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Japanese Foreign Direct Investment (FDI) Essay

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JAPANESE FDI

In the era of globalization, international trade and international investments are expanding at exponential rates. Almost all developed countries are involved in Foreign Direct Investment processes, both in the form of outward and inward FDI. Among those developed countries there is the case of Japan that is different; Japanese attitude towards FDI has always been, in fact, very cautious. One one hand, Japanese outward foreign investment and exports have played a fundamental role in the postwar period of economic rise; on the other hand, the accesses to the domestic market by foreign investors, the so called Inward FDI, has been very limited. (Paprzycki, Fukao, 2008).
Japan is a highly industrialised country, it has a large-sized market, its labour force is very well-educated and the political situation is much more stable than almost all other East asian countries, then why is inward foreign direct investment rate so small in Japan? ( Frank, 1975).
As a study of Hara and Razafimahefa (2003) highlights: “in 1999, inward FDI amounted to 0.7% of the GDP whereas the ratio reached 9.3%, 9.5%, 11.7% and 23.3% for Germany, The United States, France and England, respectively”.
Even if the level of inward FDI is still very low, from the second half of 1990 its level is steadily increased; it's passed, in fact, from 3,837 millions US$ to 28,276 millions US$ in 2000. (Hara, Razafimahefa, 2003). Japanese government has promoted some policies to help Inward FDI to rise such as a new legislation facilitating the acquistion of Japanese firms by foreign Companies and the creation of the Japanese External Trade Organisation (JETRO) (Head, Ries, 2005). By analysing the attitude of Japanese government towards inward FDI, it can be no...


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...m that permitted to use stock instead of cash, and the Improvement of legal procedures for the creation of a M&A activity. (Arikawa, Miyajima, 2007).
Despite all these government regulations and laws helping inward FDI; in the early 90s the inward flow of investment has not grow substantially. The major growth has been between 1998 and 1999 and since 2000 is still growing steadily. Yet, the inward flow of foreign investment is clearly much lower than the outward flow and, although the steady growth during last years, the ratio of inward FDI to GDP remains very low compared to almost all other industrialised countries. The action of the government towards the promotion of inward investment is still strong, in fact, in 2003 established the Invest Japan Office within the JETRO and other measures concerning the elimination of barriers are still in place. (Suginohara)


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