Japan's Foreign Direct Investment

Abstract

Japan's foreign direct investment (FDI) began in the early 1950s but was conducted only on a small scale until the beginning of the 1970s. Until the 1970s, Japan's FDI was mainly in the mining sector for resource development, the commercial sector, and the labor-intensive manufacturing sector, directed toward developing countries. With the 1980s came deregulation of the financial sector as well as increased import barriers by major countries in North America and Western Europe, leading to an unprecedented increase in Japan's FDI in the finance and manufacturing sectors of these countries. The latter half of the 1980s was another period of a sharp increase in Japan's FDI, resulting from the large appreciation of the yen. Japan emerged as one of the top investor countries of the world. Except for resource development, government policies have neither restrained nor promoted FDI directly but have instead aimed at creating a generally favorable business environment in which FDI could be conducted.

Get full access to this article

View all access options for this article.

References

1. See U.S. Department of Commerce , “Foreign Direct Investment in the United States: Detail for Position and Balance of Payments Flows, 1988,” Survey of Current Business, Aug. 1989, pp. 47-61.

Ryuhei Wakasugi , Boueki—Chokusetsu Toushi to Nihon no sangyo soshiki [International trade, foreign direct investment, and Japanese industrial organization], (Tokyo: Toyo Keizai Shimposha, 1989), pp. 119-127.

Wakasugi , Boueki—Chokusetsu toushi to Nihon no sangyo soshiki.

4. As a result of the revision of the foreign exchange control laws in 1980, real estate acquisitions were excluded from FDI. Hence the Ministry of Finance statistics do not include the amount of real estate acquired by residents—individuals and corporations—in Japan after 1980. Nor do the FDI statistics include the amount of real estate Japanese overseas subsidiaries have purchased with funds raised in the host countries or elsewhere outside Japan. The amount of real estate purchased by Japanese enterprises and their overseas subsidiaries therefore far exceeds the amount of FDI in the real estate industry, which represents the amount of funds transferred from parents in Japan to their overseas subsidiaries engaged in real estate business.

5. Small and medium-sized enterprise is defined as follows: in manufacturing, enterprises that have fewer than 300 employees or have a paid-in capital under ¥100 million; in the wholesale sector, those having fewer than 100 employees or capital under ¥30 million; in retail and service, those having fewer than 50 employees or capital under ¥10 million.

6. See Japan, Ministry of International Trade and Industry , Dai jyukyu-kai wagakuni kigyo no kaigai jigyo katsudou [19th survey of trends in Japanese enterprises' overseas business activities] (Tokyo: Ministry of Finance Printing Bureau, 1990). The value of production by overseas subsidiaries is converted to the yen value with the exchange rate prevailing at the time of the survey.

7. The value of the sales of overseas subsidiaries of U.S. enterprises is taken from U.S. Department of Commerce , “U.S. Direct Investment Abroad: Detail for Position and Balance of Payments Flows, 1988,” Survey of Current Business, Aug. 1989, pp. 62-88.

8. See Ministry of International Trade and Industry , Dai jyukyu-kai wagakuni kigyo no kaigai jigyo katsudou.

9. Ibid.

10.

10. Ibid.

11.

11. See Japan, Ministry of International Trade and Industry , Dai nijyusan-kai gaishikei kigyo no doukou [23rd survey of the trends of foreign-owned enterprises in Japan] (Tokyo: Ministry of Finance Printing Bureau, 1990).