What began as slow, though revolutionary, car- and motorcycle-led ties - think Suzuki and Honda - has become something broader, faster, and more strategic. Tokyo is now treating India as a core destination for investment, supply-chain diversification, and geopolitical hedging.

That shift is now visible in scale. 

The number of Japanese firms active in the country has crossed 5,000 for the first time in 2026. 

During the July visit of Japanese Prime Minister Sanae Takaichi, Japan pledged roughly ¥10 trillion, or about US$ 68 billion, in private investment in India over the coming decade. This large commitment gives the relationship a deeper economic base. 

More importantly, the money is no longer confined to legacy sectors such as cars and consumer electronics. It is moving into the sectors that sit at the centre of the rivalry with China: consumption, finance, AI, defence, semiconductors, and infrastructure.

Reaching Critical Mass 

The clearest sign of that change came in 2025. 

Japanese investment in India reached record levels, with inflows linked to mergers and acquisitions reaching over US$ 9 billion. On FDI, Japanese investment in India was US$ 5.3 billion in 2025 and exceeded Japanese investment in China for the second year running. 

The economic momentum is robust and indicates that Japan is going beyond diversifying away from China: it is reallocating fresh capital toward India because the latter now looks like the likelier long-term growth market and the safer strategic partner.

Deal Street 

The big-ticket deals are now ticking away. 

MUFG’s US$ 4.4 billion investment in Shriram Finance is sumo-sized. SMBC’s stake in Yes Bank, Mizuho’s move into Avendus, and JFE’s acquisition of Bhushan Power & Steel were among the most important Japanese announcements in India during the year.  

The action is not just in multi-billion-dollar big-ticket investments. There is depth here. Kikkoman Group, the famous Japanese condiments multinational, for example, is scouting to invest in a new mega factory in India. 

Harry Hakuei Kosato, Director & Kikkoman India Representative, told The Secretariat, “We aim to become the leading brand in India’s Asian sauce category by 2030, and to achieve this, we are driving our business activities with the goal of becoming the number one brand in the soy sauce market.”

“Kikkoman INDIA is focusing on developing the food service market, particularly the HORECA (Hotel, Restaurant, Cafe, and Catering) sector,” he said.

Japan is investing in India’s financial deepening and the massive consumer market. 

In that sense, Japanese capital is becoming more embedded in the manufacturing of the Indian economy rather than merely passing through it.

Masahiro Fukui, Global Managing Officer of Kokuyo, the Japanese furniture major, told The Secretariat, "India is one of Kokuyo's most important growth markets globally. We are expanding beyond workplace solutions into residential real estate, lifestyle, and education to strengthen our India presence.” 

He said, “Our strategy is to allocate more capital to high-growth markets like India. Our Nagpur manufacturing facility will remain at the heart of our 'Make in India, for the World' vision, driving manufacturing and design innovation.”

Our strategy is to allocate more capital to high-growth markets like India

- Masahiro Fukui, Global Managing Officer, Kokuyo (Japanese furniture major)

Defence is the other striking change. 

Japan and India signed a memorandum of implementation for the co-development of UNICORN masts, with Bharat Electronics Limited involved on the Indian side. This is a revolutionary project in scope, technology transfer, and ecosystem development. 

To put it simply, it introduces a new radar and fundamentally changes how a warship manages its electromagnetic signature. Traditional warships carry dozens of exposed antennas for communications, tactical data links, electronic warfare, navigation, and identification, creating a cluttered mast that reflects radar energy and increases detectability. 

UNICORN integrates many of these functions within a single streamlined radome, sharply reducing radar cross-section. What matters here is that this is not simply a purchase; it is a co-development project, and therefore a sign that Japan is willing to share frontline defence technology that no other country will.

The same pattern is visible in consumer technology and infrastructure. 

SoftBank, the Japanese mega fund of funds, remains one of the most recognisable Japanese investors in India. It has a renewed interest in AI-linked startups. It has already invested a massive US$ 15 billion in India in technology infrastructure and consumer sectors. 

NTT, the Japanese telecom giant, has long had a footprint in India’s enterprise and digital infrastructure market, which is increasingly relevant as India’s AI, data-centre, and cloud ecosystem deepens. 

China Facing Investments

These are not random Japanese investments. They are precisely the kinds of markets where competition with China is the strongest, and where Japan wants to ensure that its own companies, standards, and platforms are not left behind.

The bullet train remains the most visible symbol of this ambition. For both countries, it is a statement about industrial trust and technological transfer. Japan’s role in India’s rail modernisation also extends to urban mobility, metro systems, and industrial corridors.

India Needs Japan To Buy More 

Trade, however, remains a less flattering part of the story. India still runs a large trade deficit with Japan. 

Japan’s foreign ministry figures indicate bilateral trade in FY2025-26 was US$ 27.48 billion, with India exporting US$ 6.04 billion and importing US$ 21.44 billion, leaving a gaping deficit of about US$ 15.4 billion. India buys far more from Japan than it sells, mainly because Japan supplies capital goods, machinery, precision components, and industrial inputs.

On investments, though, the good news is likely to continue. 

Japan, which once arrived in India through Suzuki, now comes through AI, bullet trains, and co-developed defence technology. That is a much bigger bet. It is also a more durable one. 

Conventional thinking says the Japanese are cautious investors. That is ancient history. Remember India’s biggest consumer brand, IPL, was first telecast back in 2006 by Sony of Japan. For Japanese investments to continue flowing, India needs to ease the cost of doing business, remove double taxation hurdles, and make acquiring land easier. 

It also hinges on the hope that the Yen recovers from its historic low.  As they say in cricket, stick around - this could be fun! 

(The writer is a senior journalist and analyst. Views expressed are personal.)