When Prime Minister Narendra Modi arrives in Japan on 29th August this year, it will be more than just another bilateral visit. Tokyo plans to invest about ¥10 trillion (approximately $68 billion) in India over the next decade, exceeding its previous commitment of ¥5 trillion for five years in 2022.
The visit is more than just a bilateral ritual. India has emerged as an indispensable partner for Japan, which shares concerns about China’s growing aggression, in the midst of a shifting global order.
The United States, Japan’s other strong ally, is also embroiled in a tariff war at the same time. After months of negotiating, Washington has lowered the baseline tariffs on Japanese exports from the original threatened 25% to 15%.
The agreement was more of a new tariff “floor” than a compromise. This implies reduced profit margins and a reevaluation of their international strategy for Japanese businesses. It means an opportunity for India.
Why India gains from US-Japan trade friction
Japan and the United States are considered to be the closest of allies. However, Washington’s economic nationalism has solidified into tariffs, even against allies.
All nations now face the default threat of a 15–20% “world tariff” unless they reach special agreements with the United States.
To prevent worse, Japan has to accept a 15% tariff agreement. The US and the EU struck a similar agreement a few days later.
The lesson is clear for Japan. There is a risk to its overdependence on US markets. Profits must be safeguarded elsewhere if tariffs are to remain in place. India is becoming more and more like “elsewhere.”
- Japan requires scale, India provides it. With American tariffs eroding profitability, Japanese companies must find a base with reduced prices and high consumption. India’s 1.4 billion population, rapidly increasing middle class, and predicted 6.4% GDP growth by 2025 (IMF) make it the sole viable alternative to both China and the tariff-heavy US market.
- Strategic autonomy pays dividends. India has steadfastly opposed joining blocs, whether they be Western sanctions regimes or the RCEP in East Asia. As Japan seeks diversification without relying on China, New Delhi is the ideal hedging partner due to its balanced autonomy.
- The macro landscape is evolving. Japan’s inflation is hovering above the BoJ’s target, and markets are pricing in future rate hikes, indicating that the historic era of ultra-cheap yen finance is coming to an end, even if the yen remains weak in the short term. This encourages Japanese capital to seek higher returns elsewhere, just where India can position itself.
- Beyond Japan, there is pressure, recent rounds of US-Indian negotiations have been called off, and India itself faces the threat of additional US tariffs in the absence of a bilateral agreement. Washington has threatened more duties if oil geopolitics and other irritants continue, and a planned round of negotiations in late August was cancelled. The need for India to (i) derisk export mixtures and (ii) strengthen third-country partnerships that reduce market risk is heightened by this.
India-Japan partnership is mutually beneficial
As the United States strengthens its tariff wall against friends like as Japan and the EU, India is emerging as the greatest tariff-free partner of choice.
The India-EFTA FTA will take effect on October 1, 2025, while the UK FTA has already been negotiated. This means that Japanese investments in India will immediately get access to Europe. PM Modi may position this as a geopolitical arbitrage that India offers.
Semiconductors and advanced electronics: Make India a “plus-one” to Japan’s semiconductor renaissance. Japan’s Rapidus project intends to achieve 2-nm production by 2027, with strong METI support and global partners. Tokyo has also established a Japan-India Semiconductor Supply Chain Partnership and hosts a formal Japan-India Semiconductor Policy Dialogue. India should propose a Rapidus-India “design, packaging, and talent” corridor headquartered on Bengaluru/Hyderabad and Gujarat’s Dholera, in line with India’s PLI and OSAT initiatives.
Infrastructure and Connectivity: From the Mumbai-Ahmedabad bullet train to the North-East road corridors, Japanese ODA has previously supported India’s most ambitious connectivity initiatives. The Japan International Cooperation Agency (JICA) has funded the development of almost 750 kilometres of new roads, improving connectivity throughout the North-East region. Aside from physical connectivity initiatives, Japan has been actively involved in regional water supply and sanitation projects. In Guwahati, for example, JICA has funded and supported measures to upgrade water delivery infrastructure.
The Mumbai-Ahmedabad High-Speed Rail (MAHSR) project is the main symbol of India-Japan economic cooperation. It marks not only India’s first high-speed rail line, but also Japan’s desire to export cutting-edge infrastructure know-how. It was largely funded by highly concessional Japanese ODA loans and built with Shinkansen technology.
The Gujarat segment is scheduled to be completed by December 2027, with full commissioning in December 2029. The Indian government is pushing for additional Japanese engagement in India’s national high-speed railway project, and Japan is expected to submit proposals for routes other than the one currently under development in western India, which will use Shinkansen bullet train technology.
Security and partnerships: India and Japan’s security collaboration has evolved into a multifaceted strategic alliance founded on mutual interest and trust. Their 2008 Joint Declaration on Security Cooperation established a comprehensive framework for partnership, ranging from intelligence sharing and maritime coordination to counterterrorism and peacekeeping.
This foundation was strengthened by subsequent agreements, including the 2014 Memorandum on Defence Exchanges, the 2015 pacts on Defence Equipment & Technology Cooperation and Military Information Protection, and the 2020 Reciprocal Provision of Supplies and Services (RPSS) arrangement, which allows for logistical support. In 2024, a Memorandum of Intent was signed to co-develop the UNICORN mast for Indian naval vessels, marking a significant step forward in defense technology collaboration.
The significance of PM Modi’s visit to Japan
Realpolitik is another factor in this visit. PM Modi wants to demonstrate that India not only endures but also benefits from world unrest. India transforms the trade conflict into supply chains, capital flows, and geopolitical leverage while others respond to it.
As part of their efforts to expand the India-Japan partnership, leaders from both countries will look into areas such as intelligence-sharing mechanisms, semiconductor supply chains, rare earth elements that are essential for electric vehicles, and more general economic-security cooperation, including coordination through the Quad framework.
China’s aggression is changing the Indo-Pacific, which means that both democracies have less options and more necessities.
Japan’s move toward India, as seen by expanding defense equipment and technical cooperation, nuclear exemption, cooperative exercises such as Malabar, Maritime Partnership Exercises, and rising technology collaborations, is a planned hedge against regional instability.
Both states avoid ideological alliances and instead create a flexible, interest-driven security architecture through the Quad, SCRI, and bilateral ties. This improves deterrence without formal entanglements.
Prime Minister Modi’s trip to Tokyo will be more than simply another bilateral meeting; it will be an opportunity to showcase India’s progress to the globe. India under Modi stands out as a reliable and potent ally at a time when China is attempting to exert dominance through threats and the US is applying tariff pressure to partners.
India is now viewed as a key player in Asia’s future, as evidenced by the bullet train, new chip projects, defense ties, and Japan’s enormous investment plan.
This visit demonstrates that India is becoming a nation that shapes global trends rather than merely responding to them. India is emerging under Modi’s leadership as self-assured, dependable, and prepared to take the lead globally.
