Japanese Investment in the World Economy
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Japanese Investment in the World Economy

A Study of Strategic Themes in the Internationalisation of Japanese Industry

Roger Farrell

This book examines Japanese Foreign Direct Investment (FDI) in the world economy over more than five decades. It provides a unique focus on the internationalisation experience of selected industries, such as forestry, textiles, electronics, motor vehicles, steel and services as well as case studies of individual firms. Japanese Investment in the World Economy is distinctive in that it examines overseas investment by firms in the primary, manufacturing and services sectors over the period in which the Japanese economy became the second largest in the world.
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Chapter 5: Geography and Investment

Roger Farrell


BACKGROUND In the early twentieth century Japan emerged as an important regional power and overseas investment occurred primarily in its colonial territories in Taiwan, Korea and China, to develop coal, iron ore and other resources and energy and to supply these markets. The Japanese government encouraged the establishment of basic industries such as steel and investment in railways and other transport infrastructure to facilitate trade with Japan in these vital industrial raw materials. This investment pattern was also aimed to strengthen the position of the Japanese military forces in these territories. In this period, Japanese foreign direct investment was heavily regulated and considerably influenced by political imperatives of the expansionary governments of the time. Firms in Japan were encouraged by the government to pursue investment even if the economic rationale was comparatively weak. The Japanese government was active in supporting early Japanese investments in China, Manchuria, Korea and Taiwan through granting monopolies and providing tax subsidies or concessional finance (Remer, 1968). Over the period from 1914 to 1930, it is estimated that almost $US900 million was invested by Japanese firms in China – a remarkable part of total investment by the whole economy at that time (Remer, 1968). Investments in China, Korea, Taiwan and Manchuria continued until the 1940s and were large in scale (Mizoguchi and Yamamoto, 1984). Indeed, the stock of overseas investment in 1930 may have been larger in real terms than achieved for the next half century (Kuwahara, 1990; Mason, 1994). In the mid-1930s, Japanese cumulative investment...

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