Japan emerged as India’s largest source of foreign direct investment in Q1 FY27, accounting for nearly 29% of total equity FDI inflows. Major financial deals, acquisitions and growing investments in technology and manufacturing drove the surge.
Highlights
- Japan invested $5.71 billion in India during April-June 2026, becoming the largest FDI source.
- Japan accounted for nearly 29% of India’s total $19.81 billion equity FDI inflows.
- Investment exceeded Japan’s full-year contribution of $3.74 billion in FY26.
- MUFG Bank’s ₹39,618 crore investment in Shriram Finance was a major contributor.
- Singapore ranked second with $5.22 billion, followed by Mauritius with $2.4 billion.
- Japan aims to invest around ₹7 lakh crore in India over the next decade.
Japan Becomes India’s Biggest FDI Investor in Q1 FY27
Japan has emerged as India’s largest source of foreign direct investment (FDI) during the first quarter of financial year 2026-27, reflecting growing confidence among Japanese companies and financial institutions in the Indian economy.
According to government data reported by Business Standard, Japan invested $5.71 billion in India between April and June 2026. This was significantly higher than the $3.74 billion received from Japan during the entire financial year 2025-26 and $2.48 billion in FY25.
India received total equity FDI inflows of $19.81 billion during the April-June quarter, with Japan contributing nearly 29% of the amount.
Major Financial Deals Drive Investment
Large acquisitions and investments in financial services played an important role in Japan’s rise to the top position.
One of the biggest transactions was Japan’s Mitsubishi UFJ Financial Group (MUFG) acquiring a 20% stake in Shriram Finance for approximately ₹39,618 crore, equivalent to around $4.4 billion.
Other major transactions involving SMBC and Yes Bank, along with Mizuho and Avendus, also highlighted the growing interest of Japanese financial institutions in India’s banking and financial services sector.
Japanese companies are increasingly investing in digital infrastructure, technology, global capability centres and manufacturing.
Japan Targets ₹7 Lakh Crore Investment in India
Japan has set a target of investing approximately 10 trillion yen, equivalent to around ₹7 lakh crore, in India over the next decade.
Commerce and Industry Minister Piyush Goyal recently visited Japan to strengthen bilateral trade and investment relations. During his visit, he said Japanese companies had already invested around ₹1 lakh crore towards the commitment made in 2025.
India has also established 12 Japanese Industrial Townships across nine states to support Japanese businesses with infrastructure and investment facilitation.
Technology and Manufacturing to Benefit
Experts believe rising Japanese investment could support India’s manufacturing sector, supply chains and technological development.
Both countries are exploring stronger cooperation in artificial intelligence, semiconductors, critical minerals, batteries, energy, railways and next-generation mobility.
Japanese companies are also diversifying their global supply chains amid geopolitical tensions, higher production costs and trade-related uncertainties.
Singapore Ranks Second in FDI Inflows
Japan overtook Singapore to become India’s largest FDI source during the quarter.
| Country | Equity FDI (April–June 2026) |
|---|---|
| Japan | $5.71 billion |
| Singapore | $5.22 billion |
| Mauritius | $2.40 billion |
| Netherlands | $1.38 billion |
| United States | $1.35 billion |
The sharp increase in Japanese investment signals stronger economic ties between the two countries. However, a significant portion of the quarterly inflows came through acquisitions rather than entirely new manufacturing projects.
Continued investment in advanced technology, infrastructure and industrial production could create opportunities for businesses and employment in India.
