Tokyo to Mumbai: The Japanese are pouring big money into India

Mizuho Bank Global CEO Masahiko Kato, speaking to ET recently (for the first time since the announcement of Mizuho’s acquisition of Avendus Capital in December) made a clear statement — India has rapidly become the most promising destination for Japanese companies.

“Our strategy is to build the India-Japan corridor — supporting Japanese companies entering India and Indian companies expanding overseas. We aim to bring the full strength of the Mizuho group –commercial banking, investment banking, and global boutique advisory — into a single integrated offering. This model has succeeded for us in the US, and we are confident it will succeed here as well,” Kato was quoted in an ET report. He added that client inquiries related to India have surged sharply in recent years, rising more than 50% in FY2024 alone.

Also Read: Avendus to help Mizuho link India, Japan, US and Europe, says Masahiko Kato, Global CEO

Kato’s remarks provide a revealing window into why Japan’s largest financial institutions are deploying billions of dollars into India. What may appear as isolated transactions — the Avendus acquisition, large equity stakes in Indian lenders or private credit investments — are in fact part of a deeper strategic shift. Japan’s banking giants are building long-term exposure to India’s growth story.

Advantage India

For Mizuho, India is not just another emerging market outpost. It is central to a deliberate strategy of creating a Japan-India investment corridor. The bank is combining its traditional strength in commercial banking with expanded investment banking capabilities gained through Avendus. The objective is to provide an integrated platform that serves Japanese corporates entering India while also supporting Indian companies expanding overseas.

Kato underlined how dramatically perceptions have shifted in Tokyo. “Japanese companies now view India as their most promising market. Japan Bank for International Cooperation surveys have ranked India No. 1 since 2022, and Japanese investment is set to reach 1.2 trillion yen in 2025. Conversations in Tokyo increasingly focus on expanding in India,” he told ET.
Also Read: NITI Aayog calls for structured Trade Missions targeting Japan, Middle East, GermanyHe highlighted India’s structural advantages — a 1.4-billion-strong market, rising GDP, strong consumption, a vibrant digital ecosystem and deep technology talent. He also pointed to sectoral opportunities in semiconductors, materials, and renewable energy, the areas where Japanese companies possess technological depth and are actively exploring partnerships.

The new frontier

The scale of Japanese investment into India’s financial sector illustrates how central banking and financial services have become to this strategy.

Japan’s largest megabanks such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation and Mizuho, are increasingly active in India. MUFG’s $4.45 billion investment in Shriram Finance followed Mizuho’s Avendus acquisition. SMBC last year purchased a 20% stake in Yes Bank for $1.6 billion. MUFG also invested over $338.5 million in DMI Finance Private, later raising its stake to 20%. Meanwhile, Daiwa Securities Group has invested in Ambit.

Kato explained this surge of interest in straightforward terms. “Two reasons. First, the relationship between India and Japan, governmental and people-to-people, is very deep. Second, the Indian financial sector across banking, NBFCs, asset management and investment banking is growing rapidly. Japanese investors are poised for exponential, not incremental, growth in India’s financial sector over the coming years.”

The phrase “exponential, not incremental” captures the ambition driving Japanese capital flows. India’s financial services ecosystem is not merely expanding but deepening and formalising at speed.

India’s structural growth story

The attraction lies in structural fundamentals. India offers what Japan increasingly cannot. such as rising incomes, strong loan demand, infrastructure-led growth and a rapidly formalising economy. Retail and small-business lending continue to expand, fuelled by vehicle ownership, personal consumption and MSME financing. Credit penetration remains relatively low, leaving significant room for expansion.

India’s demographic profile further strengthens its case. A young and expanding workforce, coupled with rising digital adoption and financial inclusion initiatives, is creating sustained demand across retail, MSME and corporate credit segments. For banks accustomed to saturated markets, this represents long-duration growth.

Kato emphasised how India’s digital ecosystem and technology talent pool make it a hub for innovation. For Japanese corporations seeking both market access and cost-efficient innovation, India offers a compelling combination.

Japan’s structural constraints

In contrast, Japan’s domestic banking environment is constrained by structural realities. The market is mature and already dominated by the “big three” megabanks — MUFG, SMBC and Mizuho. Most households and corporates are already banked. Population growth is negative, society is ageing and household credit demand is subdued.

Although the Bank of Japan began raising interest rates last year after decades of zero and negative-rate regimes, the shift has not fundamentally altered the growth equation. Margins remain thin, credit demand is weak and demographic decline continues to cap long-term expansion. Many regional banks face shrinking local populations and limited digital capabilities, leading to consolidation rather than growth.

Under such conditions, overseas diversification has evolved from strategic option to structural necessity.

Japanese mega banks are confronting a domestic ceiling. Organic growth at home is slow. Opportunities to add new customers or expand credit volumes are limited. Emerging markets offer scale, rising financial penetration and expanding credit demand.

Among them, India stands out. Its expanding middle class, infrastructure push and policy emphasis on financial inclusion generate sustained demand for banking services. For Japanese banks, India provides exposure to consumption-led growth without the demographic drag that defines their home market. The surge in client inquiries reported by Kato indicates that the push into India is not confined to boardroom strategy. It reflects real demand from Japanese corporates seeking to embed themselves in India’s growth cycle.

What is unfolding is not a tactical reallocation of capital but a long-term strategic realignment. Japanese banks are positioning themselves to intermediate trade, investment and capital flows between two large Asian economies whose economic complementarities are deepening. For Mizuho, the Avendus acquisition provides the investment banking muscle to complement its commercial banking network. For MUFG and SMBC, equity stakes in Indian lenders offer embedded exposure to India’s retail and MSME credit expansion. For securities firms like Daiwa, India provides a platform for capital markets growth.

At the centre of this transformation is a recognition voiced by Kato: “Japanese companies now view India as their most promising market.”