Papers & Books 2005
The Extent and History of Foreign Direct Investment in Japan
Ralph Paprzycki and Kyoji Fukao
2005/4(HI-STAT DP Series No.84)
Body(PDF/537K)
Abstract
The past few decades have seen a significant rise in foreign direct investment(FDI) worldwide. While Japanese companies have actively contributed to this trend, FDI in Japan continues to be much lower than in other countries. This paper explores the history of both outward and inward FDI in Japan, looking in particular at the reasons for the low levels of inward FDI. New calculations for this paper - based on data from the Establishment and Enterprise Census - show that foreign firmsf role in the Japanese economy may be substantially larger than the most frequently cited published statistics suggest. In some industries (motor vehicles and electrical machinery in particular), inward FDI penetration, as measured by the share of employment accounted for by foreign affiliates, in Japan in fact is on par with the United States. However, a large number of gsanctuariesh with almost no foreign involvement remain, so that FDI penetration overall is still very low. While to some extent, this can be explained by Japanfs relatively isolated geographic location, historical factors play an important role. Throughout the centuries and until quite recently, Japanfs rulers have viewed foreign involvement in the economy as a threat and consequently erected various barriers to FDI, which are discussed in detail.