New Delhi, Dec 26 (IANS): Hopes are high in India as Shinzo Abe, leader of Japan's pro-business Liberal Democratic Party (LDP), Wednesday returned as prime minister with an agenda to revive the economy and overhaul foreign policy.

Government and business circles are expecting the comeback premier would facilitate greater investment into the country, especially in infrastructure, and more two-way trade.

The expectations are powered by Abe's past and recent statements about Japan's relations with India and a set of economic policies dubbed "Abenomics".

Abe is pushing for a big-scale monetary and budget stimulus plan, aimed at fighting deflation that has deadened its economy for the last two decades. He has pressed the Bank of Japan to further ease its monetary policy and push down the value of the yen to enhance competitiveness of Japanese companies.

A weakening yen makes Indian imports cheaper.

Abe has said he would deregulate the energy, healthcare and environment sectors that has attracted attention of Indian investors.

Economic ties have been the bedrock of relations between India and Japan. As Yasukuni Enoki, former Japanese envoy to India, has pointed out, bilateral relations earlier used to be driven by initiatives by political leaders. Today, it is business interests that drive the relationship.

India considers Japan a source of economic funding. Between 2000 and 2012, Japanese FDI into India touched $12.86 billion. Japan has also decided to invest $4.5 billion in a 1,483-km New Delhi-Mumbai industrial corridor.

And this is expected to be further consolidated now as Abe moves to pursue his stated policies, believe diplomatic observers and business experts. They say there is now greater room for closer cooperation in a range of economic and strategic issues given the shifting power balance in the Asia-Pacific.

Abe on his own has said he wants to deepen ties with India.

"We need to deepen ties with the rest of Asia, including India, and Australia, and not only diplomatically but in the fields of security and energy, before starting to work on improving ties with China," said Abe after the LDP's landslide election victory this month.

And the reasons are not far to seek. Experts say they are rooted in the two countries' demographics and economic and strategic needs.

Japan is one of the world's most rapidly aging societies, while India's is overwhelmingly young. Japan has high technology and infrastructure know-how that India needs.

India has natural resources and is a strategic location, being closer to the Middle East and European markets. Companies like Hitachi and Panasonic are planning to use India as a manufacturing base for exporting to third countries such as African ones.

Japan's difficult relationship with China is forcing some Japanese companies pivoting investments to India. In September, angry crowds across China attacked Japanese businesses in protest against Japan's claims to a chain of disputed islands in East China Sea.

Japanese firms have begun to buy stakes in India's insurance and information technology sectors.

"With its market, human resources and business partnerships, India is an important strategic base for Hitachi," Hitachi president Hiroaki Nakanishi said after holding the company's first board meeting outside Japan in New Delhi this month. Hitachi, he said, would acquire companies in the social infrastructure segment.

"Japanese companies are interested in India because the consumer demand here is increasing much more than supply," said a trade analyst.

Said Yorihisa Shiokawa, Panasonic's managing executive officer, "India has been a potential growth market for Panasonic. Localisation (of products) will be the key."

Trade between India and Japan in 2011 was worth a modest $17.8 billion. It is targeted to grow to $25 billion by 2014. However, it is too little when compared to Sino-Japanese trade that touched $345 billion in 2011.

India's ties with Japan have come a long way since May 1998, when Japan suspended its overseas development assistance over India's nuclear tests. Since then, the changing strategic environment in the Asia-Pacific has brought the two closer, culminating in Prime Minister Manmohan Singh's visit to Japan in 2011.

Abe last week said he would consider revoking the ban on construction of new nuclear reactors. That bodes well for India as talks on civilian nuclear cooperation, suspended since the March 2011 Fukushima nuclear tragedy, could be restarted.

As big time consumers, both Japan and India have a shared interest in guaranteeing the free transit of energy and trade between the Suez Canal and the Western Pacific.

As the two countries celebrate 60 years of diplomatic relations this year, observers say, economic and strategic imperatives would make New Delhi and Tokyo further deepen their engagement in the days to come.