Japanese Investment Shifts From China Toward India
Japan is accelerating business engagement with India as companies retreat from China due to economic downturns and geopolitical risks.
Japanese business engagement with India is now outpacing growth in Japan-China relations as firms pivot toward New Delhi to leverage its large domestic market and manufacturing potential. This shift follows a visit to India by Prime Minister Takaichi Sanae, where Tokyo and New Delhi committed to enhancing technology partnerships, energy security, and critical mineral supply chain resilience.
Japanese companies are significantly reducing their presence in China, with the number of operating firms falling to 10,118 in June 2026, the lowest level since 2010. This retreat is driven by China's property downturn, restrictions on rare-earth exports, and deteriorating bilateral relations. In contrast, cumulative Japanese direct investment in India reached $48.1 billion between April 2000 and March 2026, with bilateral trade exceeding $25 billion in the 2025 fiscal year.
Investment is surging across multiple sectors. Toyota and Suzuki pledged approximately $11 billion for expansion, with Suzuki aiming for India to account for 60% of its global sales and investment by 2030. In the financial sector, MUFG Bank acquired a 20% stake in Shriram Finance for $4.45 billion, while Sumitomo Mitsui Trust Bank acquired a 20% stake in YES Bank for $1.6 billion. Additionally, Japan is intensifying efforts to recruit Indian engineers and technical experts to offset domestic labor shortages caused by a declining birthrate.
