New Delhi: Prime Minister Narendra Modi’s two-day visit to Japan is set to see the launch of a number of new initiatives and Tokyo promising to double their investment target for India to $68 billion.
Modi reached Tokyo on Friday for the annual India-Japan Summit. He will interact with Japanese dignitaries before the Summit late in the evening. On Saturday, he will travel by the Shinkansen to Sendai, which will include a visit to a semiconductor factory as well as a lunch hosted in his honour by Japanese Prime Minister Shigeru Ishiba.
The second leg will see him in China for two days for the Shanghai Cooperation Organisation’s (SCO) Heads of State summit, New Delhi’s larger view to the Far East amidst the ongoing tensions with the US over trade.
The upcoming pledge of doubling Japanese investment to $68 billion comes after Tokyo achieved its earlier goal of $34 billion two-years ahead of schedule. The $34 billion target was announced by former Japanese prime minister Fumio Kishida in 2022.
Momentum in defence and security ties are also expected, with sources in the diplomatic circles indicating a revision to the 2008 Joint Declaration on Security Cooperation is likely to be announced by Modi and Ishiba.
Co-production of defence equipment will be on the agenda. In November 2024, the two countries signed a Memorandum of Implementation (MoI) for the co-development of the Unified Complex Radio Antennae (UNICORN) for Indian naval vessels, which is a significant leap in ties. India is the second Asian country after the Philippines to receive Japanese military technology in recent years, according to reports.
The two leaders are also set to witness the signing of a number of MoUs and the announcement of an economic security initiative focussed on semiconductors, supply chain resilience in critical minerals, artificial intelligence and telecommunications.
“During my visit, we would focus on shaping the next phase in our Special Strategic and Global Partnership, which has made steady and significant progress over the past eleven years. We would endeavour to give new wings to our collaboration, expand scope and ambition of our economic and investment ties, and advance cooperation in new and emerging technologies, including AI and Semiconductors,” PM Narendra Modi said in a statement while departing for Tokyo.
The visit comes at a delicate moment in Indian diplomacy. New Delhi in the last few months has been balancing its tense ties with the US, while moving to stabilise its relationship with China after the Galwan clashes in 2020, as well as continuing its overall policy of “strategic autonomy” through its enduring partnership with Russia.
Modi is set to travel to China from Japan for the SCO summit, seven years after his last visit to the country, which was also for the last such summit hosted by Beijing. In the midst of this fine balancing act, the Indian PM is also seeking greater economic engagement with foreign countries, to diversify India’s export basket in the face of 50 percent tariffs imposed by US President Donald Trump that came into force on 27 August.
The US is India’s largest export market, with merchandise exports touching $86 billion in the last financial year (2024-2025). With Japan promising to increase its investment, it is also a moment to take stock of trade ties between the two countries that have in similar fashion to its ties grown steadily over the past few years.
Japan is also a member of the Quad, along with India, Australia and the US. Quad is expected to figure in the talks between the two leaders. India is expected to host the next Quad summit. However, there is no clarity on the dates, especially amidst the tense ties between New Delhi and Washington D.C.
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India-Japan economic engagement
The expected $68 billion investment target by Japan is part of a long trajectory of economic engagement from Tokyo. The country has become a trusted development partner for India, with large investments in the North East—a sensitive region for New Delhi.
The $68 billion builds upon the earlier target announced in 2022 of $34 billion, which came after former prime minister Shinzo Abe announced a roughly 3.5 trillion yen (around $25 billion) investment in India in 2014, after a meeting with Modi in Tokyo.
Japan has been India’s largest official development assistance (ODA) donor since 1958. In 2023-2024, Japan’s total ODA disbursement stood at roughly $4.5 billion, which includes funding for the ambitious Mumbai-Ahmedabad High Speed Rail project. The latest tranche of $2.2 billion for the high speed rail project was signed in March 2023.
Japan is cumulatively the fifth largest source for FDI in India since 2000, which stood at roughly $43.2 billion as of December 2024, with around 1,400 Japanese businesses registered in the country. India has consistently been ranked as the most promising long term investment destination by Japan.
The cornerstone of New Delhi’s economic relationship with Tokyo, however, is the Comprehensive Economic Partnership Agreement (CEPA) signed in 2011. CEPA envisioned the abolition of tariffs on roughly 94 percent of items traded between India and Japan within a decade. The agreement covers both goods and services.
Merchandise trade between the two countries touched roughly $25 billion in the last financial year (2024-2025), according to data published by the Ministry of Commerce and Industry. However, the trade is skewed heavily in favour of Japan. India exported roughly $6.2 billion worth of goods to Japan, while importing around $18.9 billion worth of goods from the East Asian nation.
India’s primary imports are machinery, steel and copper, while its primary exports are chemicals, vehicles, aluminium and seafood. Trade has steadily grown through the years. In the 2023-2024 financial year it stood at roughly $22.85 billion.
In 2022-2023 trade stood at roughly $21.96 billion and the year previous to that it was around $20.57 billion. The two years previous to the Covid pandemic (2018-2019 and 2019-2020) trade stood at roughly $17.5 billion and $17 billion, respectively.
Japan accounted for roughly 2.62 per cent of India’s total imports in the last financial year, but accounted for only 1.4 percent of its total exports, highlighting the gap between exports and imports. The two countries are keen to expand engagement to include a digital partnership focused around the manufacturing of semiconductors and the creation of public infrastructure.
Defence & strategic ties
Apart from larger economic outcomes, India and Japan are set to deepen their security ties. At a special press briefing Tuesday, Foreign Secretary Vikram Misri acknowledged the importance defence has come to play in the overall partnership.
“This [defence] has indeed emerged as an important pillar of cooperation between the two countries in recent years. There was a meeting between the defence ministers that was held just recently in May, where the two sides were able to review a whole host of issues, operational engagements. But more importantly, defence equipment and technology collaboration, which is an important part of the overall defence and security engagement between the two sides,” said Misri.
The two countries are exploring possible cooperation in the area of ship maintenance in India apart from co-developing the UNICORN naval masts for the Indian Navy. The designated agencies of both countries—DRDO in India and ATLA in Japan—are engaged in a number of “other issues”.
The Indian Space Research Organisation (ISRO) and the Japan Aerospace Exploration Agency (JAXA) are also working together on a Lunar Polar Exploration Mission (LUPEX) in tandem with India’s Chandrayaan-5 mission. The two countries are also cooperating in other areas of space including remote-sensing and satellite navigation.
(Edited by Tony Rai)
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