Amazingly low foreign investment into Japan

Personally I was surprised to find in the Eurobiz magazine for October 2010 that foreign investment coming from Western Europe (41.9% of the total inward FDI, JPY Mio 77,728,100) outweighs the inflow from the United States (37.5%, JPY Mio 69,100,000). Although the Japanese media focuses on the US, looking at the actual business related figures a balanced viewpoint would be more appropriate. Hearing these high figures of investment might sound impressive, but let me show you a comparison to other countries as FDI stocks as percentage of the GDP (data from 2009 from the Eurobiz magazine):

Japan: 3.9%
South Korea: 13.3%
Germany: 21.0%
United States: 21.9%
France: 42.8%
United Kingdom: 51.7%

For sure Japan stands out with its low percentage on foreign investment. Some of the quoted reasons are according to Jetro president Michitaka Nakatomi: “Japanese corporate tax is not very low. Also, we sometimes hear complains about administrative procedure issues: that paperwork is slow or complicated. Sometimes foreign companies talk about a lack of skilled labour capable of working in an international environment.”
Honestly I wish I could argue against these points, which hinder foreign investment. Corporate tax is the highest in Japan with 40.69%, which let’s the figure stand out again when compared with US, France, Italy, Germany, UK, South Korea in decreasing order of their corporate tax. In general the argument is that freeing up more cash for the companies to reinvest in future products and expansion is the key for growth. From my perspective this is what Japan needs to get out of the slump and get back on a global stage. At the same time paperwork at governmental institutions and within larger Japanese companies is rather extensive and complicated, which forces all involved into an inefficient working style.
Then not surprisingly we come back to the issue of the low number of fluent English speaker. Japan is a country with a very limited English exposure at work, not even depending on the product sector. Apart from language skills, my biggest concern is the general lack of experience in business in a multi-national and multi-cultural environment. I agree not all countries around the world are involved in the same scale in global business, but it becomes more and more important for Japan especially now with the decreasing local market. I strongly believe for Japanese employees there is no choice but to bite into the sour apple and to jump into a multinational waters of business. Swimming in the Ocean can be scary, but it is just a question of making the first stroke. I am sure the rest will follow.

Brought to you by Sibylle Ito (シビル伊藤)

3 thoughts on “Amazingly low foreign investment into Japan

  1. Seeking Quotes and Insights for a Book About Working in Japan

    I found your blog on the Japan Blog List and am contacting you regarding research for a new book I’m writing for ThingsAsian Press. I am looking for insights and quotable comments from individuals who have worked in Japan. I’m gathering information on a variety of fields, such as teaching, technology, office-based business, consultant services, visual arts, music, culinary arts, martial arts, entertainment, fashion, volunteer work, etc.

    If you are interested in participating in this project, please respond and I will send you a questionnaire. The reward for your efforts will include writer’s credits and bio, plus six copies of the published book.

    Looking forward to your reply….Celeste

  2. Thank you for this piece, Sibylle. I don’t think very well of JETRO and I’ll tell you why: people like me, who from time-to-time assist U.S.-based businesses enter Japan, must build in-Japan teams to effectuate a successful in-bound Japan project. On the surface one would think that JETRO should be a starting point for building such teams (from market research to logistics to distribution to site selection to legal and accounting assistance to marketing, etc., etc.).

    Well, it only took 2 instances, back about 6 years ago, to teach me to never go to JETRO. In both cases JETRO cut me out of the loop after I made introductions. I wondered if this was just my bad luck, but found that this typically happens to go-betweens like me. The silver lining to this is that it compelled me to strengthen, broaden and build-up my own teams and connections and contacts.

    Anyway, I’ll never go to or rely upon JETRO again and, as mentioned, there are thousands of people like me in North America — and I’m sure in the EU and South America and Australia/NZ, etc — who feel exactly the same way. While the overall impact of this may not be that great (after all, we’re still making connections for our clients and getting business done in Japan), it is, indeed, a shame that we feel that JETRO’s not a worthy ally and that much of good it could be doing languishes because of its own, self-defeating policies and practices.

    Richard Newton

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