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Japan’s biggest economic challenge today isn’t an external shock or a supply chain squeeze. It is the simple arithmetic of age. Nearly one in three Japanese citizens is already over 65, and by 2040 that figure is set to climb further. With its workforce shrinking by the millions and its IT backbone dangerously outdated, Japan is being forced to look outward. Increasingly, that search is leading east, specifically towards India’s surging network of Global Capability Centres (GCCs).

The shift is visible in numbers. According to the JoulestoWatts (J2W) GCC Adoption Survey 2025, India currently hosts around 85 Japanese GCCs employing more than 180,000 professionals. This is projected to almost double to 150 centres by 2028, creating 350,000 jobs and attracting US$2.5 billion in annual investments. For India’s already thriving GCC sector – 1,800 centres contributing US$64.6 billion to the economy in FY24 – Japan’s push is more than an incremental addition; it is an acceleration rooted in structural realities back home.

A Crisis of Age and Systems

Japan’s “silver tsunami,” as local commentators have dubbed it, is not a distant worry but an everyday drag. According to an Al Jazeera report on government data, Japan’s elderly population hit 36.25 million in September 2024, making up nearly one-third of the country. The National Institute of Population and Social Security Research projects that by 2040, 34.8% of the country will be over 65, while the working-age base will contract sharply. A BBC report also estimates a looming shortfall of 11 million workers by 2040, an erosion that no immigration tweak or robotics fix can quickly cover.

Layered on top of this is what Tokyo policymakers call the “2025 Digital Cliff.” According to Japan’s Ministry of Economy, Trade and Industry, by the end of this year more than 60% of mission-critical IT infrastructure will be over two decades old. According to Priti Sawant, CEO & founder, Joules2Watts, as reported in Economic Times GCC portal, with mass retirements of IT professionals expected, 590,000 by 2030, the capacity to maintain or modernise systems is collapsing. The World Economic Forum warns that the economic cost of this digital lag could reach ¥12 trillion (US$77.6 billion) annually.

For Japanese corporations, these twin crises – labour and technology – are forcing a hard pivot from cautious in-house models to offshore partnerships. And India, with its youthful workforce and deep tech talent, has emerged as the natural destination.

The India Advantage

India’s GCC story is decades old, but its Japan chapter is relatively new. According to NASSCOM, Japanese companies were late entrants compared to US and European peers, but momentum has built since 2020. The cost economics are clear – labour costs are 3.5 times lower than in Japan, with 30–40% operational savings, according to NASSCOM reports. Add to this a steady stream of 1.5 million STEM graduates annually, a maturing startup ecosystem, and policy incentives such as SEZ benefits and IP protections.

Recent corporate moves validate the trend. Dai-ichi Life Holdings, one of Japan’s largest insurers, opened its first-ever overseas GCC in Hyderabad this June in partnership with Capgemini. According to The Hindu BusinessLine, it plans to scale from 60 to 600 employees by 2027, focusing on AI, cybersecurity, and data analytics. Toyota and Sony are expanding their Bangalore GCCs in EV design and global R&D, while financial giants like Nomura and MUFG are using Indian centres for technology and compliance functions.

The average Japanese GCC in India employs between 500 and 750 people, according to the Economic Times GCC portal, but firms are experimenting with larger, more agile setups in mid-markets to speed up decision-making.

Diplomacy Meets Demography

Corporate expansions are being reinforced by government-to-government collaboration. At the 15th India-Japan Annual Summit in August 2025, the two countries adopted a Joint Vision for the Next Decade across eight pillars. According to the Press Information Bureau, agreements included boosting private investment to ¥10 trillion (US$68 billion) over the next decade and a digital partnership covering AI, semiconductors, and tech talent exchange.

Crucially, the summit announced an Action Plan for Human Resource Exchange that envisions 500,000 personnel exchanges in five years, including 50,000 skilled Indians moving to Japan. METI also disclosed that 170 private-sector MoUs were signed at its August forum, many with downstream implications for GCCs.

For Indian policymakers, this aligns neatly with ambitions to grow the GCC sector to 2,400 centres and 4.5 million jobs by 2030.

More Than Cost Arbitrage

The Japan-India GCC story is not just about saving money or filling gaps. Companies are leaning on India for advanced capabilities in AI, cybersecurity, and product design that their home market increasingly cannot sustain. According to Zinnov-NASSCOM’s 2025 report, mid-market GCCs in APAC are scaling faster because they are more innovation-led, not just cost-driven.

This shift is visible in the talent itself. Bilingual teams, cultural training, and rotational programmes are becoming standard practice to bridge the gap between Japanese headquarters and Indian centres. As more Japanese firms embed innovation mandates into their GCC charters, India’s role expands from support hub to co-creator.

The Road Ahead

Japan’s labour shortages and the looming digital cliff are not reversible trends. According to Japan International Cooperation Agency’s (JICA) research arm’s estimates, as reported by Reuters, foreign workers today make up just 3% of Japan’s workforce, far below the 6.9 million that will be needed by 2040. Even with reforms, the demographic maths does not add up.

For India, this presents a generational opening. Every new Japanese GCC is more than an investment, it is an endorsement of India’s position as a partner in economic resilience. From Dai-ichi Life’s fledgling team in Hyderabad to Fujitsu’s plan to hire 9,000 Indian engineers after the August summit, the arc is clear.

The “silver tsunami” that threatens to wash over Japan’s economy is, paradoxically, fuelling a tide of opportunity in India. If nurtured well, with focus on talent, digital infrastructure, and cross-border collaboration, it could become one of the defining business stories of the decade.