Japan and India signed a free trade pact Wednesday, under which the high-tech nation and the South Asian giant pledged to scrap tariffs on 94 per cent of goods within a decade.

Japan's Foreign Minister Seiji Maehara and Indian Commerce Minister Anand Sharma signed the deal in Tokyo, hoping it will boost two-way trade between the the countries.

"We have no doubt in our minds that this will usher in a new era of economic engagement, which will bring development, innovation and also prosperity in both societies," Sharma said.

Japan is seeking more such partnerships in the region as it looks to catch up with export rival South Korea, and after China overtook it as the world's second-largest economy in 2010.

In October India's Prime Minister Manmohan Singh met his counterpart Naoto Kan to stress warm ties linking two of Asia's biggest democracies at a time of high diplomatic tensions between Japan and communist-ruled China.

The deal with India may also bring further cooperation over crucial rare earth materials as Japan looks to diversify supply for its high-tech industries after the spat with Beijing led to shipment disruptions last year.

Resource development "definitely figured in our discussions," Sharma said Wednesday.

Two-way trade between the two totalled 900 billion yen ($10.7 billion) in 2009 -- less than one per cent of Japan's total foreign trade.

The agreement, approved in principle by both countries' leaders last year, aims to open new markets for Japan as its population ages and shrinks, and to fuel the rapid growth of emerging power India.

It will help Japanese auto makers such as Suzuki by lifting tariffs on car parts shipped to its factories in India, and ease access for Indian generic drug makers to a lucrative market in fast-greying Japan.

India -- which has already signed a free-trade deal with South Korea, Japan's export rival in autos and electronics, but not with China -- will become Japan's 12th free trade partner.

The agreement, for which Tokyo hopes to gain legislative approval by the summer, will immediately reduce Japan's tariffs to zero on almost all industrial products imported from India.

Tokyo also plans to scrap duties on some foodstuffs -- including curry ingredients, pepper and tea -- within 10 years, but will maintain a high tariff wall to protect its politically sensitive rice sector.

New Delhi will cut barriers on auto parts gradually, as well as on Japanese steel, electronics and machinery products, eventually to zero.

But India, with booming auto sales to its growing middle class, will maintain tariffs on assembled vehicles.

It will also ease access to Japanese single-brand companies, allowing them controlling stakes of 51 per cent in local entities, and giving them the right to set up franchises in the country.

But in other sectors, the two only agreed to continue talks.

Japan, which tightly controls immigration, has so far failed to grant India's wish to send nurses and caregivers to Japan, where almost one in four people is aged over 65 and the aged-care sector is suffering labour shortages.

The Indian minister expressed hope that his country would eventually be able to export its welfare workers to Japan, stressing: "We have a lot of good caregivers and nurses who, when invited, will make a good contribution."

Under separate free trade agreements Japan currently allows Indonesian and Filipino nurses and caregivers to work there.

Another key deal on civilian nuclear power cooperation, sought by New Delhi as it looks to power its expanding economy, currently remains beyond reach.

Japan and India launched negotiations in June on a pact that would allow Tokyo to export its cutting-edge nuclear technology to energy-hungry India, a hotly contested market for atomic plants.

But Japan -- the only country to have suffered atomic bombings, and a key voice in global denuclearisation efforts -- is concerned because nuclear-armed India has not signed the Nuclear Non-Proliferation Treaty.

channelnewsasia.com