India–Japan Trade Agreement 2026: A Golden Gateway for Japanese Businesses to Set Up in India

On Thursday (2nd July, 2026), India and Japan signed a fresh set of agreements that could change the way Japanese companies look at India. During the 16th India–Japan Annual Summit in New Delhi, Prime Minister Narendra Modi and Japanese Prime Minister Sanae Takaichi signed several important pacts and Memorandums of Understanding (MOUs) covering trade, artificial intelligence, energy, critical minerals, and defence. For any Japanese business planning to expand abroad, this is one of the clearest signals yet that India is open, ready, and waiting.
In this blog, we break down what was signed, why it matters, and most importantly, how your Japanese company can use this moment to set up business in India and grow.

 

Table of Contents

What exactly did India and Japan sign on Thursday?

The two countries agreed to work more closely together across some of the most important sectors of the future. Here is a simple summary of the key outcomes:

  • A joint roadmap on economic security to build reliable and resilient supply chains.
  • A joint statement on Artificial Intelligence (AI), combining Japan’s precision manufacturing with India’s software and digital talent.
  • The first-ever India–Japan defence co-development project.
  • An India–Japan Bio-Gas Initiative to set up 1,000 bio-gas and organic fertiliser plants across India.
  • Cooperation on critical minerals like lithium, cobalt, and rare earths that power electric vehicles and clean energy
  • An agreement to review and modernise the 15-year-old India–Japan CEPA (Comprehensive Economic Partnership Agreement).

Alongside these, the leaders reaffirmed a powerful target: 10 trillion yen (around US$68 billion) in Japanese investment into India over the next ten years. Bilateral trade between the two countries has already crossed US$27.5 billion, and both sides want to grow it much faster.

 

Why This Agreement Is A Big Win For Japanese Businesses ?

This is not just a diplomatic handshake. It is a practical invitation. Prime Minister Modi openly called for doubling the number of Japanese companies operating in India over the next decade. That means more support, smoother approvals, and a warmer welcome than ever before for Japanese investors.

Here is why India makes so much sense right now for Japanese companies:

1. A Huge and Growing Market
India has over 1.4 billion people and a young population with a median age of around 28. The economy grew 7.7% in the last financial year, making it one of the fastest-growing large economies in the world. For Japanese products and services, this is a massive and hungry market.

2. The Perfect China+1 Destination
As Japanese companies look to reduce their dependence on a single country under the China+1 strategy, India has become the top alternative. In fact, a Japan Bank for International Cooperation (JBIC) survey has ranked India as the most promising destination for Japanese businesses for the fourth year in a row.

3. 100% Ownership in Most Sectors
India allows 100% Foreign Direct Investment (FDI) through the automatic route in most sectors. This means a Japanese company can own its Indian business fully, keep complete control, and enter without needing a local partner in most cases.

4. No Double Taxation
The India–Japan Double Taxation Avoidance Agreement (DTAA) makes sure your company is not taxed twice on the same income. Tax paid in India can be adjusted against tax in Japan, protecting your profits.

5. Strong Government Support
India actively welcomes Japanese investment through the Make in India initiative, Production-Linked Incentive (PLI) schemes, and even a dedicated “Japan Plus” desk at Invest India to fast-track Japanese projects. New manufacturing companies can also enjoy a concessional corporate tax rate as low as 15% (plus surcharge and cess).

 

Which sectors should Japanese companies look at?

Thursday’s agreements point clearly to the sectors with the brightest future. Japanese businesses will find strong opportunities in:

  • Artificial Intelligence, semiconductors, and digital technology
  • Automobiles, EVs, and auto components
  • Clean energy, bio-gas, and renewables
  • Critical minerals and advanced manufacturing
  • Electronics, robotics, and industrial machinery
  • Pharmaceuticals, healthcare, and food processing
  • Logistics, textiles, and infrastructure

 

How can a Japanese company set up business in India?

Setting up a company in India from Japan is simpler than most people expect, and much of it can be done online while you are still in Japan. Here is the basic path:

  • Choose the right structure – A Wholly-Owned Subsidiary (Private Limited Company) is the most popular choice, used by about 90% of Japanese businesses because it allows full ownership and limits risk.
    Other options include an LLP, Branch Office, or Liaison Office.
  • Get Digital Signatures (DSC) and Director Identification Numbers (DIN) for the directors. Remember, at least one director must be an Indian resident.
  • Reserve your company name and file incorporation through the SPICe+ form with the Ministry of Corporate Affairs (MCA).
  • Receive your Certificate of Incorporation (COI), along with PAN and TAN.
  • Open an Indian bank account, bring in capital, and file Form FC-GPR with the Reserve Bank of India (RBI) within 30 days under FEMA rules.
  • Complete GST registration and other sector-specific licences as needed.

Documents signed in Japan usually need to be notarised and apostilled. Since Japan is part of the Hague Apostille Convention, this is fully accepted in India. With the right guidance, most companies can be registered in just a few weeks.

 

The Right Partner Makes All The Difference

The opportunity is clear, but navigating Indian regulations, FEMA, RBI filings, tax, and compliance can feel overwhelming from across the sea. This is exactly where an experienced local partner becomes priceless. The companies that succeed in India are the ones that get their structure, tax, and compliance right from day one.

 

Why Choose Mercurius

At Mercurius, we help Japanese businesses enter and grow in India with confidence. With a dedicated presence in Tokyo and offices across India, we speak your language, understand your standards, and handle every step for you – from company formation, FDI advisory, and RBI/FEMA compliance to accounting, tax, payroll, and audit.
We turn a complex process into a smooth, guided journey, so you can focus on your business while we take care of the paperwork.

 

Ready to Set Up Your Business in India?

The India–Japan partnership has never been stronger, and there has never been a better time to make your move. Let Mercurius be your trusted partner on the ground in India.

Contact Mercurius today for a free consultation on setting up your company in India. Visit masllp.com or write to us to get started.

https://masllp.com/contact-us/