China has been at the center of business strategy for Japanese firms, which is not surprising given that China overtook the US as the largest market for Japan’s exports in 2006. The first decade of the century was dubbed “the third wave” of Japanese FDI flows to China. Even if Tokyo’s political relations with Beijing were tumultuous, companies hoped politics and economics could be separated (政冷経熱 or Cold Diplomacy, Hot Economic Relations”). A sea change now seems underway. Known in Japan as “China Plus One,” an increasing number of Japanese firms are starting to undertake measures to reduce exposure to China by rebalancing their FDI across Asia.
