From billion-dollar banking deals to manufacturing investments and clean energy partnerships, Japan is steadily positioning itself as one of India’s most important long-term economic partners. The timing is significant because it coincides with a broader shift in Asian investment patterns, with India increasingly emerging as a preferred destination for Japanese companies and financial institutions. The summit is therefore as much about economics as it is about geopolitics.
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A summit powered by economic momentum
The 16th India-Japan Annual Summit comes less than a year after Modi’s visit to Tokyo, where Japan pledged to more than double its investment in India to over $61 billion during the coming decade. That commitment reflected growing confidence in India’s economic prospects and has since been reinforced by a series of major investments.
The economic relationship already rests on a substantial foundation. Bilateral trade reached $27.5 billion in fiscal year 2025-26, while Japanese investment in India stood at $3.2 billion between April and December 2025. Nearly 1,400 Japanese companies now operate in India and almost half are engaged in manufacturing activities.
Takaichi and Modi are also expected to interact with business leaders from both countries during the visit, underlining how commerce and investment have become central pillars of the partnership. The summit is likely to focus on technology, infrastructure, manufacturing, supply chains and investment facilitation, all areas where the relationship has gained momentum over the past few years.
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The rush of Japanese capital
The rush of Japanese investment into India is being driven by a combination of opportunity in India and constraints within Japan. India offers something increasingly rare in the developed world: a large and expanding consumer market, rising incomes, a young workforce, growing credit demand and ambitious industrialisation plans. Government initiatives in manufacturing, semiconductors, electronics, renewable energy and infrastructure have further strengthened India’s appeal. For Japan, the picture is very different. The country’s population is ageing, domestic credit demand is relatively weak and growth opportunities at home remain limited. Large financial institutions face mature markets and intense competition. Looking overseas has become less a strategic option and more a necessity.
This contrast explains why Japanese corporate attention has increasingly shifted toward India. Surveys by the Japan Bank for International Cooperation have ranked India as the most attractive overseas investment destination for Japanese companies since 2022. Executives in Tokyo increasingly view India not simply as an emerging market but as a long-term growth engine.
The China factor behind the India story
An equally important driver is the gradual reassessment of China by Japanese companies and banks. For decades, Japanese financial institutions followed manufacturers into China, financing factories and supporting trade. That model is now being reworked. Rising labour costs, slowing growth, geopolitical uncertainty and stronger competition from Chinese companies have made China a less compelling destination than it once was. The shift is visible across the Japanese banking sector. Regional Japanese banks have reduced their branch presence in China over recent years and are increasingly directing resources toward Southeast Asia and India. The three Japanese megabanks have also seen their corporate lending exposure in China shrink significantly.
This does not amount to an abandonment of China. Rather, future growth capital is increasingly being directed toward markets that offer stronger long-term opportunities. India stands out as one of the biggest beneficiaries of that reallocation. The result is a structural realignment in Asian investment flows. Japanese institutions that once concentrated heavily on China are now building capabilities to support clients entering India and participating directly in India’s domestic growth story.
Billions-dollar bets
Nothing illustrates Japan’s confidence in India better than the scale of recent financial-sector investments. Sumitomo Mitsui Banking Corporation’s acquisition of a 20 per cent stake in Yes Bank for about $1.6 billion was among the most prominent deals. The investment gives SMBC a major foothold in India’s banking sector while strengthening its ability to serve Japanese corporate clients operating in the country.
Mitsubishi UFJ Financial Group has gone even bigger. Its investment of around $4.45 billion in Shriram Finance provides exposure to one of India’s largest non-banking finance companies, particularly in commercial vehicle and small-business lending. MUFG has also expanded its presence through investments in DMI Finance, targeting India’s rapidly growing consumer and MSME lending segments. Mizuho Financial Group chose another route by acquiring a majority stake in investment bank Avendus. The deal gives Mizuho access to India’s technology ecosystem, startup landscape, mergers and acquisitions activity and capital markets business.
These transactions reveal a common strategy. Japanese financial institutions are no longer limiting themselves to servicing Japanese companies overseas. They are embedding themselves directly into India’s financial system and positioning for decades of growth.
The yen-rupee trade: Building an India-Japan financial corridor
One of the most consequential outcomes of the summit could emerge in the financial sphere. India and Japan are reportedly advancing plans for a direct yen-rupee settlement mechanism that would reduce dependence on the US dollar in bilateral trade, as per a Nikkei report. If included in the summit’s joint statement, it would mark the first time currency cooperation has been formally incorporated into a leaders’ declaration between the two countries.
The proposed framework would allow Japanese non-residents to open accounts with Indian banks and enable direct settlement of transactions in yen and rupees. Such a system would make trade and investment flows more efficient while reducing transaction costs and currency-conversion risks. For Japanese companies expanding operations in India, easier settlement mechanisms could remove an important friction point. More broadly, it would represent a significant deepening of financial integration between Asia’s second- and fourth-largest economies.
Green energy becomes the next frontier
Another major development expected during Takaichi’s visit is a landmark green ammonia partnership between Japan’s IHI Corporation and India’s ACME Group, as per Nikkei. The roughly $3 billion project is designed around India’s natural advantages in renewable energy production. Solar power generated in India will be used to produce green hydrogen through electrolysis. That hydrogen will then be converted into ammonia and exported to Japan.
The planned annual output of around 400,000 tonnes of ammonia will be used across multiple Japanese industries, including power generation, chemicals and semiconductors. Japanese government subsidies are expected to support the project for up to 15 years, helping bridge the cost gap between green and conventional alternatives. The project highlights a new dimension of the India-Japan partnership. Instead of simply exporting goods or capital, the two countries are beginning to build integrated supply chains in emerging sectors that are expected to define the global energy transition.
From infrastructure to strategic partnership
Japanese investment in India is not confined to finance and energy. Japan remains a major partner in infrastructure development, most notably through the Mumbai-Ahmedabad high-speed rail project. Japanese companies also continue to expand their presence across manufacturing, industrial technology, logistics and advanced engineering. These economic links reinforce the broader strategic partnership. Both countries are members of the Quad and share concerns about maintaining a free and open Indo-Pacific. Security cooperation has steadily expanded over the years, but economic interdependence is increasingly providing the foundation for a deeper relationship.
As geopolitical uncertainty reshapes global supply chains, India and Japan are discovering that their economic interests align in powerful ways. India needs capital, technology and industrial expertise. Japan needs growth opportunities, new markets and reliable partners. That convergence explains why Takaichi’s visit matters beyond the immediate announcements. The summit takes place at a moment when Japanese capital is flowing into India on a scale not seen before. What began as a strong strategic partnership is increasingly evolving into one of Asia’s most important economic relationships, with implications that could extend well beyond the two countries.