Japan has emerged as the largest source of foreign direct investment (FDI) into India during April-June of the current fiscal year, according to government data.
FDI inflows from Japan stood at $5.71 billion in the first quarter of 2026-27, surpassing the $3.74 billion India received from the country during the entire 2025-26 fiscal year. It was $2.48 billion in 2025-26.
The foreign inflows from Japan account for nearly 29 per cent of the total equity inflows ($19.81 billion) which India received during the quarter, the data showed. The investments from Japan are important as Japan had set a target of investing 10 trillion yen (about Rs seven lakh crore) in India in over a decade.
Commerce and Industry Minister Piyush Goyal visited Japan last month to further boost bilateral trade and investment ties between the countries. Goyal in Nagoya stated that Japanese firms have already invested Rs 1 lakh crore of the 10 trillion Yen (around Rs 6 lakh crore) investment target in India over a decade, as committed in 2025.
According to Anil Talreja, Partner, Deloitte India, Japanese institutional investors are becoming much more active and Japanese financial institutions are increasing their engagement with India.
“Japan is increasingly diversifying its supply chains. Japanese companies are reassessing their dependence on certain geographies on account of geopolitical tensions, slower growth rate, rising labour and manufacturing costs, and tariff risks,” he said.
Talreja added that India is also positioning Japanese capital as particularly valuable because it brings technology, manufacturing capability, supply-chain integration and long-term capital, rather than simply financial investment.
Artificial intelligence, semiconductors, critical minerals, batteries, energy and next-generation mobility have been identified as key areas for future cooperation,” he said, adding the automotive sector attracted the largest volume of Japanese industrial equity as vehicle makers and their tier-one suppliers expanded production capacity.
“The Q1 FY27 spike was not primarily the result of greenfield manufacturing investments. Instead, it was significantly driven by major financial-sector transactions and acquisitions. Banking and financial services, technology, digital infrastructure and Global Capability Centres (GCCs) are accounting for a larger share of Japanese investment,” Talreja said.
This suggests that Japanese firms are increasingly viewing India not only as a manufacturing base but also as a large consumer market, technology and innovation hub, and GCC, he added.
India has dedicated industrial townships specifically designed for Japanese investors. 12 JITs (Japanese industrial townships) across nine states. They provide Japan-specific infrastructure – including translation and facilitation support through dedicated Japan desks, Japanese-standard utilities, residential clusters with Japanese amenities, and single-window regulatory coordination through Japan Plus and JETRO.
Echoing similar views, Rudra Kumar Pandey, an equity partner at Shardul Amarchand Mangaldas & Co, said that Japan’s lead in the latest quarter signals strong confidence in India.
“Large strategic transactions have driven the headline figures, while Japanese companies’ expansion plans point to a deeper, long-term opportunity across manufacturing, financial services and technology,” Pandey said.
“The surge reflects new strategic investments and platform entries alongside continued expansion by established Japanese companies. Financial services, construction and logistics are driving the latest wave, with automotive, batteries, industrial manufacturing, renewable energy, food processing and insurance adding depth,” he added.
In April, Japan’s MUFG Bank acquired 20 per cent stake in Shriram Finance Ltd (SFL) for Rs 39,618 crore (about $4.4 billion). The transaction represents the largest cross-border investment in India’s financial services sector.
“Financial services are driving recent large transactions, while construction and logistics have become increasingly important platforms for Japanese participation. Automotive and components, batteries, manufacturing, renewable energy, food processing and insurance are also attracting investment or supporting established Japanese businesses in India,” Pandey said.
He added that semiconductors, railways and defence represent promising areas for the next phase.
“Japanese institutions are expanding into India’s retail and MSME credit markets, banking distribution, investment banking, asset management and insurance. Strategic equity positions bring not only capital but also funding capabilities, risk management expertise and cross-border client networks. The MUFG’Shriram, SMBC’YES BANK and Mizuho’Avendus transactions illustrate this broadening footprint,” he said.
After Japan, Singapore was the second largest investor with FDI worth $5.22 billion. It was followed by Mauritius ($2.4 billion), the Netherlands ($1.38 billion), and the US ($1.35 billion).
