FICCI Flags India-Japan Trade Deficit: All You Need to Know

On August 25, 2026, Commerce and Industry Minister Piyush Goyal landed in Tokyo with one of the largest Indian business delegations to visit Japan in recent memory. Over 200 Indian businesses made the trip. FICCI President Anant Goenka was among them. The agenda was to deepen investment and commercial ties, explore new collaboration in technology and data centres, and strengthen the broader India-Japan economic relationship.

What the delegation found was a bilateral trade relationship that looks good on the headline number and concerning once you go one level deeper.

India and Japan’s two-way trade grew 9.18% year-on-year to $27.47 billion in FY 2025-26. That sounds like progress. But India’s trade deficit with Japan widened 21.64% over the same period, from $12.66 billion to $15.40 billion. Trade grew. The deficit grew faster. And most of that growth, on both counts, was in one direction.

Japan was selling more to India. India was not selling proportionally more to Japan. That imbalance is what brought FICCI’s concerns to the surface during the Tokyo meetings, and it is what Goenka addressed directly with reporters after a day of business-to-business meetings.

What Anant Goenka Actually Said?

FICCI President Anant Goenka did not mince words.

“That (trade deficit) has been an area of concern,” he said. “I think our trade deficit has widened during this period, and it has been raised by the minister as well over the course of various conversations that while trade has grown, it has primarily grown one way. So how do we access Japanese markets?”

That question, how do we access Japanese markets, is the central frustration embedded in the India-Japan trade relationship right now. The Comprehensive Economic Partnership Agreement, or CEPA, between India and Japan has been in effect since 2011. Fifteen years of a formal trade deal, and the deficit has not just persisted. It has widened. In the last fiscal year, two-way trade between the nations rose by 9.18% to reach $27.47 billion in FY26. On the other hand, India’s trade deficit rose to $15.40 billion, which is 21.64% higher than $12.66 billion in FY25.

For Indian exporters, the CEPA was supposed to create more balanced trade flows. On the import side, Japanese goods have found their way into India without major friction. On the export side, Indian products face a different reality: strict certification requirements, regulatory barriers, and what Goenka described, with some candour, as a cultural dynamic working against them.

“There is some amount of cultural opening as well in Japan, where you see a fair amount of bias towards buying products of Japanese companies within Japan,” Goenka said. “That is something where it may take time to solve.”

That is a polite way of saying Japan’s domestic market is not as open in practice as it appears on paper.

The Pharmaceutical Problem Is the Most Stark Example

If you want one concrete example of why Indian exports to Japan have not scaled despite fifteen years of CEPA, the pharmaceutical sector tells it clearly.

India is the world’s pharmacy. It produces nearly 20% of global generic medicine supply by volume. It is a dominant exporter of pharmaceuticals to the US, Europe, Africa, and Southeast Asia. And yet, in Japan, one of the world’s largest pharmaceutical markets with a market projected to touch $100 billion, Indian pharma companies have been unable to crack in.

The reason is not pricing. It is registration. Goenka flagged this directly: “Pharma companies cannot even register their products yet in Japan.”

Registration in Japan requires navigating the Pharmaceuticals and Medical Devices Agency, a process that is lengthy, costly, and structured in ways that favour domestic producers. Indian certifications are not mutually recognised. Quality standards, even where Indian manufacturers meet them fully, must be re-verified through Japanese processes rather than accepted on the basis of equivalent certifications already obtained.

The result is that Indian generic medicines, which could provide Japan’s ageing population with significantly more affordable healthcare options, are effectively locked out of the market. For Indian pharmaceutical companies looking to export to Japan, the regulatory barrier is not a nuisance. It is a structural wall.

Goenka called for greater recognition of Indian certifications in Japan as a key area that could be addressed even outside a formal bilateral agreement update. This is a practical and pragmatic ask. Mutual recognition of pharmaceutical certification standards between India and Japan does not require a renegotiated CEPA. It requires a regulatory dialogue and willingness on the Japanese side to accept that Indian standards, verified by bodies like the Central Drugs Standard Control Organisation, meet a comparable quality threshold.

What Piyush Goyal Brought to the Table?

Minister Goyal’s engagement in Tokyo ran parallel to FICCI’s conversations. He met with Japanese Minister of Economy, Trade and Industry Akazawa Ryosei and addressed representatives of Japanese semiconductor and artificial intelligence companies.

The most significant announcement from his side was a framework in development to exempt high-tech sector companies, including Japanese firms, from mandatory Bureau of Indian Standards certification for equipment and components needed to set up manufacturing facilities in India. This exemption could apply at the company, industry, product, or project level depending on requirements.

The intent is to reduce friction for high-tech manufacturers entering India through the Make in India initiative. For Japanese semiconductor, AI, and precision manufacturing companies evaluating India as a production base, mandatory BIS certification for every component and piece of equipment adds time and cost that makes India less competitive compared to alternative locations like Vietnam or Thailand that have lighter certification requirements.

Goyal also pitched India as a global data centre hub, noting that India has already received investment commitments worth $200 billion from large global hyperscalers. He highlighted India’s semiconductor demand, which is expected to grow to $150 billion by 2032, as a compelling opportunity for Japanese firms with semiconductor expertise.

On the bilateral investment side, Goyal summarised the partnership framework around four pillars: increasing trade, strengthening technology cooperation, boosting investments, and promoting tourism. He noted that India recorded 7.7% growth last year and is working toward becoming a $30 trillion economy by 2047.

The Opportunity Side of the Conversation

The Tokyo visit was not just about flagging problems. Both sides identified areas where the relationship has genuine expansion potential.

Data centres emerged as the most immediately actionable collaboration area. Japan’s technology companies and financial institutions have significant capital looking for deployment in AI and cloud infrastructure. India’s rapidly growing demand for data centre capacity, combined with its improving power infrastructure and large English-speaking technical workforce, makes it a natural destination for Japanese data centre investment.

Semiconductors and AI are a natural pairing given Japan’s hardware strengths and India’s software and services capabilities. The automotive sector came up repeatedly, with Goenka noting it has grown over 15% in the past year and a half in bilateral trade.

Steel, industrial parks, shipbuilding, and critical minerals were also on the agenda. And in what was described as an interesting new direction, both sides discussed the concept of India-Japan collaboration for Africa, where Indian and Japanese companies have complementary capabilities and long-standing relationships that could be combined into joint ventures serving African markets.

Japan had earlier committed 10 trillion yen as a broader investment target for India. Current investment levels remain modest relative to that target, but momentum is described as building. Goyal met with executives from Japan’s leading financial institutions specifically to accelerate that capital deployment.

What This Means for Indian Investors?

For investors tracking India’s trade trajectory and the sectors most affected by it, the Tokyo meetings carry several implications worth understanding.

The pharmaceutical sector is the clearest near-term opportunity story. Any progress on mutual recognition of Indian pharmaceutical certifications in Japan, even outside a full CEPA renegotiation, would open a market of enormous scale to India’s generic drug manufacturers. Companies like Sun Pharma, Dr Reddy’s, Cipla, and Aurobindo already have the product portfolios and quality infrastructure to compete in Japan. The barrier is not product quality. It is regulatory. Regulatory progress is therefore the single biggest catalyst to watch for this sector’s Japan export story.

The data centre and semiconductor investment push is a longer-term play but a structurally significant one. Japanese capital flowing into Indian data centre development would support demand for power infrastructure, real estate, construction, and technology services. The BIS certification exemption for high-tech sector companies, if implemented as announced, reduces one of the practical friction points that has made India less attractive as a manufacturing base for precision technology companies.

On the trade deficit itself, the widening India-Japan trade gap fits into a broader pattern that Indian policymakers are managing across multiple bilateral relationships. The concern is not unique to Japan. It is a structural feature of India’s trade profile, where the country imports high-value manufactured goods and exports lower-value goods in return. Resolving this requires either increasing the value of Indian exports, which is what the pharma certification push addresses directly, or reducing imports through domestic manufacturing substitution, which is what the Make in India semiconductor and electronics push aims at over a longer horizon.

For investors tracking the India-Japan CEPA review, the next formal round of renegotiation discussions will be worth following for what concessions Japan agrees to on pharmaceutical registration and certification recognition. These are the specific outcomes that would translate FICCI’s Tokyo conversations into actual export volume and corporate revenue growth for Indian companies in the pharma sector.

Wrapping Up

India and Japan are economically complementary in important ways. Japan has capital, technology, precision manufacturing expertise, and an ageing population that needs affordable pharmaceuticals. India has scale, a young workforce, growing demand for Japanese technology, and the pharmaceutical capability to serve Japan’s healthcare needs at competitive prices.

The problem is that the bilateral trade relationship has not yet translated these complementarities into balanced flows. The deficit has widened. Indian pharma companies cannot register products. Certification barriers remain. A cultural preference for Japanese products within Japan adds another layer of friction that regulation alone cannot address.

What the Tokyo delegation meetings have done is put these issues directly and publicly on the agenda. The CEPA review, the pharmaceutical registration dialogue, the BIS exemption framework for high-tech manufacturers, and the data centre collaboration discussions are all concrete pathways toward a more balanced relationship.

None of this resolves overnight. But the conversation in Tokyo in August 2026 was more candid, more specific, and more action-oriented than the usual diplomatic language of bilateral summits. That is a genuine step forward.

At Bonanza Wealth, we track bilateral trade developments like this because they shape medium-term sector performance in ways that matter for portfolio positioning. If you want to understand how India’s evolving trade relationships with Japan and other major economies affect your investment strategy, our team is here to help you think it through.

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