As India has been relevant neither to Japan's security interests nor international economic strategy, New Delhi has figured little in Tokyo's foreign policy hierarchy. Historical and linguistic ties to the West, economic policies of import-substitution and protectionism, and political policies of close relations with the former Soviet Union kept India at a distance from Japan. India's policy of nonalignment with a tilt toward Moscow contrasted sharply with Japan's role as the bastion of U.S. forward deployment in the Asia-Pacific. The persistence of poverty in India and the successful drive to prosperity in Japan changed the basis of the bilateral relationship. Today, Japan is the biggest aid donor to Asia and India.
Japan remains critical of India's protectionist and nuclear policies.
Japanese investors are discouraged partly by the social and political instability of South Asia, and partly by the complex and restrictive foreign capital laws and the miles of red tape that confront investors. The Indian economy has been opening to domestic and international competition since 1991. India also has a proven record in adapting management styles to match new technology. India can be a useful conduit for Japan to outflank uncomfortable historical memories in Southeast Asia. Japanese interests and capabilities are so much at variance with India's that New Delhi has never vied to compete with Tokyo for influence in Southeast Asia.