Japan’s new economic affairs division goes fully operational to help firms crack Indian market
RNA Media illustration for representation.
New Delhi: Japan’s foreign ministry put its dedicated “Japan-India Economic Affairs Division” into full-scale operation on Monday, as the new division head took charge. The unit, working with roughly 10 staff members, including dedicated personnel, will now press the Indian government through diplomatic channels to remove regulatory hurdles that have long frustrated Japanese businesses.
The division was actually created in April this year under the ministry’s Southwest Asia Division, but it has taken until now to become fully staffed and functional. Its mandate is to support small and midsize Japanese companies and startups seeking to enter the Indian market or expand their investment there.
The division’s core task is unglamorous but consequential: identifying the specific rules and procedural roadblocks tripping up Japanese firms that lack an established base or distribution network in India. Officials will then use negotiations with the Indian government to try to improve the business environment for these companies. A ministry source said the aim was to resolve corporate problems through diplomacy rather than leaving firms to navigate India’s bureaucracy alone.
The division plans to raise these issues at summit-level and ministerial meetings, folding corporate grievances into the broader intergovernmental dialogue between Tokyo and New Delhi. That approach reflects a longstanding Japanese complaint, several years old now, about inconsistent regulations across Indian states, opaque legal processes and an unpredictable tax structure.
As of 2024, only 1,434 Japanese companies were operating in India, a figure that has barely moved since crossing 1,400 back in 2018. That stagnation sits awkwardly against India’s scale and growth. The country has a population exceeding 1.4 billion and a real GDP growth rate of around 7% – numbers that ought to be pulling in far more Japanese capital than they currently do.
Tokyo has not been shy about its ambitions here. Japan previously set a target of ¥10 trillion (roughly $62 billion) in private-sector investment into India over the coming decade, a goal that both governments have reaffirmed at successive summits.
Investments still modest
The money has been trickling in rather than flooding. Japanese foreign direct investment into India stood at $1.79 billion in 2022-23, rose to $3.1 billion in 2023-24, then eased to $1.36 billion in the first nine months of 2024-25, according to figures reported by the Indian embassy in Tokyo. Cumulative Japanese investment between 2000 and December 2024 is estimated at $43.2 billion, enough to place Japan fifth among India’s foreign investors, with capital concentrated in automobiles, electrical equipment, telecommunications, chemicals, financial services and pharmaceuticals.
On an annual basis, however, Japan’s ranking looks less flattering. India drew close to $50 billion in FDI equity inflows in the 2024 financial year, a rise of 13% over the previous year, but Japan contributed only about $2.5 billion of that – placing it sixth, well behind Singapore’s $15 billion.
The economic push is inseparable from the wider Tokyo-Delhi relationship, which both sides describe as a special strategic and global partnership. Japan and India are Quad partners alongside the United States and Australia, and the new division’s work follows the pattern set by their 2025 bilateral summit, which flagged cooperation on clean energy, technology and supply chain resilience as shared priorities.
There is also a demographic subtext to Japan’s urgency. Some projections suggest India’s nominal GDP could overtake Japan’s as early as this year, making it the world’s fourth-largest economy – a shift that would sharpen Tokyo’s incentive to secure an early and entrenched presence in the Indian market rather than compete for space later.
Whether a 10-member division inside the foreign ministry can meaningfully shift the regulatory landscape that has kept Japanese firm numbers flat since 2018 remains to be seen. What is clear is that Tokyo has decided diplomacy, not just corporate lobbying, is now the preferred lever.
