Japanese companies are expanding their presence in India, with a notable increase in investment across various sectors. This surge is attributed to a contracting domestic market in Japan and deepening risks associated with China.
Last week, India's commerce minister, Piyush Goyal, led the country's largest business delegation to Japan to strengthen trade and investment ties. This follows a landmark summit in July during Japanese Prime Minister Sanae Takaichi's first official visit to Delhi, where Japanese companies committed $12.5bn in investments through approximately 120 agreements, spanning semiconductors to green energy.
The expansion is visible in India's retail sector, with brands like Uniqlo, Muji, and Onitsuka Tiger rapidly growing. Nitori, a Japanese furniture maker, recently entered the market, and convenience store chain Lawson reportedly plans to open 10,000 stores in India by 2050, starting in Mumbai. Beyond retail, Japanese banks are actively acquiring Indian financial assets; MUFG Bank purchased 20% of Shriram Finance for $4.4bn last year, and Sumitomo Mitsui Banking Corporation became the largest shareholder in Yes Bank with a 24.22% stake.
According to Vipul Nath Jindal of Next Bharat Ventures, Japanese companies are looking to India for growth due to a permanent shrinking of their domestic market over the past 16-17 years. He also noted that traditional expansion markets, such as China, have become less attractive due to geopolitical tensions and economic dynamics, while the US market presents challenges from tariffs and competition.
A recent Deloitte report indicates that over 100 Japanese firms operate Global Capability Centres (GCCs) in India, making Japan the largest contributor to India's GCC ecosystem in the Asia Pacific. These centres serve as offshore innovation hubs for critical business functions, including R&D and AI development.