and more. On the other hand, China and maybe Vietnam are much better investment grounds for industrial scale-up and manufacturing. I am curious why Japan, Korea, and China can't come together; the past fatigue is causing value destruction in the East Asian belt.
"Economic ties are only half the story. Our shared heritage—steeped in Confucianism and Buddhism—fosters mutual understanding. These traditions emphasize harmony and respect, easing communication at governmental and societal levels."
https://ccgupdate.substack.com/p/excerpt-henry-huiyao-wang-on-china?r=1enwh&utm_campaign=post-expanded-share&utm_medium=web