Japan Inc deepens India bet as China risks mount, led by retail and banking expansion

Japanese consumer brands are becoming increasingly visible across India's major cities. Uniqlo and Muji, already established, are accelerating their store openings. Premium sneaker brand Onitsuka Tiger continues to expand, while furniture maker Nitori recently entered the market. Convenience store chain Lawson is reportedly planning to open 10,000 stores in India by 2050, starting with Mumbai.

Beyond retail, Japanese financial institutions are making aggressive moves. MUFG Bank, Japan's largest lender, last year closed a $4.4 billion deal for a 20% stake in Indian shadow lender Shriram Finance — the largest ever foreign investment in India's financial sector. Sumitomo Mitsui Banking Corporation (SMBC) became the biggest shareholder in Yes Bank with a 24.22% stake.

Japan Inc has also become the largest contributor to India's ecosystem of global capability centres (GCCs) in the Asia Pacific, according to a recent Deloitte report. More than 100 Japanese firms now operate GCCs in the country, tapping into India's skilled talent pool for technology and business services.

The push comes as geopolitical tensions and supply chain disruptions have made China a riskier destination for Japanese investment. India, with its large consumer market and improving business climate, is emerging as a key alternative.

Why This Matters

Japanese investment provides India with capital, technology and jobs, helping offset slowing domestic demand and boosting Prime Minister Modi's 'Make in India' pitch.
The shift away from China signals a realignment of global supply chains, with implications for Asian trade dynamics and the U.S.-led effort to de-risk from Beijing.
If Japanese banks continue acquiring Indian financial assets, it could reshape the country's lending landscape and increase competition for local lenders.

Background

Japan has long been one of China's largest trade and investment partners, but Beijing's assertive policies, labour cost increases and geopolitical uncertainty have prompted many Japanese firms to adopt a 'China plus one' strategy. India, with its young population and growing middle class, has become the preferred alternative. The visit by Goyal — the largest Indian business delegation ever to Japan — reflects the political will on both sides to deepen economic ties.

Key Perspectives

Japan Inc: Seizing growth opportunities in India's underpenetrated consumer markets and financial sector while reducing exposure to China. Banks like MUFG and SMBC see strategic value in partnering with Indian lenders to tap credit growth.

India's government: Actively courting Japanese investment as a source of capital, technology and jobs. Goyal's delegation signals willingness to reduce trade barriers and improve ease of doing business.

Critics/Skeptics: India's infrastructure bottlenecks, complex bureaucracy and regulatory unpredictability could slow the pace of Japanese expansion. Some analysts caution that the China pivot may not fully materialise if India cannot match China's scale and efficiency.

What to Watch

Lawson's store rollout: whether the 10,000-store target by 2050 proceeds as planned.
Further Japanese bank deals: MUFG and SMBC may seek additional stakes in Indian financial firms.
Trade agreement progress: negotiations for an India-Japan economic partnership agreement could accelerate.

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