Key facts
- Japanese investors are increasingly prioritizing India over China for long-term investments.
- India is seen as attractive due to its domestic demand, policy stability, and supply-chain relevance.
- Japanese entities invested an estimated $9 billion in India last year, mainly in financial services.
- Infrastructure, financial services, and real estate are key sectors for Japanese investment in India.
- India's renewable energy and battery storage sectors are identified as significant investment opportunities.
India is emerging as a preferred long-term investment destination for Japanese capital, with investors shifting focus from China due to geopolitical tensions and a search for markets offering domestic demand, policy stability, and supply-chain relevance. Tsutomu Takemura, senior managing director and global head of investment banking at Nomura, stated that India provides a rare combination of growth, scale, and supply-chain diversification benefits.
Japanese companies and financial institutions invested an estimated $9 billion in India last year, a significant acceleration of interest, particularly in the financial services sector. Takemura noted that while existing investments in China are being maintained, there is limited appetite for new capital deployment there. He expects India to be one of Asia's most important M&A destinations alongside Japan over the next three to five years.
Japanese investors are showing strong interest in India's infrastructure, which now encompasses data centers, logistics, renewable energy, and transmission assets. Financial services and real estate are also key areas of focus. Large Japanese pension funds, such as GPIF, are increasingly investing in global infrastructure funds that are deploying capital into markets like India.
The energy transition in India presents a significant opportunity, with ample space for solar and renewable projects, and a growing need for battery storage solutions. However, challenges remain for Indian pharmaceutical companies looking to enter the Japanese market due to Japan's stringent healthcare regulations and pharmaceutical pricing policies.