I believe the Alpha+3 rules have changed it to “Axis” control now. If any Axis power controls India, Japan gets the $5 bonus. In some games, I have seen Italy get strong enough to take India.
This is also true for Japan’s other NOs. (Sydney, Honolulu, San Francisco, the four DEI territories and the five islands – Midway, Wake, Guam, Gilbert and Solomons). They can be held by Axis powers, not just Japan, and Japan will get the $5 bonus.
Seems kind of silly to me but I guess Larry wanted to make it slightly easier for Japan to get their NOs, or at least make it seem like it was easier.
Like I said, I have seen a couple of games where Italy took Calcutta, although by that time it is usually pretty much game over for the Allies. Also, I imagine if Germany or Italy managed to invade Central US, they could conceivably go on and take Western US, which would result in Japan getting a $5 NO.
It’s really hard to imagine a German or Italian task force floating all the way to the Pacific and taking any of the 5 small islands, the DEI, Honolulu or Sydney, but I guess it could happen in some kind of weirdly played game. Maybe Larry wanted it to be open to any type of off the wall scenarios.