With one eye on China, Japan backs Sri Lanka as a partner in the Indo-Pacific

Japan's Foreign Minister Yoshimasa Hayashi said Saturday that Sri Lanka is a key partner in a Tokyo-led initiative aimed at building security and economic cooperation around the Indo-Pacific but also at countering an increasingly assertive China.

Sri Lanka, strategically located in the Indian Ocean, is integral to realizing a free and open Indo-Pacific, Hayashi said. He was speaking after a meeting with his Sri Lankan counterpart, Ali Sabry, in the capital, Colombo.

The initiative, announced by Japanese Prime Minister Fumio Kishida in March includes Japan’s assistance to emerging economies, support for maritime security, a provision of coast guard patrol boats and equipment and other infrastructure cooperation.

Last year Sri Lanka, which owed $51 billion in foreign debt, became the first Asia-Pacific country since the late 1990s to default, sparking an economic crisis.

While Japan is Sri Lanka's largest creditor, about 10% of its debt is held by China, which lent Colombo billions to build sea ports, airports and power plants as part of its Belt and Road Initiative. In March, China agreed to offer Sri Lanka a two-year moratorium on loan repayments.

Hayashi said that he conveyed expectations for further progress in Sri Lanka's debt restructuring process. He welcomed Sri Lanka’s efforts under an agreement with the International Monetary Fund, which includes anti-corruption measures and transparency in the policy-making process.

Sri Lanka's Foreign Minister Sabry said that he, along with Sri Lankan President Ranil Wickremesinghe, invited Japan to resume investment projects already in the pipeline and to consider fresh investments in sectors such as power generation, ports and highways, and dedicated investment zones, as well as in the green and digital economy.

Over many decades, Japan became one of Sri Lanka's key donors, carrying out key projects under concessionary terms. However, relations between the two countries came under strain after Wickremesinghe's predecessor Gotabaya Rajapaksa unilaterally scrapped a Japan-funded light railway project following his election in 2019.

Sri Lanka's Cabinet has already approved a proposal to restart the railway project.

Rajapaksa was forced to resign in July 2022 amid angry public protects over the country's worst economic crisis.