Japan Economic Foundation Executive Managing Director Naoyuki Haraoka delivers keynote address at the “New Developments for Japanese and Chinese Firms” Conference.

At opening of the “New Developments for Japanese and Chinese Firms” conference, Mr. Naoyuki Haraoka, Executive Managing Director of the Japan Economic Foundation (JEF), delivered a keynote address entitled “Japanese FDI in Asia and Asian FDI in Japan.” Mr. Haraoka began his speech by providing background on JEF’s origins and its evolving areas of research. He provided rich data showing that Japanese outward foreign direct investment (OFDI), already substantial, has been increasing overseas and that commensurate with this the overseas production activity of Japanese firms has been significantly increasing. While the United States has been Japan’s most important investment destination, Mr. Haraoka noted that the Association of Southeast Asian Nations (ASEAN), particularly Myanmar and Vietnam, and China also have been very important, with some fluctuations in Japanese OFDI (JOFDI) volumes due to political and economic reasons. As for China, he pointed out that fluctuations in JOFDI are not just about politics, but also about rising costs. He also highlighted that JOFDI in China is shifting from the manufacturing to the wholesale and retail sectors to take advantage of China’s greater emphasis on consumption as well as the favorable attitudes of Chinese consumers towards Japanese goods. The rising importance of Asia for Japanese firms also is indicated by the rising share of Asia in the sales and profits of Japanese firms. As for the latter, the profits of Japanese firms in Asia dwarf profits from North America and Europe. Mr. Naoyuki observed that Japanese firms have been drawn to Asian countries by the allure of their market, past successes, the allure of markets adjoining the countries in which they invest, and the availability of cheap labor (though this is less and less important of a consideration). He reported, too, that local procurement is becoming more prevalent for Japanese firms. Mr. Haraoka further offered some observation about world trade and inward FDI (IFDI) into Japan, remarking that the 2020 Olympics could be expected to boost Japan’s IFDI. During his concluding remarks, Mr. Haraoka turned to China which is critical to the fortunes of Japanese firms. Noting their political difficulties, Mr. Haraoka said the two countries needed to get at their core problems and solve them and find common areas such as environmental and population ageing where the two sides could build their collaboration. He encouraged Japanese business to pay attention to politics within China and elsewhere and to take a holistic mindset.