The first three weeks of December witnessed a trio of big-ticket cross-border deals involving Japanese entities, underscoring a renewed surge of interest of investors and corporations to India from the Land of the Rising Sun.

The month kicked off with a $1.7-billion investment announced by JFE Steel Corporation in Bhushan Power & Steel Ltd where it was picking up a 50 per cent stake. It was followed up by a mega $4.4 billion deal by Mitsubishi UFJ Financial Group (MUFG) to pick up a minority stake in Shriram Finance.

Moreover, Mizuho Financial Group also declared last week that it is acquiring a majority stake in investment banking entity Avendus for $523 million.

Even as deals take months, sometime years in making and their back-to-back culmination could just be a coincidence, the transactions underscore the importance of India and its future potential to global investors who are looking for opportunity to grow, experts say.

“India is emerging as a favoured destination for investors among the Asean countries and outside the Asean. Japan may also be trying to build a position in India as a counter to China where their interest is on the wane,” Ambarish Dasgupta, founder of Intueri Consulting LLP, said.

A survey released earlier this year by the Japan External Trade Organisation (JETRO), the government agency that promotes overseas trade and investment, showed that nearly 81 per cent of Japanese companies are keen to expand their business operations in India over the next couple of years.

The rising interest in India contrasts sharply with waning confidence in other Asian markets. Japanese firms looking to expand in China over the next two years are only 21.7 per cent, while only 34.1 per cent of the companies are interested in expanding in Thailand, traditionally a favoured destination for Japanese businesses.

By September, FDI from Japan stood at $2.3 billion, already exceeding the full-year inflow of $1.8 billion recorded in 2024. The number is likely to widen further by the year end given the spate of deals.

The pitch

Communications made by the Japanese firms to their investors offer a glimpse of the thought process behind the boardroom door.

For MUFG, India is “one of the most important markets globally, expected to become the world’s third largest economy by 2030, due to factors such as rapid population growth”.

The strategic step, MUFG explains, is to establish “a business foundation in India’s MSME and retail markets and capture the country’s growing domestic demand”.

For JFE, India offers the opportunity to set up third largest integrated steelworks — the only one outside Japan. “The JV (with JSW in BPSL) expects to be able to quickly capture steel demand in the rapidly growing Indian market and achieve accelerated profitability.” JFE aspires to triple BPSL’s capacity to 15 mt, as India becomes the only major economy projecting robust steel consumption growth for decades.

Mizuho sniffs opportunity in “India’s rapidly developing and maturing capital markets” through Avendus as many of Mizuho’s clients have shown “significant interest in expanding into the Indian market”, and this collaboration will enable “Mizuho to provide robust support in this regard right from the conceptual stage”.

Bird’s eye view

Analysts attribute the shift towards India to a changing global environment marked by supply chain disruptions, rising strategic risks and India’s efforts to diversify trade ties through a wider network of free trade agreements.

Japan has set a target of 10 trillion yen ($63 billion) in investment in India over the next decade.

“Japan’s rising investment into India reflects a strategic deepening of bilateral economic relations rather than a short-term spike,” said Siddharth Deshmukh, president of the Indo-Japan Business Council and founder and CEO of IT firm Shimi Labs. “We are seeing a transition from project-led cooperation to an ecosystem-led partnership.”

Deshmukh pointed out that Japan has been among India’s most consistent long-term investors, with cumulative Japanese FDI exceeding $40 billion over the past two decades. He said the current phase of investment is marked by diversification beyond manufacturing into financial services, real estate, digital infrastructure, logistics and urban development.

Dasgupta concurred. “Working with Japanese companies is a fulfilling experience. They look at the long-term horizon and strong partnerships, anchored in strong value system and ethics, overriding the short-term blips along the way,” he said.

Former IAS officer Debi Prasad Patra, who was instrumental in bringing the largest Japanese FDI in Bengal through Mitsubishi Chemical plant at Haldia in the late 1990s, agreed.

“Japanese look at long-term commitments. They may take time to take a decision but move fast once the decision is taken,” Patra, now with The Chatterjee Group (TCG), observed.

According to Deshmukh, India is increasingly viewed by Japanese companies as a strategic growth platform, offering not only access to a large domestic market but also a base for expansion into regions such as Africa and West Asia and the next phase of growth will see increased participation from small and mid-sized companies.