A significant shift is underway in the strategic investment landscape of East Asia, as major Japanese corporations increasingly turn their gaze westward, specifically towards India, to address pressing domestic challenges and capitalize on burgeoning opportunities. This pronounced pivot, marked by a surge in technology centre establishments and expansions, signifies a strategic realignment driven by Japan’s severe demographic headwinds, evolving geopolitical considerations concerning China, and India’s rapidly maturing digital talent pool. Following a record year for Japanese financial investments in India in 2025, the focus is now firmly on leveraging India’s deep reservoir of skilled technology professionals, transforming the bilateral economic relationship beyond traditional trade and manufacturing.
This strategic recalibration is evident across diverse sectors, with prominent Japanese groups like Mitsubishi UFJ Financial Group (MUFG), Nidec Corp, and Daicel-owned Polyplastics actively establishing or significantly expanding their technology footprints in India. These moves underscore India’s rising appeal as a global capability centre (GCC) hub, providing a critical antidote to Japan’s shrinking domestic talent pipeline and the growing imperative for multinational corporations to diversify their operational and intellectual property exposure away from high-risk geographies. The confluence of these factors is catalyzing a new era of Japan-India economic cooperation, deeply rooted in technological collaboration and innovation.
Japan’s demographic predicament stands as a primary catalyst for this outward investment strategy. With one of the world’s oldest populations and a persistently low birth rate, Japan faces an acute and worsening shortage of skilled labour, particularly in critical high-tech domains. The National Institute of Population and Social Security Research projects a drastic decline in Japan’s workforce over the coming decades, creating an existential challenge for its industries. Companies are struggling to find engineers, data scientists, and cybersecurity experts domestically, forcing them to look abroad. India, with its vast young population, robust higher education system producing millions of STEM graduates annually, and widespread English proficiency, presents an unparalleled solution to this talent deficit.
Beyond demographics, geopolitical realities are exerting a powerful influence on Japanese corporate strategy. The "China Plus One" approach, advocating for diversification of supply chains and operational bases away from China, has gained significant traction among global enterprises. For Japanese firms, this strategy is increasingly driven by concerns over intellectual property protection, rising labour costs, and potential geopolitical instability. Beijing’s tightening regulatory environment and the heightened risk of data localization mandates further incentivize a shift towards more predictable and stable markets. India, as a democratic nation with a robust legal framework and a rapidly growing economy, offers a compelling alternative, fostering an environment where innovation can thrive with greater security for proprietary knowledge.
The appeal of India as a technology offshoring hub is multifaceted, extending beyond mere cost efficiencies to encompass a vibrant ecosystem of innovation and a deep talent pool capable of advanced work. India currently hosts over 1,760 Global Capability Centres (GCCs), according to industry body Nasscom, generating an impressive $64.6 billion in export revenue. This figure is projected to soar to $105 billion by March 2030, with the number of GCCs expected to reach 2,200. Cities like Bengaluru and Hyderabad lead this charge, hosting 875 and 355 centres respectively, establishing themselves as global epicentres for digital innovation and engineering excellence. The evolution of these centres from basic support functions to strategic innovation hubs, driving core product development and R&D, is particularly attractive to Japanese firms seeking to enhance their global competitiveness.
Illustrating this trend, Mitsubishi UFJ Financial Group (MUFG), one of Japan’s largest private lenders, has significantly expanded its Global Capability Centre operations in India. With locations in Bengaluru and Mumbai, MUFG’s GCC now boasts a workforce exceeding 2,000 employees, with technology roles being a key growth driver. The bank is actively recruiting for over 150 positions, encompassing data analysis, Java software development, cloud security, and client management services, often in collaboration with specialist firms like ANSR. This expansion follows MUFG’s substantial financial investments in India, including capital injections into entities like Shriram Finance, signaling a comprehensive and long-term engagement with the Indian market. The bank’s impressive net interest income of $20.8 billion last fiscal year underscores its financial capacity to drive such strategic global expansions.
Similarly, Japanese manufacturing conglomerates are making decisive moves into India’s tech landscape. Daicel Corp.-owned Polyplastics, a key player in engineering plastics, is reportedly evaluating plans to establish a technology centre in Chennai. This initiative aims to recruit approximately 200 engineers and back-end IT professionals, leveraging Chennai’s growing reputation as an automotive and manufacturing tech hub, complementing Polyplastics’ existing manufacturing facility in the city which produces components for the automotive sector. Daicel’s global revenue of $3.87 billion last fiscal year provides the financial muscle for such strategic investments aimed at enhancing product development and operational efficiencies through localized tech talent.
Kyoto-based Nidec Corp., a global leader in electric motors, exemplifies a parallel trend of deepening commitment to India. After investing $55 million in a manufacturing campus in Hubli-Dharwad, Karnataka, in November last year, Nidec further solidified its presence with the opening of a dedicated research and development centre in Bengaluru in September 2024. This progression from manufacturing to R&D signifies a clear intent to tap into India’s engineering prowess for core product innovation, critical for Nidec’s continued growth, which saw its revenue increase by 11% year-on-year to $17.2 billion last fiscal year. These examples highlight a broader movement, positioning Japan as the fifth-largest source of foreign direct investment into India, a testament to the burgeoning economic partnership.
Analysts are unanimous in their expectation of an acceleration in Japanese investments in India-based tech centres. Peter Bendor-Samuel, founder of Everest Group, points to "structural factors" such as Japan’s declining birth rate and the corresponding reduction in available tech talent as primary drivers. He further emphasizes the "increasingly unattractiveness of China," which is now viewed as a "strategic threat" and a high-risk geography for intellectual property loss, cementing India’s role as a vital alternative. This strategic imperative is pushing Japanese firms not merely to outsource, but to integrate Indian talent deeply into their global operational frameworks.
The nature of work being sought by Japanese firms in India is increasingly sophisticated, moving beyond traditional IT services to higher-value domains. Phil Fersht, chief executive of HFS Research, notes that the opportunity lies in areas such as core platform engineering, AI-enabled manufacturing systems, advanced financial services technology, digital twins, and data-driven operations. This shift suggests that Indian talent is being engaged for critical innovation and strategic development, rather than just routine support. Over time, this deepened collaboration is expected to translate into "stronger IP creation and long-term leadership roles for Indian talent within Japanese global organizations," fostering a more integrated and mutually beneficial relationship.
The growing Japanese interest has also manifested in competitive compensation packages for Indian tech talent. Reports indicate that Japanese firms are offering attractive salary packages, often exceeding ₹20 lakh annually, to graduates from leading Indian engineering colleges. This aggressive recruitment strategy underscores the high demand for skilled professionals and signals Japan’s commitment to securing top-tier talent from India’s competitive market. Such investments are not merely transactional; they represent a strategic allocation of resources to secure future innovation capabilities and mitigate domestic skill shortages.
The implications of this burgeoning partnership are profound for both nations. For Japan, it offers a pathway to sustain technological competitiveness, circumvent the constraints of an aging workforce, and diversify its strategic economic relationships in a volatile global environment. For India, it translates into significant job creation, further skill enhancement through exposure to advanced Japanese technologies and management practices, and a deeper integration into global value chains. It also validates India’s position as a premier global tech hub, attracting high-quality foreign direct investment and fostering an ecosystem of innovation. The strengthening economic ties between these two major Asian democracies also holds broader geopolitical significance, aligning with regional strategies that promote stability and prosperity.
Looking ahead, the trajectory of Japanese investment into India’s tech sector appears set for continued expansion. The fundamental drivers—Japan’s demographic imperative, the strategic imperative to diversify away from China, and India’s unparalleled talent pool—are structural and long-term. This strategic pivot is more than just a temporary trend; it represents a foundational shift in how Japanese companies envision their global operations and talent acquisition strategies. As India continues to solidify its position as a global digital powerhouse, the deepening technological nexus with Japan promises to unlock immense mutual value, forging a robust partnership poised to navigate the complexities of the 21st-century global economy.
