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 24: Global Real Estate Investment

Roger Farrell


INTRODUCTION Japanese direct investment in overseas real estate was a minor part of total outflows of FDI until the second half of the 1980s. According to the Ministry of Finance, real estate FDI by all Japanese industries in the period from 1951 to 1972 totalled only $US100 million, partly due to severe regulatory controls. This scenario changed dramatically from the mid-1980s, when deregulation of outward investment, appreciation of the yen and a booming domestic real estate market provided Japanese investors with increased equity and borrowing capacity for overseas real estate investment at a time when the domestic market was both illiquid and remarkably expensive (Farrell, 2000a). During the 1980s, total outflows of Japanese direct investment expanded at an unprecedented pace, peaking at over 20 per cent of total outflows in 1991, as investors in many industries sought to acquire or develop foreign landmark office buildings, hotels and apartments – at a time when many overseas real estate markets were entering a period of price decline and many key buildings became available to Japanese investors. In this decade, overseas real estate investment became popular for many firms across a range of Japanese industries, as well as for individual Japanese investors. Partly in response to high land prices in Japan, investors considered foreign office buildings, hotels and other real estate comparatively inexpensive, especially in the United States and the United Kingdom, while tourism-oriented investment was also popular in Australia. This phenomenon was short-lived, as many investments were overly...

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