Economic ties between India and Japan are strengthening, with Japanese companies increasing investment in India and expanding their local brands and financial-asset holdings. Against a backdrop of intensifying China-related risks, companies are reportedly seeking to establish India as a base for long-term growth.
On 24 August, India's Commerce and Industry Minister Goyal led an economic delegation on a visit to Japan aimed at expanding trade and investment ties between the two countries. Japanese brands are further expanding their presence in the Indian market, including Fast Retailing's UNIQLO, Ryohin Keikaku's MUJI and ASICS' Onitsuka Tiger. Furniture retailer Nitori has announced plans to enter the market, while Lawson's plans to expand into India have also been reported, including a target of 10,000 stores in the country by 2050.
Japanese financial institutions are stepping up their acquisitions of Indian financial assets. Mitsubishi UFJ Bank acquired a 20% stake in non-bank financial company Shriram Finance for INR 396.2 billion, completing the investment in April this year. Sumitomo Mitsui Banking Corporation, a subsidiary of Sumitomo Mitsui Financial Group, acquired a 24.22% stake in YES BANK, becoming its largest shareholder.
Global capability centers (GCCs) are growing rapidly in India, and Deloitte has noted that more than 100 Japanese companies already operate GCCs there. Japanese companies are turning their attention to India for growth, and ties between Japan and India have deepened rapidly since the conclusion of the Comprehensive Economic Partnership Agreement (CEPA).
However, the expansion of cooperation between Japan and India also presents challenges. Some have pointed out that the tax system, bureaucratic procedures and delays in obtaining approvals remain barriers for foreign investors. While stronger economic ties with India are viewed as part of Japanese companies' market-diversification strategies against a backdrop of rising China-related risks, some experts believe that a wholesale withdrawal from China is not taking place.
With domestic and overseas investment through NBV and official visits by the Japanese government, cooperation between Japan and India may advance toward stronger long-term manufacturing, defense and economic ties, according to some observers. Japanese investment in India is expected to remain an ongoing trend.