Japan Prime Minister Sanae Takaichi arrived in New Delhi on Wednesday evening for a three-day official visit to India. The visit is her first to India since assuming office as Prime Minister. On 2 July, she will participate in the 16th India-Japan Annual Summit with Prime Minister Narendra Modi, where the two leaders will conduct a comprehensive review of the India-Japan Special Strategic and Global Partnership and discuss the future direction of bilateral cooperation.
The summit agenda includes discussions on trade, investment, defence, semiconductors, artificial intelligence (AI), supply chains, maritime security, critical minerals, and cooperation in the Indo-Pacific region.
During her visit, Prime Minister Takaichi will also attend the India-Japan Business Forum, which will be attended by more than 150 Japanese business leaders and investors. The governments of both countries are expected to focus on increasing investment, strengthening business cooperation, and promoting new industrial partnerships through the forum.
Discussions at the business forum are expected to include cooperation in high-tech manufacturing, automobiles, electronics, digital technology, green energy, and emerging technologies. The Government of India has stated that Japanese investment can play an important role in strengthening India's manufacturing sector and generating employment.
A key agenda item at the summit is a proposal to expand bilateral trade using local currencies. India and Japan are working on a framework that would allow trade payments to be settled directly in Indian rupees and Japanese yen. If approved, the arrangement would reduce dependence on the US dollar for bilateral trade transactions.
Under the proposed mechanism, Japanese companies would be able to open special accounts with Indian banks to make payments directly in rupees and yen. The arrangement is expected to reduce foreign exchange conversion costs, accelerate payment processes, and lower transaction expenses for businesses.
The proposal for local currency trade was first introduced during Prime Minister Narendra Modi's visit to Japan in August 2025. At that time, the two countries released a joint vision document for the next ten years, committing to strengthening payment systems and expanding trade in local currencies.
Japan's Ministry of Finance is now working on a cooperation agreement with the Reserve Bank of India (RBI) during the 2026 financial year to formally implement the framework.
India has continued efforts in recent years to promote the international use of the rupee. In July 2022, the Reserve Bank of India introduced the Special Rupee Vostro Account (SRVA) mechanism, allowing foreign banks to open special accounts with Indian banks for rupee-denominated trade.
According to government data, 156 Special Rupee Vostro Accounts have been opened across 26 Indian banks for 123 foreign banks from 30 countries. The initiative aims to reduce dependence on foreign currencies and increase the acceptance of the Indian rupee in international trade.
Economic ties between India and Japan have continued to strengthen in recent years. Bilateral trade between the two countries reached approximately US$27.5 billion during the 2025-26 financial year. Between April and December 2025, Japan recorded US$3.2 billion in foreign direct investment in India.
Japan has also set a target of investing more than US$61 billion in India over the next ten years. The planned investments will focus on sectors including semiconductors, clean energy, high-tech manufacturing, digital technology, and the defence industry. Around 1,400 Japanese companies currently operate in India, with a significant number engaged in manufacturing.
Cooperation between the two countries extends beyond trade. The Mumbai-Ahmedabad High-Speed Rail Project remains a flagship example of bilateral collaboration, with Japan providing financial assistance and Shinkansen technology.
India and Japan are also expanding cooperation in semiconductor manufacturing, critical minerals, clean energy, electric mobility, digital infrastructure, and defence technology. In 2025, the two countries initiated a dedicated strategic dialogue on semiconductors and critical minerals to support efforts to reduce global supply chain dependence on China.
Security in the Indo-Pacific region will also feature prominently in the summit discussions. Prime Minister Modi and Prime Minister Takaichi are expected to discuss strengthening a free and rules-based maritime order, enhancing maritime security, and advancing cooperation under the Quad framework.
The leaders are also expected to discuss defence cooperation, joint military exercises, cybersecurity, advanced technologies, and regional stability.
Prime Minister Takaichi's first visit to India comes as both countries seek to deepen cooperation in supply chains, emerging technologies, strategic partnerships, trade, investment, local currency payments, semiconductor collaboration, defence cooperation, and coordination in the Indo-Pacific region.
