I found out how to do this on the Android emulator itself (Menu, “Settings” App – not the settings of the emulator outside). All you need to do is:
open settings app -> Language & Input -> Go to the “Keyboard & Input Methods -> click Default
This will bring up a Dialog in which case you can then disable the Hardware Keyboard by switching the hardware keyboard from on to off. This will disable the Hardware keyboard and enable the softkeyboard.