Head-on | Japan’s pivot to India can remake Asia’s power dynamic

The blossoming geo-economic relationship between India and Japan promises to reshape Great Power politics across Asia and beyond.

Japanese Prime Minister Sanae Takaichi is a no-nonsense leader. She has adopted a hawkish stance on China, angering Chinese President Xi Jinping. Soon after taking office as Japan’s first woman prime minister in October 2025, Takaichi abandoned Japan’s 80-year policy of pacifism under the protective umbrella of the United States. The only country in history to be bombed by nuclear weapons, Japan is rapidly building a modern and lethal defence force.

The India-Japan Summit in New Delhi from July 1-3 could mark the beginning of an important new partnership between two Asian powers with complementary strengths. Japan is a global technology superpower. When Xi boasted about China’s advanced AI-powered humanoids during his recent summit with US President Donald Trump in Beijing, Tokyo pointed out that 70 per cent of the world’s robots are still manufactured in Japan.

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Till the 1990s, Japan was the world’s second largest economy behind the US. In 1990, Japan’s GDP was $3.19 trillion, within touching distance of the US GDP of $5.96 trillion. China’s GDP in 1990, at $0.36 trillion, was one-tenth Japan’s. But deflation and near-zero growth stalled Japan’s rise.

Japan’s traditional strengths in heavy industries, automotive, semiconductors, electronics, railways and infrastructure complement India’s large market and endless stream of engineering talent. Japan’s own market is stagnant and its population steadily declining. It is now officially the world’s oldest developed country with the average Japanese 51 years old. In contrast, the average Indian is 28 years old. For the next 30 years, India will have one of the world’s largest, youngest and most dynamic workforces.

For ageing but technologically advanced Japan, India is the perfect fit. Prime Minister Takaichi is accompanied at the India-Japan summit by over 50 CEOs of leading Japanese companies. All have big plans to invest in India’s rapidly growing but still developing industrial and technological ecosystem.

Japan’s largest banks have begun investing heavily in Indian banks. Sumitomo Mitsui Financial Group (SMFG) acquired a 24.2 per cent stake in Yes Bank for $1.7 billion (Rs 16,000 crore) this year. Mitsubishi UFJ Financial Group (MUFG) earlier bought a 20 per cent stake for $4.45 billion in Shriram Finance. The Mizuho Financial Group has acquired 60 per cent controlling shareholding in Avendus Capital for $520 million.

Japan and India have common concerns over China’s expansionism. PM Takaichi’s ambiguous comment that Japan could defend Taiwan in the event of a military assault on it infuriated Beijing. China banned the import of Japanese seafood in retaliation but Takaichi has not withdrawn her statement backing Taiwan, a red flag for China. Even the US was forced to pause a $14 billion weapons contract with Taiwan after Xi complained to Trump at their Beijing summit.

Japan has long wanted India to be part of its China+1 policy to reduce dependence on Chinese supply chains. That is a key agenda during the India-Japan summit in New Delhi this week. “Japanese SMEs are known for their advanced manufacturing techniques and technical innovation,” said Siddharth Deshmukh, president of the Indo-Japan Business Council, which helps Indian and Japanese firms collaborate. “Their entry in the Indian market can facilitate transfer of technology and enhance the quality and efficiency of Indian manufacturing processes.”

A bullet point

Japan’s investment in India’s first bullet train shows how the two countries can work together despite differences in culture. The Mumbai-Ahmedabad bullet train is effectively a Rs 2 lakh crore ($21 billion) gift from Japan to India, financed by Japan International Cooperation Agency (JICA) at a nominal annual interest rate of 0.1 per cent, repayable after 50 years with a 15-year payment moratorium. To be partially launched, after many delays, in 2028 and fully operationalised in 2030, the bullet train project has revealed how India and Japan can collaborate in future.

Milinda Moragoda, a former Sri Lankan cabinet minister with a keen eye on Asia’s geopolitics, notes: “Japan brings technological depth, capital, institutional capacity, and decades of development experience across Asia. India brings demographic scale, economic dynamism, geopolitical weight, and growing manufacturing capacity. Together, they represent one of the few partnerships capable of shaping the emerging Asian order in a stable and inclusive manner. The address by Prime Minister Sanae Takaichi in Vietnam outlining Japan’s evolving approach to the Free and Open Indo-Pacific (FOIP) may ultimately prove significant not only for Japan’s regional strategy, but also for the broader evolution of Asian geopolitics. For much of the past decade, the strategic discourse of the Indo-Pacific has been shaped largely through responses to external pressures: The rise of China, the war in Ukraine, instability in West Asia, and the broader strategic priorities of the US and Europe.”

Both Beijing and Washington will be watching the Modi-Takaichi summit closely. Beijing worries that deeper Japan-India ties can erode its primacy in Asia. India and Japan’s combined GDP will approach $10 trillion in 2028 — nearly half China’s GDP. The complementary strengths of Japanese technology and capital and India’s large market and tech talent make an India-Japan alliance a powerful force.

Washington’s concerns are more nuanced than Beijing’s. It has reconciled itself to one Asian rival — China. In 10 years, it could be staring at two — China and India.

Japan remains under the US nuclear umbrella but its new independent defence policy is a subtle warning to Washington not to take it for granted. The India-Japan geoeconomic alliance is well timed. India is set to become the world’s third largest economy behind the US and China in 2030. An expanded, lethal Indian military with rising defence exports to Southeast Asia, the Middle East and Southern Europe may make Trump’s G2 configuration outdated in less than a decade.

(The writer is an editor, author and publisher. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)