Foreign Direct Investment in Japan
FDI in Figures
Despite the increase of FDI since the mid-1990s, Japan continues to have the smallest inflow of foreign investments. The stock of FDI in Japan did not account but for 4% of the GDP at the end of 2009. The flow of FDI had slowed down due to the global economic crisis, and they started to pick up again at a slow rhythm. According to the UNCTAD report on world investment, Japan's potential appeal for foreign investment is very strong compared to the other countries of the world, but its performance in terms of reception of FDI is weak. Of the 141 countries studied for the report, Japan ranked on the 135th place on performance level in 2009.
The main asset of Japan is its position as a leader in matters of high technology, research and development. The potential hindrance to investment are of a linguistic order and business culture. The disaster that hit Japan on March 11, 2011 (the earthquake and the devastating tsunami that followed), as well as environmental and health concerns about the situation of the Fukushima Daiichi Nuclear Plant could slow down foreign investment for a short period. However, Japan remains a key market for investors. In addition, the Japanese economy should be able to finance the reconstruction of the country without too much difficulty thanks to a Surplus in Savings accumulated over recent years.
Country Comparison For the Protection of Investors
|Index of Transaction Transparency*||7.0||6.0||7.0||5.0|
|Index of Manager’s Responsibility**||6.0||5.2||9.0||5.0|
|Index of Shareholders’ Power***||8.0||6.8||9.0||5.0|
|Index of Investor Protection****||7.0||6.0||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||22,550||24,426||11,939|
|FDI Stock (million USD)||132,851||203,372||200,141|
|Performance Index*, Ranking on 141 Economies||134||129||135|
|Potential Index**, Ranking on 141 Economies||27||25||-|
|Number of Greenfield Investments***||179||200||161|
|FDI Inwards (in % of GFCF****)||2.2||2.1||4.0|
|FDI Stock (in % of GDP)||3.0||4.2||3.9|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in Japan
- Strong Points
- Japan is the world's second economic power. The purchasing power is one of the highest in the world. Technology is modern and innovative. Substantial means are devoted to education and R&D. Accessing the Japanese market gives access to the rest of Asia. The business climate is favorable. The population is ageing, which opens up a new development potential to meet the needs of the older age groups.
Click here for further arguments in favor of investing in Japan.
- Weak Points
- Over-regulation in Japan continues to restrain economic growth, raise the cost of doing business, restrict competition, slow down the market entry and exit, and slow down investment.
- Government Measures to Motivate or Restrict FDI
- The government still imposes some restrictions on the penetration of the Japanese economy by foreign investors. Nevertheless, Japan’s Company Law has been re-examined in 2009, which simplified and made access to the national market easier for foreign investors.
Click here for further information about this reform.
- Bilateral Investment Conventions Signed By Japan
- Japan is a signatory to 12 conventions.
UNCTAD allows you to visualize the list of conventions signed by Japan, and to download these conventions.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Acquisition of Holdings
- Obligation to Declare
- The different obligatory declarations in Japan are :
- when a company with a capital of more than 2 billion Yen acquires 10%, 25%, or 50 % of a Japanese company.
- when a company with more than 10 billion Yen acquires business from another company with more than a billion Yen turnover.
- Competent Organization For the Declaration
Ministry of Finance
Japan Fair Trade Commission (JFTC)
- Requests For Specific Authorizations
- Investment of foreign capital in the fields of agriculture, forestry, fishing, mines, oil, leather and the industries of the transformation of leather, and telecommunications is examined first by the Japanese government.
Any investment in the banking sector, insurance, security, and pharmaceutical products is subject to license.
- Investment Aid Agency
Japan External Trade Organization, JETRO
Invest Japan Business Support Centers (IBSC)
Kansai Council of Investment Promotion
Japan Invest Council
Entry Point Tokyo Business
- Tenders, Projects and Public Procurement
JETRO - Japan External Trade Organization, Tenders
Asian Development Bank, Procurement Plans in Asia
Tenders Info, Tenders in Japan
DgMarket, Tenders Worldwide
- Other Useful Resources
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Economic DI rose to 36.1, improving for the second consecutive month while the domestic economy remained on the track to recovery
Teikoku Databank America, Inc. on 14 Nov 2011 related to Foreign Direct Investment in Japan
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