Sunday 22 / March / 2026
Record Japanese investment in India’s financial sector showcases the growing business links between the world’s fourth and fifth-largest economies.
Japan’s largest bank, Mitsubishi UFJ Financial Group, closed a $4.4bn deal to acquire part of an Indian shadow bank at the end of last year, the largest ever foreign investment in India’s financial sector.
MUFG’s purchase of a fifth of Shriram Finance’s shares was part of a record $8.8bn spent by Japanese companies on stakes in Indian businesses in 2025, according to Dealogic data.
Closer business and investment links between Japan and India are being driven by the opportunities presented by the south Asian nation’s vast market, geopolitical tensions and an urgent need to compete with ascendant Chinese companies.
India, which had restricted investment from China until recently after clashes on their Himalayan frontier in 2020, sees Japan as an important source of funds, especially for capital-short banks, and of technology and technical expertise for its manufacturing sector.
Sourav Mallik, deputy chief executive of Kotak Investment Bank, which has been involved in some of the deals with Japanese companies, said a lack of growth in their domestic economy was making their investors push them to “go global”.
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As a fastest-growing large economy, “India naturally pops up”, said Mallik, while Japan’s “very long-term patient capital . . . ties in very nicely with Indian companies and entrepreneurs who want to retain a certain degree of control”.
Yoshinobu Agu, head of Citigroup Global Markets Japan’s mergers and acquisitions unit, said Japanese investors had tended to “prefer strategic minority positions” because of the difficulty of acquiring full control of Indian companies and also their high valuations.
Masahiro Kihara, chief executive of Mizuho, Japan’s third-biggest bank by assets, has described India as requiring a “very long-term” view.
Mizuho announced in December it would take a majority stake in Indian financial services provider Avendus Capital, and Kihara said then that his ambitions went beyond serving Japanese industrials in the country.
“I would say that European companies, US companies, also will have interest”, and Mizuho saw its purpose as connecting the commercial relationships it had around the world with India, he said.
Tokyo and New Delhi share a desire for closer geopolitical alignment as a bulwark against an increasingly powerful and assertive China.
“Investment in India is on an expanding trend, surpassing investment in China for the second consecutive year in 2024 and maintaining a high level” at $5.34bn, the Japan External Trade Organisation said in a global trade and investment report last year.
By contrast, Japanese foreign direct investment in China fell for a third consecutive year to $3.39bn, its lowest level since 2014, Jetro said.
