Japan Inc Bets Big on India as China Risks Grow

**Published: 01 September 2026. The English Chronicle Desk. The English Chronicle Online**

Japan’s biggest companies are stepping up their investment in India as an expanding consumer market, a growing technology sector and rising geopolitical risks surrounding China reshape corporate strategies across Asia.

The latest signs of the shift came during a visit to Japan by India’s Commerce Minister Piyush Goyal, who led the country’s largest-ever business delegation to the country. The visit highlighted the increasingly important commercial relationship between Tokyo and New Delhi at a time when Japanese businesses are looking for new sources of long-term growth.

From shopping centres in Mumbai and Delhi to technology hubs in Bengaluru, Japanese brands are becoming increasingly visible across India. Companies that once treated the country as a secondary market are now expanding their operations, while new entrants are preparing major investments.

Apparel retailers Uniqlo and Muji and premium footwear company Onitsuka Tiger have already established significant Indian operations and are continuing to expand.

Japanese furniture company Nitori has recently entered the Indian market, while convenience store chain Lawson is reportedly preparing an ambitious expansion, with plans to eventually open as many as 10,000 stores in India by 2050, beginning in Mumbai.

The expansion is not confined to consumer businesses. Japanese financial institutions are also becoming increasingly aggressive in the Indian market.

MUFG Bank, Japan’s largest bank, completed a $4.4bn deal last year to acquire a 20% stake in Indian non-bank financial company Shriram Finance. The transaction represented the largest foreign investment in India’s financial sector.

Sumitomo Mitsui Banking Corporation, meanwhile, became the largest shareholder in Yes Bank after acquiring a 24.22% stake.

Together, these developments demonstrate how Japan’s corporate sector is increasingly viewing India as a strategic market rather than simply an alternative manufacturing destination.

## India Offers a New Growth Opportunity

For Japanese businesses, India’s attraction is closely connected to demographics.

Japan has experienced a declining population for more than a decade, creating structural pressure on domestic consumption and limiting opportunities for companies dependent on population growth.

“Japanese companies are having to look to India for growth,” said Vipul Nath Jindal, founder of Next Bharat Ventures, an impact investment fund backed by Suzuki Motor Corporation.

He said Japan’s declining population had created not simply a temporary slowdown but a permanent reduction in the size of the domestic market.

India offers the opposite demographic picture.

Its enormous population, rising household incomes and expanding middle class provide Japanese companies with the prospect of sustained consumer growth over several decades.

The country’s rapidly expanding digital economy is another attraction.

India has developed into a major destination for multinational technology and business operations, while its pool of engineers, software developers and other highly skilled workers has helped attract global companies.

Japanese businesses are increasingly participating in this ecosystem through global capability centres, or GCCs.

These centres perform functions ranging from research and development to corporate strategy, artificial intelligence and other business-critical activities.

More than 100 Japanese companies now operate GCCs in India, according to Deloitte research, making Japan one of the largest contributors to India’s growing network of multinational innovation centres in the Asia-Pacific region.

## A Strategic Hedge Against China

India’s growing importance also reflects changing calculations around China.

Japanese companies have maintained extensive manufacturing and supply-chain relationships with China for decades. However, geopolitical tensions, trade disruptions and concerns about excessive dependence on a single market have encouraged companies to diversify.

This does not mean Japanese businesses are abandoning China.

Instead, many are attempting to reduce their exposure to concentration risk.

Shruti Pandalai, India chair at the Lowy Institute, said Japanese companies were reducing concentration risk following years of supply-chain disruptions and geopolitical tensions.

India therefore represents both an opportunity and a hedge.

Japanese businesses can maintain important operations in China while developing another major Asian market capable of supporting future growth.

The approach is commercially significant because China remains deeply embedded in Japanese manufacturing networks.

Moving production or investment away from China entirely would be expensive and, in many cases, impractical.

India consequently offers a more gradual strategy: diversification rather than complete withdrawal.

## Government Ties Have Created the Foundation

The strengthening of commercial ties is not entirely new.

Japan and India have spent years building closer economic and strategic relations.

After Narendra Modi became India’s prime minister in 2014, the relationship was elevated to what the two countries described as a “special strategic and global partnership”.

The governments also established ambitious economic targets, including efforts to increase the number of Japanese companies operating in India.

One of the most visible symbols of the relationship has been India’s first high-speed railway between Mumbai and Ahmedabad, based on Japan’s Shinkansen technology.

The project has also illustrated some of the difficulties faced by Japanese companies operating in India, including delays, administrative hurdles and disagreements over implementation.

Nevertheless, the broader relationship has continued to deepen.

A major summit during Japanese Prime Minister Sanae Takaichi’s first official visit to Delhi in July produced announcements of $12.5bn in Japanese investment through around 120 agreements.

The agreements covered sectors including semiconductors, green energy and other strategic industries.

Piyush Goyal has suggested that Japan could reach its target of investing 10 trillion yen in India earlier than originally anticipated.

The scale of the investment announcements indicates that the relationship is becoming increasingly institutionalised.

## Small Businesses Are Joining the Push

The shift is not being driven exclusively by Japan’s largest corporations.

Japanese small and medium-sized enterprises are also exploring opportunities in India.

Hamamatsu, a Japanese manufacturing centre associated with companies including Suzuki, Honda and Yamaha, has established an India committee to examine how local SMEs can expand into the Indian market.

That development is important because Japan’s industrial economy depends heavily on smaller manufacturers and specialist suppliers.

If these companies begin establishing operations in India, the investment relationship could become considerably broader than the current concentration on major corporations.

Japanese SMEs often possess highly specialised manufacturing expertise, making them potentially valuable partners for India’s ambitions to expand domestic production.

For India, attracting these companies could help strengthen industrial supply chains and improve manufacturing capabilities.

## India Wants More Foreign Capital

The Japanese investment push comes at an important time for India.

Although the country remains one of the world’s fastest-growing major economies, attracting sustained foreign direct investment has been a continuing challenge.

For New Delhi, Japanese capital could help support manufacturing, infrastructure, financial services and advanced technology.

Closer economic cooperation could also reduce India’s dependence on China in strategically important sectors.

India runs a substantial trade deficit with China, and policymakers have increasingly focused on developing alternative supply chains for critical minerals, electronics and advanced manufacturing.

Japanese investment could therefore serve both economic and strategic purposes.

The relationship is not necessarily directed against China, but reducing excessive dependence on Chinese suppliers is increasingly important to both Japan and India.

## China Remains Difficult to Replace

Despite the enthusiasm surrounding India, Japanese companies face a difficult balancing act.

China remains a critical part of the Asian manufacturing system.

Japanese corporations depend on Chinese factories, suppliers and logistics networks across numerous industries.

Pratnashree Basu of the Observer Research Foundation has argued that Japan remains deeply integrated into Chinese manufacturing networks, while India’s integration is more uneven.

That interdependence limits how quickly businesses can redirect investment.

Any coordinated attempt to reduce economic ties with China could impose significant costs on Japanese companies and potentially provoke economic retaliation from Beijing.

For that reason, India’s rise is more likely to complement than immediately replace China’s role.

## Doing Business Remains a Challenge

India’s potential comes with significant obstacles.

Foreign companies have long complained about tax uncertainty, bureaucratic procedures, delays in land acquisition and environmental approvals, and difficulties enforcing contracts.

Japanese investors are no exception.

The Mumbai-Ahmedabad bullet train project has experienced substantial delays, and a former Japanese minister publicly criticised the Indian government over what he described as repeated changes and delays.

Indian officials rejected the criticism.

The dispute nevertheless highlighted an important issue for Japanese businesses: investment decisions depend not only on market size but also on predictability.

Japanese corporations typically make long-term investments and require confidence that regulations, contracts and government commitments will remain stable.

India’s ability to provide that certainty will therefore influence whether the current investment surge becomes a lasting trend.

## A Relationship Moving Beyond Leaders

One of the most significant features of the Japan-India relationship is that it appears increasingly independent of individual political leaders.

Toshiro Nishizaewa of the University of Tokyo has described the decline in Japanese investment in China and the increase in India as a commercially driven diversification strategy rather than simply a government-led geopolitical shift.

Pandalai similarly argues that successive Japanese governments have continued raising economic targets for India.

That suggests the relationship has become embedded in corporate strategies, government institutions and long-term economic planning.

This institutionalisation could make the partnership more resilient to political changes in either country.

## India Faces a Test of Its Opportunity

The challenge for India now is to convert Japanese interest into sustained investment.

The country has the market size, workforce and growth prospects Japanese companies are seeking.

But those advantages must be supported by efficient infrastructure, predictable regulation, faster approvals and reliable contract enforcement.

The recent expansion by retailers, banks, technology operations and manufacturers demonstrates that Japanese companies are willing to make substantial commitments.

The next phase will depend on whether India can maintain the momentum.

For Japan Inc, India offers something increasingly difficult to find elsewhere: a large and expanding market at a time when domestic demand is shrinking and traditional overseas markets face greater uncertainty.

China will remain indispensable to Japanese industry for years to come, but the balance of corporate exposure is changing.

India is emerging as an important second pillar of Japanese economic strategy in Asia, driven simultaneously by commercial opportunity, supply-chain diversification and economic security.

If the investment momentum continues, the consequences could extend well beyond individual corporate deals.

A deeper Japan-India partnership could strengthen India’s manufacturing ambitions, expand Japanese companies’ access to one of the world’s largest consumer markets and gradually reshape the distribution of Japanese capital across Asia.

For Tokyo, the calculation is increasingly straightforward: China remains too important to abandon, but India is becoming too important to ignore.

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