(Singapore) — Post-Covid, India has taken on a growing role in the expansion strategies of Japanese companies, particularly as corporate groups diversify supply chains and seek faster-growing markets. Japanese foreign direct investment into India rose to US$3.17 billion in fiscal 2023/24, before easing to US$2.48 billion in 2024/25 and then rising to about US$3.7 billion in fiscal 2025/26. Cumulative Japanese investment in India reached about US$48.14 billion between April 2000 and March 2026, making Japan the fifth-largest source of foreign direct investment into India and accounting for about 6 per cent of total FDI.
The increase has coincided with a broader rise in acquisitions and strategic investments by Japanese companies, rather than greenfield manufacturing projects alone. In 2024, Japanese companies completed 665 outbound transactions globally, with India accounting for 33 deals, behind the US with 213 and Singapore with 51. India was ahead of Vietnam with 21 transactions, mainland China with 20, South Korea with 19 and Indonesia with 17, underlining its growing position in Japan’s regional M&A map.
The shift was already visible in 2023, when Japanese outbound M&A expanded sharply. Total outbound M&A by Japanese companies reached about US$57.65 billion in 2023, an increase of 79 per cent from the previous year, while India accounted for about 6 per cent of outbound transactions. India was therefore emerging as a significant destination for Japanese acquisitions even before the stronger investment momentum seen in 2024-26.
The sectors attracting Japanese capital have broadened to include financial services, manufacturing, automotive, technology, energy and infrastructure. Sumitomo Corporation completed the acquisition of the remaining shares of Fullerton India in 2024 in a transaction valued at about US$700 million, after taking a majority stake in 2021, while MUFG invested about US$334 million in Indian financial company DMI Finance. The transactions illustrate how Japanese groups are moving beyond manufacturing to acquire financial platforms that provide direct access to Indian consumers and businesses.
The trend became more pronounced towards the end of 2025, when Mizuho Securities agreed to acquire more than 60 per cent of Avendus Capital in India. JFE Steel also committed about ¥270 billion, or roughly US$1.8 billion, to Bhushan Power & Steel as it sought to expand its steel operations in the country. MUFG separately moved to acquire a 20 per cent stake in Shriram Finance, highlighting how Japanese banks are increasingly using equity investments to build positions in India’s financial-services market.
By deal volume, however, India has not yet become Japan’s largest M&A destination in Asia. Japanese companies completed 361 cross-border transactions in the Asia-Pacific region in 2025, with Singapore accounting for 57, China 50, Vietnam 42, Thailand 39 and India 37. India therefore represented about 10.2 per cent of the regional total, placing it among Japan’s principal Asian markets but still behind several South-East Asian destinations and China.
The composition of Japanese activity in India also differs from that in China and several ASEAN markets. In the first quarter of 2026, Japanese companies recorded 91 cross-border transactions across Asia-Pacific, including 18 in Singapore, 12 in China, 10 in Thailand and nine in Taiwan, while India, Malaysia and South Korea each recorded eight. The Indian transactions were concentrated on investment, acquisition and capital alliances, with no divestment recorded in the dataset.
The pace of activity in early 2026 is significant because Japanese companies are becoming more selective in allocating capital overseas. Of the 91 Asia-Pacific transactions recorded in the first quarter, 35 were acquisitions, 22 minority investments and five capital alliances, indicating that investment and acquisition structures accounted for a substantial share of activity. India’s eight transactions represented 8.8 per cent of the regional total, matching Malaysia and South Korea but remaining behind Singapore, China and Thailand.
The comparison with China highlights an important change in Japanese corporate strategy. Japanese companies recorded 50 cross-border transactions in China during 2025, compared with 37 in India, while the first quarter of 2026 produced 12 transactions in China and eight in India. At the same time, Japanese FDI into China stood at US$3.385 billion in 2024, while Japanese FDI into India was reported at about US$5.34 billion on the relevant Indian and Japanese reporting basis, although the two figures should not be treated as directly comparable with M&A transaction values.
Singapore remains a major destination for Japanese capital when measured by both deal activity and FDI. Japanese companies completed 57 transactions in Singapore in 2025, equivalent to 15.8 per cent of the Asia-Pacific total, compared with 37 transactions in India. Japanese FDI into Singapore reached US$16.76 billion in 2024, up 70.4 per cent from US$9.83 billion in 2023, significantly above the corresponding flow into India.
Vietnam also remains an important market for Japanese companies. Japan recorded 42 transactions in Vietnam in 2025, equivalent to about 11.6 per cent of the regional total, compared with 37 in India. By the first quarter of 2026, however, Vietnam had recorded five Japanese transactions, while India had eight, suggesting that the relative distribution of Japanese M&A activity across Asia can shift considerably from one period to another.
Indonesia occupies a lower position in the recent transaction count, although Japan remains a significant investor in the country. Japanese companies recorded 21 transactions involving Indonesia in 2023, 17 in 2024 and two in the first quarter of 2026 in the relevant M&A dataset. Japanese FDI into Indonesia was about US$2.5 billion in 2024, down 12.9 per cent, while Thailand attracted about US$4.2 billion and Malaysia roughly US$2 billion.
India’s appeal is also reflected in Japanese corporate surveys. In the Japan Bank for International Cooperation’s 2025 survey, India remained the most promising country for Japanese manufacturers over the medium term, with 61.8 per cent of respondents selecting it, up from 58.7 per cent in 2024. India also ranked first for the automotive, electrical equipment and electronics, chemicals and general machinery sectors.
The existing Japanese corporate base in India provides an additional platform for expansion. Indian government data puts the number of Japanese companies registered in India at about 1,500, with almost 5,000 business establishments, while manufacturing companies account for roughly half of the total. Automotive, electrical equipment, telecommunications, chemicals, insurance and pharmaceuticals are among the principal sectors in which Japanese companies have established operations.
In 2026, Japanese investment in India is also moving deeper into strategic technologies such as semiconductors. Renesas Electronics holds a 6.8 per cent minority stake in CG Semi in Gujarat and provides technology as well as acting as an anchor customer, while the first facility is being ramped towards an annual capacity of 300 million units and a second plant is expected to lift capacity to 4 billion units by late 2027 or early 2028. The wider project is backed by an investment of about Rs76 billion, or roughly US$900 million, underscoring the shift from traditional automotive manufacturing towards semiconductor supply chains and advanced industrial technology.
The pattern is consistent with a broader change in Japanese overseas investment following the pandemic, as companies seek greater supply-chain resilience and new growth markets. Japan’s outward FDI reached US$208.1 billion in 2024, up 6.5 per cent from 2023, while Asia attracted US$42.7 billion and ASEAN US$28.7 billion. Within ASEAN, Singapore received US$16.8 billion, Thailand US$4.2 billion, Indonesia US$2.5 billion and Malaysia about US$2 billion, while India recorded about US$5.34 billion on the relevant reporting basis.
The investment relationship is also being supported by increasingly ambitious policy targets. Japan and India agreed in 2022 on a target of ¥5 trillion in Japanese investment and public-private financing for India over five years, while the two governments in 2025 announced a new target of ¥10 trillion in private Japanese investment over the following decade. If achieved, the latter target would imply average annual Japanese private investment of about ¥1 trillion over the 10-year period, although actual flows will depend on corporate investment decisions and market conditions.
The past three years therefore point to a Japanese investment relationship with India that is becoming broader rather than simply larger. India has not displaced Singapore, China, Vietnam or Thailand as the leading destination for Japanese companies when measured by every M&A metric, but its combination of market growth, manufacturing capacity, financial services, technology and government support has made it an increasingly important destination for Japanese capital. The transactions and projects announced through 2026, from financial-services acquisitions to steel, data centres, renewable energy and semiconductor manufacturing, suggest that Japanese companies are increasingly using India not only as a sales market but also as a platform for manufacturing, technology and regional supply-chain expansion. (NB)
