Investment of Japanese companies in India is continuously increasing.
In recent months, there has been more trend towards Japan in India. Many Japanese companies have made huge investments in Indian companies. In a recent media report, Global CEO of Mizuho Bank Masahiko Kato said that India has emerged as the most promising destination for Japanese companies. An ET report quoted Kato as saying that our strategy is to build the India-Japan Corridor – to support Japanese companies entering India and Indian companies expanding abroad.
He said that our target is to bring together the entire strength of Mizuho Group – commercial banking, investment banking and global boutique advisory. This model has been successful for us in the US, and we are confident that it will be successful here too. He further said that there has been a rapid increase in customer inquiries related to India in recent years, with an increase of more than 50 percent in FY 2024 alone.
This statement of Kato is a clear glimpse of why Japan’s largest financial institutions are investing billions of dollars in India. What may appear to be isolated transactions — such as the acquisition of Avendus, large equity stakes in Indian lenders or private equity investments — are actually part of a broader strategic shift. Japanese banking giants are making long-term investments in India’s growth story.
India’s advantage
For Mizuho, India is not just another emerging market. This is the center point of the planned strategy to build the Japan-India Investment Corridor. The bank is combining its traditional strength in commercial banking with Avendus. It aims to provide an integrated platform to serve Japanese companies entering India as well as support Indian companies expanding overseas. Kato said in media reports that Japanese companies now consider India as their most promising market. India has been at number 1 in the survey of Japan Bank for International Cooperation since 2022, and Japanese investment is going to reach 1.2 trillion yen in 2025. There is increasing emphasis on expansion in India in the talks in Tokyo.
Highlighting the structural benefits of India, he said that it is a market of 140 crore people. There is a continuous increase in GDP. Very good in consumption. There is no dearth of digital ecosystem. Also, a lot of talent is seen in the tech sector. He also pointed to opportunities in the semiconductor, materials and renewable energy sectors, areas where Japanese companies have technical expertise and are actively exploring partnerships.
Continuously increasing investment
The scale of Japanese investment in India’s financial sector shows how central banking and financial services have become to this strategy. Japan’s largest megabanks, such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation and Mizuho, are becoming increasingly active in India. MUFG’s $4.45 billion investment in Shriram Finance follows Mizuho’s acquisition of Avendus. SMBC bought 20 percent stake in Yes Bank last year for $1.6 billion. MUFG also invested more than $338.5 million in DMI Finance Pvt., later increasing its stake to 20 percent. Meanwhile, Daiwa Securities Group has invested in Ambit.
Kato explained this growing interest in simple words. There are two reasons for this. First, the government and people-to-people relations between India and Japan are very deep. Second, the Indian financial sector, including banking, non-national financial companies, asset management and investment banking, is growing rapidly. Japanese investors are expecting rapid but not gradual growth in India’s financial sector in the coming years. India’s financial services mechanism is not only expanding, but also increasingly deepened and formalized.
India’s structural growth story
Japan is investing in India just like that. There are big reasons behind this, in which Japan is continuously lagging behind. India offers everything that Japan is fast losing, like rising incomes, strong loan demand, infrastructure-led growth and an increasingly formalized economy. Retail and small business loans are continuously expanding, driven by vehicle ownership, personal consumption and MSME funding. There is a lot of gap in loan reach, which leaves ample scope for expansion.
India’s demographic profile lends further weight in its favor. The youth and workforce, combined with increasing digital usage and financial infusion initiatives, is creating sustained demand across the retail, MSME and corporate loan sectors. This is a sign of long-term growth for banks that are accustomed to saturated markets.
Kato emphasized that India’s digital ecosystem and wealth of technical talent make it a center of innovation. For Japanese corporations looking for both market reach and cost-efficient innovation, India presents an attractive combination.
What are the difficulties in Japan?
In contrast, Japan’s domestic banking environment is troubled by structural realities. The market is mature and already dominated by three major megabanks – MUFG, SMBC and Mizuho. Most of the households and corporates are already connected with banking services. Population growth rate is negative, society is aging and domestic loan demand is low.
Although the Bank of Japan began raising interest rates last year after decades of zero and negative interest rates, the shift has not fundamentally changed the growth equation. Profit margins remain low, loan demand is weak and population decline is limiting long-term expansion. Many regional banks are facing declining local populations and limited digital capabilities, leading to consolidation rather than growth. Under such circumstances, overseas diversification has transformed from a strategic option to a structural necessity.
Japan’s big banks are facing a ceiling domestically. Their natural growth in the domestic market is quite slow and opportunities to add new customers or increase the loan volume are limited. Emerging markets create increased financial access and demand for loans. India stands out among these. Its growing middle class, emphasis on infrastructure give rise to continuous demand for banking services. For Japanese banks, India offers an opportunity to take advantage of consumption-led growth that does not have the demographic constraints of their home market.
