Japanese companies are reducing their presence in China as geopolitical tensions, rising costs, weak demand and stronger Chinese competition reshape business strategies. The shift is creating new opportunities for India as Japanese firms look for alternative markets and manufacturing locations.

According to Teikoku Databank, the number of Japanese companies operating in China fell to 10,118 in June 2026. This is the lowest level recorded since the survey began in 2010. The number has declined 22% in two years and nearly 30% from its peak of 14,394 companies in 2012.

Japan Inc Looks Beyond China

The changing business environment is encouraging Japanese companies to diversify their supply chains. Southeast Asia has already attracted significant investment, while the United States is promoting domestic manufacturing through its reindustrialisation push.

India is emerging as another important destination. Its large domestic market offers Japanese companies opportunities across manufacturing, exports and financial investment.

India Could Gain From Japan’s China Shift

India’s growing manufacturing capacity, expanding consumer market and improving trade links could make it an attractive alternative for Japanese businesses. The shift could support investment in sectors such as automobiles, electronics, machinery, textiles and other industrial segments.

For India, increased Japanese investment could strengthen supply chains, create employment and improve export capabilities. As companies continue to reduce their dependence on China, India could become a more important part of Japan’s long-term global business strategy.

The changing position of Japan Inc highlights a wider shift in global supply chains. India is well placed to benefit if it can attract sustained investment and provide a competitive business environment.