There was a huge market for embedded software in Japan considering its volumes in high-tech toys and plant & machinery, he said.

Mr Mehta told The Financial Express that another significant area where mutual co-operation was possible was `systems-on-chip' as entire systems software required chips to sit on. To this end, many Indian companies were already in talks with Japanese firms including Sony, Fujitsu and NEC, he said.

In these segments, Indian firms could provide software to Japanese hardware products manufacturers and eventually the latter could market their software embedded products as a total package in the market, he said. "Indian software capability and Japanese hardware skills can be a right combination," he said.

In order to expand the technology trade between India and Japan, a Nasscom delegation - headed by Mr Mehta - will visit Tokyo between November 13 and 14. Later, Nasscom would also take another delegation to Seoul from December 3-5, he said.

Mr Mehta said by working in association with Japan, India would be able to capture Chinese and Korean IT markets. ``We have met several Japanese companies, who in turn develop software for Korean and Chinese firms. In fact, some of these Japanese companies told us that they would like to outsource this kind of software to Indian companies. Therefore, I see a lot of opportunities in this segment,'' he said.

However, Mr Mehta said, if enough efforts were not made towards working closely with these countries, some time down the road, India might face a possibility of losing out to China as many overseas firms were opting for China to outsource development.

Although many American companies felt that India was at least five years ahead of China in IT services, China was trying to catch up, Mr Mehta added.