A Study of Strategic Themes in the Internationalisation of Japanese Industry
New Horizons in International Business series
Chapter 2: Patterns of Japanese Investment
OVERVIEW Japan emerged as an important investor in the world economy, with signiﬁcant outﬂows of foreign direct investment, indirect portfolio investment and oﬃcial development aid to other economies, particularly in the Asia-Paciﬁc region. Overseas direct investment helped develop marketing, production, services and technology linkages with foreign markets while retaining management control by parent companies in Japan. As the Japanese economy has grown and restructured, so the direction and purpose of overseas investment has changed. Early Japanese FDI reﬂected the industrial restructuring of the Japanese economy and its need for raw materials and energy. A wave of investment in simple manufacturing occurred in nearby Asian economies, often behind trade barriers to ensure market access. From the mid-1980s, a more diverse range of Japanese ﬁrms founded overseas aﬃliates as yen appreciation encouraged the relocation of manufacturing and the acquisition of foreign assets and companies. In the electronics and automotive industries, complex supply chains have emerged in East Asia in response to the modularisation of production to create cost eﬃciencies. The automotive sector and associated industries such as chemicals, rubber and steel set up extensive production clusters in North America to oﬀset trade friction and ensure this large market would remain open to both exports from Japan and locally assembled vehicles. Japanese services industries have internationalised at a slower rate than the manufacturing sector, although trading companies were early leaders in wholesale and retail investment to facilitate the expansion of Japanese trade. In leading services...
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