Japanese Foreign Investment: An Empirical Study Using a Multi-Sectoral Econometric Model (original) (raw)

NBER WORKING PAPER SERIES FDI IN THE RESTRUCTURING OF THE JAPANESE ECONOMY

This paper examines how inward and outward foreign direct investment (FDI) have influenced the restructuring of the Japanese economy and can be expected to continue to do so in the future. We find that outward investment has helped Japanese firms to sustain foreign market shares and contributed to the restructuring of the Japanese economy away from older industries. By shifting from exporting to affiliate production, there has been a geographical reallocation of the activities of Japanese firms, particularly those of multinational manufacturing firms. However, Japanese outward FDI is still not very large relative to the Japanese economy, despite the rapid growth since the mid-1980s, and there is still scope for significant increase when compared with the levels of most other OECD countries. Inward FDI will presumably have an even stronger impact on the restructuring of the Japanese economy. Although the stock of inward foreign direct investment is still very small, there are important changes under way. Deregulation has opened up much of the industrial and service sectors to foreign multinationals.

Do Firm and Country–Specific Factors Matter in Japanese FDI and Trade Links?

2002

Our study investigates the firm-and country-specific factors that affect the link between foreign direct investment (FDI) and trade. Specifically, we address the questions "do country-and firm-specific characteristics matter in Japanese FDI trade links?" and "do the counts and values of FDI that are often alternatively used in the empirical work convey the same message about this link?" Empirically, our work integrates the models employed by Head and Ries (1999) with Campa (1993) to specifically address country and firm specific heterogeneities in the Japanese FDI-trade link. The panel data nature of this study also allows us to focus on individual host country characteristics as potential FDI and trade determinants. We find that Japanese manufacturing and non-manufacturing outward FDI flows during 1989-1999 were trade creating. However, we were not able to reject country and time specific fixed effects. There was no strong correlation between the counts of new Japanese manufacturing FDI and the value of FDI committed by these firms. Yet the FDI-trade complementarity was observed whether the count of firms or the value of FDI committed by these firms is used as a dependent variable. The economic potential of a host country, factor costs, openness to trade, and the strength and volatility of a host country's currency against Japanese Yen were important determinants of FDI inflow.

FDI in the Restructuring of the Japanese Economy

2000

Foreign direct investment and international trade: evidence from the US and Japan

Journal of Economic Geography, 2003

This paper examines the question of whether foreign direct investment (FDI) creates or replaces international trade. Theoretical and empirical studies in the past have shown that FDI tends to replace trade, but more recent evidence suggests the opposite, that is, FDI creates and complements trade. We analyse the outward investment of Japan and the United States to 29 and 32 countries respectively for the period 1996 to 1999. Our analysis indicates that trade creating effect dominates on the whole, and that this effect also varies significantly across countries.

The Extent and History of Foreign Direct Investment in Japan

SSRN Electronic Journal, 2000

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 firms' 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 "sanctuaries" with almost no foreign involvement remain, so that FDI penetration overall is still very low. While to some extent, this can be explained by Japan's relatively isolated geographic location, historical factors play an important role. Throughout the centuries and until quite recently, Japan's rulers have viewed foreign involvement in the economy as a threat and consequently erected various barriers to FDI, which are discussed in detail.

Japanese direct foreign investment and the Asian financial crisis

Geoforum, 2001

This paper examines the extent to which the Asian currency crisis of 1997±1998 impacted upon the behaviour of Japanese foreign direct investment (FDI) in the manufacturing sector. Much literature has claimed that transnational corporations (TNCs) are unlikely to be ®rmly embedded in the host countries where they operate. If this is the case, then Japanese ®rms in Asia might have exhibited a high degree of disinvestment or plant closure and transfer of operations to other countries following the onset of the ®nancial crisis. Although the events surrounding the Asian crisis and subsequent recovery are still unfolding, FDI data, surveys of Japanese ®rms, and initial reactions by Toyota Motor Corporation and Matsushita Electric Industrial were reviewed to examine this proposition. In general, the evidence suggests that Japanese TNCs have not¯ed Asia bur rather they responded in the following manner. First,¯ows of Japanese FDI into Asia overall held steady throughout ®scal year 1997±1998, although it was set to decline thereafter, at least for the short term. Second, at the level of individual corporations, there is some evidence to show that major ®rms have maintained their operations, and that they have shifted to an export-orientation so as to earn income from their Asian production in overseas currencies. Third, the survey evidence points to a long-term commitment to Asia by Japanese transnationals. Ó

Potential for inward foreign direct investment in Japan

Journal of the Japanese and International Economies, 2019

Kiyota gratefully acknowledges financial support from the Japan Society for the Promotion of Science (JSPS), Grant-in-Aid (JP16H02018, JP18H03637). All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Japanese Foreign Investment: An Empirical Study Using a Multi-Sectoral Econometric Model (original) (raw)

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