Is Japan ripe for foreign investment?

Ross Hall

August 17, 2021

Graphic showing euro notes moving towards a rising sun representing foreign direct investment in Japan

While working on a commission I came across a snippet of data that caught my interest. Japan’s inward foreign direct investment (FDI) is shockingly low.

The dollar amounts barely register: $10.3 billion in Covid hit 2020, $13.7bn the year before. Amongst the G20 countries the mean was $33.7bn and $45.7bn. At no point in the past decade has Japan managed to attract more than $20 billion annually in inward FDI.

Chart showing foreign direct investment in Japan compared with the G20 mean

As a percentage of GDP, foreign investment rarely passes a quarter of one percent. Compare that to the G20 mean where even in the godawful year of 2020, inward investment passed 1 percent of GDP.

Chart showing foreign direct investment in Japan as a percentage of GDP compared to the G20 Mean

Even without the impact of covid, inward FDI has flatlined.

A trio of complaints surface time again when it comes to investing in Japan: high taxes, lack of English and a bureaucracy that worships personal seals and fax machines over digital efficiency. Increasingly the slow pace of tackling Japan’s fixation on coal is brought up, and so too questions about diversity and equality. Then there’s the perception Japanese management as slow and insular.

I think this is disingenuous to what Japan is both capable of and is becoming. There is amazing work being done by start-ups in renewables, health-tech, biotech and robotics. These companies have products and ideas that VCs would fall over one another in London or New York to fund. Outside of Tokyo ecosystems are being created in Osaka, Kobe, Fukuoka and a host of other cities that are nurturing the next generation to sit alongside Toyota, Kawasaki, Nintendo, Uniqlo and the many other global players who are now so familiar. Questions around inclusivity, equality and accessibility are being debated and action taken.

Japan is the third largest economy and a leader in many industries and sectors. Yet in many ways it’s also like a developing nation. There is major change coming in the years to come and now might be the right time to get onboard.

I'm Ross Hall, a writer and researcher based in Kobe, Japan. You can talk to me about B2B, sustainability and strategic management.

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