Chapter III Efforts towards the vitalization of the Japanese economy
As Chapters I and II have examined, the East Asian economy has achieved comparatively high growth
in the global economy. Regarding Japan, in this context, improvements in the economic system as well
as vigorous corporate business development in East Asia have been seen. This chapter offers an analysis
of the essential issues of how Japan can achieve sustainable economic growth harnessing East Asia’s
vitality.
Section 1 Utilization of excellent overseas management resources – Inward Foreign Direct
Investment (FDI)
<Key Points>
Since the 1990s, the worldwide expansion of FDI and M&A that have occurred under the backdrop of
the liberalization of trade and investment on a global scale, the progress of technological innovation, and
intensification of cross-border corporate competition, has contributed not only to the economic
vitalization of the country receiving investment, but also to the development of the world economy
moving toward deeper economic bonds.
The investment environment in Japan has been developed in recent years through various systemic
reforms designed to promote inward FDI. The level of inward FDI, however, still remains at a very low
level by international standards and inward FDI is not being used sufficiently as a means of reviving and
vitalizing domestic industry.
FDI brings out new technologies and revolutionary management know-how, and is linked to the
securing of employment opportunities through the provision of new products and services and risk
money. It can also be an effective method in terms of vitalizing the Japanese economy as it leads to not
only management innovation of the company that receives FDI, but also promotion of domestic
structural reforms. Further promotion of FDI into Japan needs to be achieved through the steady
implementation and improvement of measures to promote inward FDI decided on by the Japan
Investment Council, and active PR activities to foreign overseas investors concerning these measures.
1. Current situation of inward FDI
(1) Global trends in FDI
Cross-border corporate competition has intensified in product and technology development as well as
in the acquisition of markets and management resources. These trends are the result of the liberalization
of trade and investment on a global scale, deregulation and privatization in each country and region, and
the progress of technological innovation such as information technology (IT). Amidst these
circumstances, worldwide FDI has been on the rise in recent years, especially cross-border M&A, which
has surged since the 1990s. Underlying this expansion is the fact that speed has become one of the
crucial factors in a corporate strategy that secures competitive advantage. In particular, the rise in
large-scale M&A by corporations in the United States (US) and Europe through stock swaps, which take
advantage of soaring stock prices, triggered a boom in global reshuffling through M&A in the late 1990s,
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and the amount of cross-border M&A in 2000 was the highest ever. However, it is true that since 2001
worldwide FDI has been on the decline, prompted by the global economic slowdown that resulted from
the collapse of the IT boom and ensuing stock price falls (difficulties in acquisition financing caused by
decreased asset values obtained by M&A and slumping stock prices), and the completion of large-scale
M&A by European Union (EU) corporations, as the following figures show: inward FDI (flow-based):
US$1.4919 trillion (2000) à US$735.1 billion (2001); fall in number of M&A cases: over 7,800 (2000)
à approximately 6,000 cases (2001); total value of M&A: US$1.1438 trillion (2000) à US$594 billion
(2001).
Nonetheless, as globalization continues to advance, the worldwide expansion of FDI and M&A will
continue to play a crucial role in revitalizing the economy of the country receiving investment. It will
also serve as a key factor in the development of the world economy, which is moving toward deeper
economic bonds through the revitalization of cross-border corporate activity (Fig. 3.1.1).
Figure 3.1.1 Trends in global inward FDI and M&A
(Billions of dollars)
1600
1400
1200
Inward FDI
M&A
1000
800
600
400
200
0
1996
1997
1998
1999
2000
2001
（Year）
Source: World Investment Report 2002 (UNCTAD).
(2) International comparison of inward FDI
In the past, countries besides Japan have vigorously taken measures to attract foreign capital in order
to induce economic growth in their countries. In the main developed countries such as the United
Kingdom (UK), US and Germany, the inward FDI balance as a percentage of GDP is over 20 percent,
but the corresponding figure is only about 1 percent for Japan (Fig. 3.1.2). The investment environment
Figure 3.1.2 Inward FDI stocks as a percentage of nominal
GDP, by major countries, 2001
(%)
45.0
38.6
40.0
35.0
28.6
29.5
Canada
Australia
30.0
25.1
24.2
25.0
20.0
15.0
10.0
5.0
1.2
0.0
Japan
US
Source: IFS (May 2003).
UK
Germany
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in Japan has been developed in recent years through various systemic reforms designed to promote
inward FDI (which will be described later). Moreover, Japan has many advantages which include the
fact that it is the second biggest market in the world and has a wealth of qualified labor resources and
high technological capabilities. Japan is also endowed with good living conditions in terms of highstandard medical services, public health, education and other areas. Therefore, it is likely that Japan has
many potential merits in assessing its investment environment1. The level of inward FDI into Japan,
however, remains at an extremely low level by international standards. As the amount of inward FDI is
determined by multiple factors including GDP, wage levels and the degree of industrial agglomeration,
it is difficult to make an evaluation based on international comparisons. According to the United Nations
Conference on Trade and Development (UNCTAD) (2002), Japan received only 0.8 percent of the total
of global FDI (inward, flow-based) in 2001, less than one-twentieth of FDI absorbed by the US (Fig.
3.1.3). Moreover, inward FDI flows as a percentage of gross fixed capital formation in Japan (0.7
percent) is much lower than the average in developed countries (25.0 percent) and the world average
(22.0 percent) (Fig. 3.1.4). As a result, as Japan has limited use and contribution of foreign capital in
areas such as domestic employment, production and sales, and research and development (R&D),
inward FDI is not being used sufficiently as a means of reviving and vitalizing domestic industry (Fig.
3.1.5). In other developed countries with higher ratios of inward FDI, foreign capital plays a significant
role in the domestic market in these areas, creating an environment in which domestic companies and
foreign affiliates compete and coexist with each other.
Figure 3.1.3 Proportion of global inward FDI accounted for in
Japan (2001)
0.8
16.9
38.4
Japan
US
EU 15
Other
43.9
Note: Figures are flow-based and their percentages are shown.
Source: World Investment Report 2002 (UNCTAD).
1
Japan External Trade Organization (JETRO) (2003).
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Figure 3.1.4 Inward FDI flows as a percentage of gross fixed
capital formation, by region and economy, 2000
(%)
60.0
50.1
50.0
48.7
46.4
47.3
40.0
25.0
30.0
22.0
16.9
20.0
17.5
14.1
10.0
0.7
Jap
an
Au
stra
lia
US
Can
ada
Fra
nce
Ge
rma
ny
UK
ave
rag
e
ＥＵ
cou
ntry
ave
rag
e
De
vel
ope
d
Wo
rld
ave
rag
e
0.0
Source: World Investment Report 2002 (UNCTAD).
Figure 3.1.5 Proportion of contribution by foreign affiliates
to employment, production, sales and R&D
(Proportion of employment by foreign affiliates (1998))
Japan
1.8
US
15.1
18.0
UK
Sweden
26.8
Portugal
7.9
Ireland
36.8
Finland
12.8
0
5
10
15
20
25
30
35
40
(%)
Note: Figures for the UK are based on 1997 data.
Source: World Investment Report 2002 (UNCTAD).
(Proportion of production and sales by foreign affiliates (1998))
3.9
Japan
0.5
US
UK
Sales
18.1
4.8
Production (value-added)
34.1
6
Sweden
28.8
9.3
Portugal
16.3
6.4
Ireland
74.9
35.8
Finland
12.8
6.1
0
10
20
30
40
Note: Figures for the UK are based on 1997 data.
Source: World Investment Report 2002 (UNCTAD).
- 188 -
50
60
70
80
(%)
(Proportion of R&D expenditures by foreign affiliates (1998))
Japan
1.7
US
14.9
UK
30.1
Sweden
17.5
Portugal
18
Ireland
65.6
Finland
13.2
0
10
20
30
40
50
60
Note: Figures for Ireland and Portugal are based on 1997 and 1999 data, respectively.
Source: World Investment Report 2002 (UNCTAD).
70
(%)
Furthermore, in terms of cross-border M&A, which is the driving force of global FDI, 70 percent of
the total is directed toward the US and EU, shedding light on the fact that US and European corporations
are aggressively using M&A to seize an advantage under global competition. Meanwhile, M&A capital
directed to Japan accounts for a mere 2.6 percent. One of the reasons why FDI into Japan is at a lower
standard than in other countries is that the volume of M&A transactions by foreign companies in Japan
is strikingly lower than in the US and Europe (Fig. 3.1.6).
Figure 3.1.6 Proportion of total global M&A value
accounted for in Japan (2001)
2.6%
30.5%
31.1%
Japan
US
EU 15
Other
35.9%
Source: World Investment Report 2002 (UNCTAD).
(3) Current situation of inward FDI into Japan
In the three-year period from FY1998 to FY2000, the size of inward FDI into Japan expanded rapidly,
reaching record-high levels. In FY2001, however, due to the effects of the slowdown in worldwide FDI,
the amount of FDI into Japan fell for the first time in four years, marking 2.1779 trillion yen, or a fall of
30.3 percent year-on-year (Fig. 3.1.7). Looking at trends by industry type, the amount of investment
received in the manufacturing and non-manufacturing industries fell by 58.5 percent year-on-year and
20.8 percent year-on-year, respectively. Because of the large margin of decline for the manufacturing
industry, the proportion of the non-manufacturing industry rose even further from 74.7 percent to 84.9
percent. In the non-manufacturing industry, the proportion of telecommunications, finance and
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insurance is high, accounting for approximately 70 percent of overall FDI into Japan (Fig. 3.1.8). An
underlying factor in this trend in telecommunications was that foreign companies entered Japan’s
market as a result of deregulations in Type 1 carriers. As for the trend in finance and insurance, this was
brought about by buyouts performed by foreign capital that took over life insurance companies and
consumer finance companies.
Figure 3.1.7 Trends in inward FDI in Japan
00s million yen）
（
35,000
30,000
Non-manufacturing industry
25,000
Manufacturing industry
20,000
15,000
10,000
5,000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
(FY)
2000
2001
(FY)
2000
2001
Source: Report on Inward and Outward Direct Investment (Ministry of Finance).
Figure 3.1.8 Trends in inward FDI by industry
(Manufacturing industry)
（00s million yen）
12,000
10,000
8,000
Food
Rubber and leather products
Chemicals
Metals
Machinery
Oil
Other
6,000
4,000
2,000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Source: Report on Inward and Outward Direct Investment (Ministry of Finance).
(Non-manufacturing industry)
（00s million yen）
25,000
20,000
15,000
Telecommunications
Trade
Finance and insurance
Services
Real estate
Other
10,000
5,000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Source: Report on Inward and Outward Direct Investment (Ministry of Finance).
- 190 -
(FY)
Furthermore, M&A in Japan by foreign companies (Out-In M&A) is leveling off because of the global
slowdown in M&A. Rising rapidly in the second half of the 1990s, Out-In M&A had bolstered FDI to
Japan. In 2001, in stark contrast to the surge in the previous year (136 cases: +34.7 percent year-on-year),
M&A in Japan fell by 16.2 percent year-on-year to 114 cases. Looking at M&A by type, equity
acquisition plummeted by 22.6 percent year-on-year to 41 cases (Fig. 3.1.9). As for other types, asset
acquisition declined to 29 cases (-14.7 percent year-on-year) and capital participation to 40 cases (-7.0
percent year-on-year) (Fig. 3.1.10). Furthermore, a regional look at the figures reveals that although
M&A by North American companies declined (48 cases: -34.2 percent year-on-year), it increased for
European companies particularly in the telecommunications sector (46 cases: +17.9 percent year-onyear) (Fig. 3.1.11).
Figure 3.1.9 Trends in M&A of Japanese companies
by foreign affiliates
(No. of cases)
160
140
136
114
120
111
100
101
80
85
60
33
40
36
37
53
40
34
20
10
0
1990
12
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
(Year)
Source: Trends in Japanese Company Related M&As in 2002 (Financial Research Center, Nomura Securities).
Figure 3.1.10 Trends in M&A in Japan (Out-In M&A) by type
(No. of cases)
160
140
Capital participation
120
Asset acquisition
Stock swap
Equity acquisition
100
Merger
80
60
40
20
0
1993
Note:
Source:
1994
1995
1996
1997
1998
1999
2000
2001
2002 (Year)
Types are defined as follows: Merger: absorption, consolidation; Equity acquisition: acquisition of more than 50% of the stock; Stock
swap: buyout through stock swap; Asset acquisition: transfer of operation or partition of corporation, etc. through acquisition of enterprises
or fixed assets (not applicable on transactions between parent and subsidiary); Capital participation: acquisition of less than (or equal to)
50% of the stock.
Trends in Japanese Company Related M&As in 2002 (Financial Research Center, Nomura Securities).
(No. of cases)
Figure 3.1.11 Trends in M&A in Japan (Out-In M&A) by
region
160
140
120
North America
Europe
Asia/Oceania
Other
100
80
60
40
20
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
(Year)
Source: Trends in Japanese Company Related M&As in 2002 (Financial Research Center, Nomura Securities).
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In particular, there were large-scale cases such as the acquisition of Japan Telecom by Vodafone Group
(UK) and capital participation in J-PHONE Group by British Telecom (UK). There were also other cases
related to business restructuring in Japanese companies such as NEC Ibaraki, which was acquired by
Solectron Corporation (US), and a joint venture (Display Technologies Inc.) between IBM and Toshiba
Corporation, which became IBM’s wholly owned subsidiary. Moreover, in 2002 there were 111 M&A
cases (-2.6 percent year-on-year) in Japan. In concrete terms, there were cases involving Japanese
corporations reexamining their businesses, as there had been in the year before, such as Toshiba selling
its semiconductor manufacturing equipment to Micron Technology (US) and Seiko Instruments Inc.
selling its vacuum pump business to BOC Edwards (UK). Meanwhile, other cases that captured
attention were those that triggered the full-scale restructuring of Japanese distribution and
pharmaceutical industries such as capital participation in Seiyu by Wal-Mart (US) and the acquisition of
Chugai Pharmaceutical by Roche (Switzerland). Thus, foreign companies are increasing their presence
in Japanese markets day by day. In addition, one of the characteristics of recent M&A in Japan is that
Chinese corporations are implementing buyouts with the aim of acquiring the sophisticated
technological capabilities and exceptional human resources of Japanese small and medium-sized
enterprises2.
2. Inward FDI into Japan: a turning point in promoting structural reform
Although the Japanese economy has seen weak recovery several times after the burst of the bubble
economy, it has failed to achieve a strong economic recovery for more than a decade. Instead of
following the footsteps of its past successes, Japan must embark on the challenge aimed at new
possibilities so that it can break through the deadlock. This is the reason why such strong appeals have
been made for the necessity of structural reform. However, the current situation is that there is chronic
dependency on the ways of the past, and Japan has been unable to seize opportunities that realize its
potential competitiveness. One of the opportunities in which Japan can find its way out of this state is
inward FDI into Japan, which elicits corporate activity, along with its novel ideas, into Japan.
The economic significance of FDI is that management rights will be acquired where investment is
received. At the same time, in the process of being involved in management, a variety of management
resources such as technology, management know-how and skills will be transferred to the destination of
investment. FDI has a powerful effect on the management and performance of corporations receiving
investment as well as on the industrial structure and economy of the country receiving investment. By
generating an inflow of tangible and intangible management resources, FDI has a strong impact on the
supply side of the country receiving investment and brings about international competition in the non-
2
Some of the examples of Chinese businesses acquiring Japanese businesses include: acquisition of
Challenge Japan (Kamo City, Niigata Prefecture), a clothing manufacturing and sales affiliate of Kanematsu
Textile Corporation by Karaku Group, a leading textile company in Shanghai, China (August 2001);
acquisition of Akiyama Printing Machinery Manufacturing Corporation (Katsushika City, Tokyo) by
Shanghai Electric (Group) Corporation (December 2001); and acquisition of Shanghai Hitachi Double Deer
Refrigerator, an industrial refrigerator manufacturer by Shanghai Whitecat (Group) Co., Ltd., a detergent
manufacturer in Shanghai (January 2002).
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tradable goods sector that is not exposed to trade competition3. Furthermore, many domestic companies
are faced with the pressing issue of having to fundamentally restructure their businesses in order to
reduce interest-bearing debt and enhance asset effectiveness. In a situation where there are hardly
enough reserves for proactive risk-taking in new business fields, let alone bailouts of affiliated
companies (keiretsu) or trading partners that have gone bankrupt or are faced with financial difficulty,
foreign investment can be expected to provide new so-called risk money that exploits their wealth of risk
management know-how. Given these circumstances, promoting inward FDI into Japan is a crucial issue
that should be examined from the viewpoint of revitalizing the Japanese economy. As corporate
activities are becoming more global and international competition is intensifying to attract more
corporations, making Japanese markets more appealing as a destination of investment is vital in order to
draw in multinational companies that possess exceptional management resources. These efforts will
simultaneously contribute to improving the investment environment for domestic companies.
To be specific, the effects of FDI into Japan on revitalizing the Japanese economy include the
following4.
(1) Introducing technology and management know-how
Multinational companies possess valuable management resources such as technology, management
know-how, experienced labor forces, international manufacturing networks, market access and an
established brand name. As these management resources have elements for promoting economic growth,
the revitalization of Japanese corporations will be advanced through the use of these elements. In
particular, it is essential to transfer new management and technology know-how in qualitative areas
where systems are not easily defined. By integrating these changes with Japan’s already existing
management and technological know-how, an even better management and technological system will be
formed, through which it will be possible to provide new products and services and in turn stimulate
consumption. Furthermore, as a result of the increased flow of employees who have been educated at
multinational companies to other companies, there are high expectations that this will have positive
effects on Japan’s economy as a whole through the transfer of management and technological knowhow to other corporations.
(2) Employment creation and skill development
Employment opportunities will arise as a direct consequence of multinational companies venturing
into Japan. At the same time, new demand will be created and employment will increase due to the
expansion in plant and equipment investment in such companies as well as in consumption. Moreover,
multinational companies can contribute dynamically to Japan’s human resource development by
technical training and technical transfer that is either lacking or insufficient in Japan. According to
JETRO’s Survey on Employment in Foreign Firms, it is estimated that foreign affiliates create
employment for over one million people, thereby contributing to the creation of employment
3
4
Takahashi and Oyama (2000).
Japan Investment Council Expert Committee (1999), UNCTAD (1999a).
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opportunities in Japan. In addition, 80 percent of foreign affiliates that responded to the survey said that
they would either increase the number of employees or maintain their current levels. In particular, 95
percent of the foreign affiliates that said that they would increase the number of employees in the future
indicated that they would like to hire mid-career clerical staff and technical staff. Hence certain labor
absorption effects can be expected from foreign companies expanding into Japan.
(3) Enhanced productivity and increased benefits to consumers through the promotion of
competition
The expansion of multinational companies into Japan encourages healthy competition in the nontradable goods sector such as the service sector as well as in other industries, making Japan’s economy
more efficient through enhanced productivity in domestic industries. As a result, consumers will have
access to high-quality products and services at low cost. Furthermore, consumers will have a wider
selection to choose from as new types of products and services become available in Japan.
3. Examples of economic revitalization through inward FDI into Japan
Many issues remain unresolved concerning the environment for inward FDI into Japan. However, a
micro-level look at individual cases reveals that there is an increasing number of specific cases5 worth
mentioning as successful cases of FDI into Japan.
(1) Speedy business restructuring
– The case of Nissan-Renault –
By 1999, Nissan Motor Company was operating at around 20 percent under its 1991 peak vehicle
production. Financially, its interest-bearing debts had mounted to 1.87 trillion yen and the carmaker was
facing severe difficulties. In an attempt to break the crisis, Nissan agreed to an alliance with France’s
Renault in March 1999. In addition to accepting a 590 billion yen capital injection, Nissan welcomed Mr.
Carlos Ghosn as its new company president. Based on the Nissan Revival Plan (NRP) formulated in
October 1999 and with new management know-how, Nissan carried out bold business restructuring. It
completely renovated management systems, and as a result of efforts such as the joint use of production
facilities between Nissan and Renault and bold concentration on its core business, a company that was
680 billion yen in debt in FY1999 staged a dramatic recovery to end up 370 billion yen in the black in
FY2001, just two years later. Nissan achieved a record consolidated operating profit in FY2002 of 737
billion yen at an operating profit ratio of 10.8 percent, putting it on the first rung in the industry. The 2.1
trillion yen in consolidated interest-bearing automotive debt recorded in early 1999 had by the end of
FY2002 been completely eliminated. The recovery assumed a pace faster than that envisaged in the
initial plan (the NRP was achieved one year ahead of schedule). Nissan is now implementing its new
three-year plan, Nissan 180. This three-year plan, which aims to achieve sustainable and profitable
growth by FY2004, contains three commitments: the achievement of an additional one million units in
sales over FY2001, a combined operating profit ratio of over 8 percent and the reduction to zero of
5
The cases were compiled using sources such as the companies’ websites for reference.
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consolidated interest-bearing automotive debt. Two of these were swiftly realized in the first year
(FY2002). The thoroughgoing rationalization and revision of old business customs by Nissan has had a
significant impact on the automotive industry as a whole and also provided the momentum for efforts
toward rationalization and industrial reorganization in the steel industry, much of whose product is
consumed by the automotive industry.
(2) Market expansion through its unique management strategy
– The case of Louis Vuitton Japan –
Even as the fashion and apparel industry suffers from sluggish business performance due to the recent
consumption slowdown, Louis Vuitton Japan, a dealer in importing and selling foreign luxury items
including travel bags, shoes and accessories, has remained untouched by such economic trends. Its sales
soared in 2002, marking an all-time high of 135.7 billion yen, leaving all other companies in the industry
far behind. Louis Vuitton Japan has thus established a name for itself as the top brand in Japan, a huge
market for luxury brands. The LVMH Group (Moët Hennessy Louis Vuitton), to which Louis Vuitton
Japan belongs, is a giant brand conglomerate (with stores in several tens of countries around the world
with overall profits of a little over one trillion yen (FY2001)), whose scope of business includes liquor,
fashion and leather, perfumes, watches and jewels. Louis Vuitton is the biggest brand name in this
enormous group, and Louis Vuitton Japan, which represents the Japanese market, accounts for around
one-third of its sales. Underlying Louis Vuitton Japan’s successes in the Japanese market is not only the
strength of its products but also its distinctive sales and marketing strategy. For example, Louis Vuitton
employs a direct management method through which it controls all the processes from manufacturing,
importing to sales and after-sales service. Louis Vuitton does not involve any other trading company or
agency in these processes. Back in 1978 when Louis Vuitton first entered the Japanese market, this
practice defied all existing conventions. This method, which was originally applied to protect the brand,
resulted in cutting marginal costs in distribution and allowed sales to be made at appropriate prices
(nowadays many brands have employed a similar structure). Furthermore, Louis Vuitton has a fixed
price range and in Japan, retail prices are set so that they are within about 1.4 times the retail prices in
Paris. By introducing an adjustable fixed price system based on exchange rate fluctuations, Louis
Vuitton was able to maintain prices at which it was difficult for parallel importers to gain a profit margin.
It also won the trust of consumers that came to the retail stores directly managed by Louis Vuitton and
would feel comfortable buying the products there. Moreover, by standardizing its store sizes (securing a
large stock room) and implementing supply chain management, it became possible for Louis Vuitton to
prevent shortages of popular products and amassing excessive inventories, thus properly managing its
inventories and providing products. In addition, as Louis Vuitton envisions itself as first and foremost a
retailer, it puts paramount importance on its sales personnel that is responsible for selling its products in
stores. In many cases, when their stores are located within department stores, other corporations borrow
sales personnel from the department store. However, a few years ago Louis Vuitton began to make many
of its sales personnel regular employees (February 2002: 800 people à January 2003: 1,700 people)
with the intention of maintaining and improving its brand and service level. Within its stores, Louis
Vuitton’s basic policy is to sell its products through a one-to-one consulting approach. It is also thorough
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in educating and developing its human resources. For example, Louis Vuitton requires its employees to
periodically undergo training in Japan and in France so that they can acquire an accurate understanding
of Louis Vuitton’s products as well as of its tradition and culture. Through this establishment of a unique
management strategy and provision of customer service which responds to consumers’ needs, Louis
Vuitton has been able to maintain its brand image and enjoy the broad support of consumers in Japan
who possess a taste for luxury goods.
(3) Creation of new employment and new markets
– The case of Starbucks Coffee –
Starbucks’ expansion into Japan is an example of how new markets have been created by a foreign
firm entering Japan. Starbucks opened its first store in Japan in 1995 and has spread throughout Japan
since then. By 2002 Starbucks had over 400 stores (as of January 2003: 435 stores), employing 1,619
people. Including its part-time employees, Starbucks has created approximately 10,000 jobs (as of the
end of March 2003) in Japan. Furthermore, inspired by Starbucks’ success, a stream of like foreign firms
(Tully’s Coffee, Seattle’s Best Coffee, etc.) have ventured into Japan. As a result, this has created a
positive cycle in which foreign firms are attracting one another to come into the Japanese market. In
addition, spurred by increased competition by foreign firms, domestic companies are also fostering new
markets through the development of new types of operations. Such moves by domestic companies
include the opening of cafés that offer espresso by existing self-service coffee shop chains and the
expansion into the self-service-style café market by traditional coffee shop chains. In summary,
Starbucks’ expansion into Japan is a good example of how FDI has created employment and generated
new effective demand.
(4) Creating new markets
–The case of Chelsea –
In July 1999, Chelsea Property Group, a specialized outlet developer in the US, embarked on a joint
venture with Nissho Iwai Corporation and Mitsubishi Estate Co., Ltd. to form Chelsea Japan Co., Ltd. In
July 2000, Chelsea Japan launched the first Premium Outlets shopping center in Gotemba City,
Shizuoka Prefecture, triggering an outlet boom in Japan. Premium Outlets represented a new type of
specialized outlet shopping center where over a hundred well-known brands from around the world
came in directly to launch stores. Chelsea Japan now operates three outlets including the one in
Gotemba, with outlets in Izumisano City, Osaka Prefecture (launched in November 2000) and Sano City,
Tochigi Prefecture (launched in March 2003). In addition, Chelsea Japan has plans to open stores in
Tosu City, Saga Prefecture and Toki City, Gifu Prefecture in 2004 (it plans to open stores in eight to ten
locations in Japan in the future). The concept of Premium Outlets has won extensive support from
consumers in Japan as people can enjoy shopping all day long in them, surrounded in an extraordinary
atmosphere where a variety of products, including famous domestic and foreign brands, are available at
low prices. As a result, Chelsea Japan is steadily fostering a consumer market in Japan. In addition, the
presence of outlet shopping centers has contributed significantly to the revitalization of regional
economies, as many of them are located in the outskirts of local cities where they attract customers as a
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kind of tourist spot in local regions.
(5) Thorough pursuit of consumer needs
– The case of Nihon L’Oréal –
L’Oréal (France), the biggest cosmetics company in the world, entered the Japanese market in 1963 as
a result of a joint venture with Kobayashi Kose (currently Kosé). The L’Oréal Group originally began its
foray into the Japanese market with industrial hair care products and has consistently expanded its
business in the Japanese market since then. In particular, L’Oréal affiliate Lancôme, an exclusive
cosmetics brand which first came on the market in 1978, has launched many hit products that were right
on target in understanding the sensitive demands of Japanese female consumers. L’Oréal currently sells
exclusive cosmetics and perfumes mainly in department stores through brands such as Helena
Rubinstein, Giorgio Armani and Ralph Lauren, and continues to win the hearts of many consumers. In
addition, using the two brands L’Oréal Paris and Maybelline New York (which merged with L’Oréal in
1999) for hair care, skin care and makeup products, L’Oréal has established a name for itself in the
Japanese market through its numerous product and sales channels targeting general consumers,
including mass merchandise stores and drugstores. One of the reasons for L’Oréal’s success is its
strengthened R&D and production system in Japan. Even as many cosmetics manufacturers remain
dependent on import product sales, L’Oréal established an R&D hub in Japan in 1983 and a production
hub in the following year, thereby dedicating itself to developing products appealing to the sensibilities
of Japanese women by means of extensive marketing. Furthermore, as overseas sales are strong for
high-quality cosmetics that have been developed in Japan and have gained acceptance among Japanese
women, Japanese hubs are becoming increasingly important from the standpoint of marketing. As such,
Tokyo, along with Paris and New York, represents one of the top three creative hubs of L’Oréal.
(6) Strengthened competitiveness aimed at global development
– The case of Chugai Pharmaceutical and Roche –
Since the second half of the 1990s, there has been progress in the global restructuring of the overseas
pharmaceutical industry. Against the backdrop of intensified global competition in genomic drug
discovery (development of medicines using information about the human genome) as well as the fact
that R&D of new medicine incurs enormous fees, leading pharmaceutical manufacturers in the US and
Europe performed M&A in pursuit of economies of scale. Foreign-affiliated pharmaceutical companies
entered Japan, a promising market, in pursuit of maximizing profits and expanding markets for new
medicines developed by investing huge funds. These companies were dynamically involved in such a
venture by developing their own sales channel instead of relying on the past system of using the
Japanese manufacturers’ distribution routes. Meanwhile, Japanese companies were faced with a
situation in which they had little chance of achieving growth through current management methods,
with a deteriorating business environment caused by drug price falls and medical fee restriction
measures as well as escalating R&D fees for biomedicine. Overwhelmed by the power of foreign
affiliates, Japanese companies had no choice but to take a defensive position. Given these circumstances,
it became indispensable for corporations to rebuild their strategies if they were to survive in global
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competition. The case of Chugai Pharmaceutical was no exception. Based in Switzerland, Roche was a
leading global pharmaceutical company in terms of biomedical production technology as well as drug
discovery and the establishment of a drug business platform based on genome information. For Chugai,
Roche had the merit of being able to create a collaborative structure for R&D, production and sales in
the field of biomedicine on a global scale. The merger took place in October 2002 in the form of Roche
acquiring 50.1 percent of Chugai’s stocks. As a result of this merger, Chugai secured a more robust
management foundation by becoming a part of the Roche Group. Chugai was also able to effectively
expand its business using Roche’s global network in overseas development and sales. It was also
expected that Chugai would make great strides as an R&D-based pharmaceutical company with the
finest global business foundation in Japan. Meanwhile, Roche was able to establish a foundation for new
drug discovery and sales in Japan, the world’s second largest market. It also became possible for Roche
to further increase its advantage in global competition by enhancing the variety of its R&D functions
through obtaining access to the drug development pipeline established in Japan. In other words, the
merger proved advantageous for both Chugai and Roche as it allowed them to create a mutually
complementary system for product R&D and sales. After the merger, newly restructured Chugai’s sales
totaled 253 billion yen (based on FY2000 results), ranking fifth in Japan for prescription drug sales.
What is more, the entire Roche Group including Chugai saw estimated sales of approximately 2.3
trillion yen (based on FY2000 results), which put them within the ten top-ranking corporations in the
world. In addition, it is expected that global competitiveness will be enhanced through efforts in areas
such as R&D. As a result of the merger with Chugai, which has a high percentage of R&D investment
(20 percent of sales), the amount of R&D investment for the entire Roche Group exceeded an annual
total of about 300 billion yen.
4. Approach toward promoting FDI into Japan
(1) Endeavors undertaken thus far
In July 1994, the Japanese government established the Japan Investment Council chaired by the prime
minister. This council was charged with gathering opinions about how to improve the investment
environment and publicizing investment promotion-related measures. Since then, three Statements of
the Japan Investment Council have been announced, in which the council indicated its dynamic
decisions and endeavors aimed at promoting FDI into Japan. In particular, the April 1999 Statement
referred to the efforts pertaining to the Seven Recommendations for Promoting Foreign Direct
Investment in Japan and the following have been realized to date (Fig. 3.1.12). In addition to these
investment promotion measures, the investment environment for FDI into Japan is gradually being
developed and improved through measures such as: (i) progress being made on various deregulations
which had been barriers to entry until now; (ii) development of laws that contribute to the facilitation of
business restructuring, such as amendments to the Commercial Code; (iii) improved transparency in
corporate management by introducing consolidated and current value accounting systems; and (iv)
cutting costs incurred by advancing into the Japanese market by the decline in land prices and office
rents and reduction of corporate tax. According to JETRO’s Survey on Attitudes of Foreign Companies
toward Direct Investment in Japan, many corporations acknowledged that the business environment
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experienced by foreign affiliates has “improved” in the past two or three years. The improvements that
were indicated include “infrastructure-related costs such as communications, electricity, etc.” (56.6
percent), “land prices/office rent” (48.9 percent) and “labor market liquidity (securing capable
personnel)” (39.3 percent) (Fig. 3.1.13). Moreover, as for measures that corporations thought were
particularly effective for improving the business environment, a significant number of them pointed out
“lowering effective corporate taxes” (59.0 percent), “introduction of international accounting standards”
(42.5 percent) and “deregulation of telecommunications, finance/insurance and other sectors” (23.8
percent) (Fig. 3.1.14).
Figure 3.1.12 The status of the implementation of the
“Seven Recommendations for Promoting Foreign Direct Investment in Japan”
Seven recommendations
(1) Make further efforts to
improve the various systems
relating to enterprise
management
Measures implemented based on the recommendations
Compulsory application of consolidated financial statements (April 1999),
enforcement of a consolidated taxation system (August 2002), legalization of
treasury stocks (possession of own stock) (June 2001), establishment of stock
swaps and transfers system (December 1999), establishment of corporate
division system (May 2000), review of stock systems including stock option
(November 2001), reform related to corporate governance (introduction of the
system of companies with committees, etc.) (May 2002), enforcement of the
Civil Rehabilitation Law (April 2000), liberalization in principle of job types
covered by the worker dispatching business (December 1999), liberalization in
principle of the area of occupation handled by fee-charging employment referral
services (December 1999), enforcement of the Defined Contribution Pension
Law (October 2001), etc.
(2) Make further efforts to
promote deregulation
Three-Year Deregulation Action Plan (April 2001–), Basic Policies for
Macroeconomic Management and Structural Reform of the Japanese Economy
(June 2001), Reform Schedule (September 2001), Basic Policies for Economic
and Fiscal Policy Management and Structural Reform 2002 (June 2002),
Program for the Promotion of Special Zones for Structural Reform (October
2002), etc.
(3) Facilitate the establishment Facilitation of transfer of closed-down public school facilities into international
and operation of international schools (September 1999), low-interest loans from the Development Bank of
schools
Japan to international schools and easing of university entrance examination
qualifications (1999), etc.
(4) Provide more extensive
information on health and
medical care for foreigners
Liberalization of advertisements (relating to language) for medical institutions
capable of offering services in foreign languages (January 2001) and provision of
information on national university hospital medical institutions on the website of
the University Hospital Medical Information Network (UMIN), etc.
(5) Promote closer coordination
between the national and local
governments through the
Meetings on Promoting Inward
Direct Investment in Regional
Areas
Organization of “Meetings on Promoting Inward Direct Investment in Regional
Areas” centered on the Bureau of Economy, Trade and Industry in each regional
block, and implementation of regional provision of regional investment-related
information
(6) Establish a comprehensive
system for providing
information concerning inward
direct investment
Implementation of comprehensive provision of information through the
establishment of information sites related to investment and mutual links on the
websites of organizations such as the Investment in Japan Information Center
(Investment in Japan), JETRO (Invest Japan), local government bodies, the
Development Bank of Japan, the Japan Regional Development Corporation
(JRDC), etc.
(7) Respond quickly to
complaints and requests
Response by the Office of the Trade and Investment Ombudsman (OTO),
Meetings on Promoting Inward Direct Investment in Regional Areas, local
government bodies, JETRO, etc.
Source: Japan Investment Council Expert Committee.-
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Figure 3.1.13 Changes in the business environment for foreign affiliates
(improvements)
56.6
Cost of communications, electricity, etc.
48.9
Land prices/office rent
39.3
Labor market liquidity
29.7
Distribution costs
Taxation
29.3
Elimination of cross-stockholding
29.1
27.1
Keiretsu and other business practices
22.9
Living environment for foreigners
21.7
Capital procurement diversification
Transparency of operation
of laws and legal procedures
20.1
0
10
20
30
40
50
Note: Data for “improvements” includes both the answers “enough improvement” and “improved but insufficient.”
Source: The 7th Survey on Attitudes of Foreign Companies toward Direct Investment in Japan (JETRO).
60
(%)
Figure 3.1.14 Policies that have resulted in a particular contribution to
the improvement of the business environment
51.6
Lowering effective corporate taxes
Introduction of international accounting
standards
59.0
22.9
42.5
Deregulation of telecommunications,
finance/insurance and other sectors
32.9
23.8
Revisions to the Worker Dispatching N/A
Law
20.4
8.6
Extension of carry-over period for losses
15.4
Improvement on administrative and
legal procedures regarding mergers, etc.
7.6
8.6
Previous Survey
Establishment of corporate division N/A
system
Expansion of low interest loan option
availability to foreign affiliates
7.0
Current Survey
2.4
4.1
Introduction of stock swaps and N/A
2.5
transfers system
0
10
20
30
40
50
60
70
(%)
Source: The 7th Survey on Attitudes of Foreign Companies toward Foreign Direct Investment in Japan (JETRO).
(2) Recent endeavors
In June 2002, the Council on Economic and Fiscal Policy (CEFP) branded the promotion of
investment into Japan as one of the economic revitalization strategies. With a view to boosting efforts
aimed at promoting investment, the Basic Policies for Economic and Fiscal Policy Management and
Structural Reform 2002 indicated that by the end of FY2002, specific measures would be compiled with
the goal of promoting inward FDI and increasing the “brain gain,” which would be implemented in a
well-planned manner. In response, the Japan Investment Council Expert Committee (Chair: Haruo
Shimada, Professor of Keio University, Special Advisor to the Cabinet Office), which is under the
auspices of the Japan Investment Council (Chair: Prime Minister), was resumed in October 2002. The
Expert Committee deliberated on the ideal vision of measures to promote FDI into Japan. In March 2003,
the committee compiled the Program for the Promotion of Foreign Direct Investment into Japan, which
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consisted of a report and an appendix to the report consisting of 74 concrete measures under five priority
categories: (i) review of administrative procedures; (ii) improvement of the business environment; (iii)
creation of favorable employment and living environments; (iv) improvement of local and national
structures and systems; and (v) dissemination of information within Japan and abroad. The program was
presented to and approved by the Japan Investment Council (Fig. 3.1.15). Furthermore, around the same
time as the Expert Committee was resumed, 12 volunteers from the private sector, who were proactive
about expanding investment into Japan, formed the Invest Japan Forum. In December 2002, this forum
compiled 12 proposals considering the viewpoints of the “Removal of obstacles towards expanding
FDIs into Japan” and “Positive promotion measures for FDIs into Japan.” These proposals were handed
to the Prime Minister and also given to the Expert Committee, which later reflected their content in its
own report.
Figure 3.1.15 Main points of Program for the Promotion of Foreign Direct Investment into Japan
Issues
1. Dissemination of
information within Japan
and abroad
2. Improvements in the
business environment
Measures for Future Implementation
Expression of Japan's stance to welcome FDI into Japan through foreign visits by top
Japanese officials, information dissemination and exchanges through Embassies Consulates,
PR campaigns for foreign press organizations
Proactive PR activities to present the advantages of Japan's investment environment and
successful examples for FDI in Japan, holding of symposiums in cooperation with promising
investors (countries and regions)
Facilitation of cross-border M&A (consider revisions of the Commercial Code related to "the
easing of rules on compensation for mergers, etc" as a permanent measure, which would
enable stocks of parent companies (including foreign parent companies) or cash to be used
for mergers, assimilations and spin-offs, or stock swaps
Ensuring of transparency and reliability of corporate information, and strengthening of
corporate governance (strengthening of fiduciary responsibility of institutional investors, and
examining the role of outside directors and auditors, etc.)
3. Reviewing administrative Clarification, simplification, acceleration of administrative procedures (establishment of the
procedures
one-stop service center in JETRO for access to available information for investment and the
comprehensive information desk in each ministry and institution)
Clarification of the interpretation of legislation (promotion the use of the "non-action-letter"
system, etc.)
4. Create favorable
employment and living
environments
Improvement of systems related to entry and residence of foreign nationals (relaxation of
requirements of status of residence for engineers and business managers, and job-assistance
for foreign students, etc.)
Increase of acceptance of foreign medical doctors (enlargement of the clinical training
system that accepts foreign doctors, and enlargement of mutual acceptance of medical
doctors)
5. Improve local and
national structures and
systems
Support for local governments that carry out proactive PR activities to attract FDI
Facilitation the use of the "special zones for structural reform"system (in particular,
improvement of living environments such as welfare and education, and improvement of
entry control for foreign engineers)
Source: The Japan Investment Council Report, the Attached Table: Program for the Promotion of Foreign Direct
Investments into Japan .
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In the General Policy Speech by Prime Minister Koizumi in January 2003, the government announced
that it would aim to double the cumulative amount of inward FDI into Japan in five years as part of its
efforts to achieve a rebirth of Japanese charm. This reaffirms the government’s understanding of the
significance of inward FDI and expresses, both domestically and abroad, the fervent will of the
government to aim for the expansion of inward FDI. In the future, further promotion of FDI into Japan
needs to be achieved through the steady implementation and improvement of measures to promote
inward FDI decided by the Japan Investment Council and active PR activities directed at foreign
investors concerning these measures.
Given the staunch will of the government as a whole to promote investment in Japan, the Ministry of
Economy, Trade and Industry (METI), with the cooperation of relevant ministries and agencies, is
dynamically promoting endeavors to promote investment into Japan, as the following will describe.
These endeavors are undertaken considering viewpoints such as improvements in the business
environment, improved system for attracting investment and development of a favorable living
environment for foreigners.
(a) Improvements in the business environment
Due to the prolonged economic stagnation and intensified international competition, there is an even
more pressing need for Japanese corporations to restructure and revive their businesses. With the
objective of facilitating business revival by methods including cross-border M&A, the Law on Special
Measures for Industrial Revitalization was amended at the current regular session of the Diet. To be
specific, in the event that mergers or stock swaps are performed based on a plan authorized in
accordance with this law, it allows the use of stocks of the parent companies (including foreign
companies) of the defunct company (triangular merger) or cash (cash-out merger) as consideration, in
lieu of the stocks of the surviving company. This measure facilitates business revival by foreign
companies because it allows them to make domestic companies their complete subsidiaries. In the future,
the government intends to deliberate on permanent measures concerning the easing of rules on
compensation for mergers and other transactions, which will allow either stocks of parent companies,
including foreign companies, or cash to be used as consideration for mergers, assimilations and spin-offs
or stock swaps.
(b) Improved system for attracting investment
In order to attract investment into Japan, it is essential to aggressively publicize Japan’s investment
environment, approach foreign companies in ways such as locating potential investors to attract to Japan,
and enhance user-friendly support measures such as one-stop service for corporations considering
investment. Therefore, METI, as one of its projects in FY2003, established a one-stop information
center at JETRO, which provides information on investing in Japan6. Through this center, METI intends
6
The JETRO Business Support Center (BSC) was established in May 2003 with the goal of supplying, in one
place, all the information concerning Japan’s investment environment and procedures as well as offering
consultations and advice on specific cases of investment. In addition, in the same month, contact points
providing information on FDI into Japan called Invest Japan were established in the relevant ministries and
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to fundamentally enhance JETRO’s ability to provide information and investment consultations by
consolidating its contact points and augmenting its advisors who respond to investment consultations in
Japan. Furthermore, METI, in cooperation with local governments, will become involved in activities
encouraging investment that draws on the appeal of local regions and provide support to foreign
companies in a way that takes their viewpoint into consideration.
Moreover, the government has decided to implement, as a new project in this fiscal year, the
Advanced Areas to Promote Foreign Direct Investment with a view to supporting local governments
that are actively involved in activities to elicit foreign capital that makes use of the distinct features of
local regions. In concrete terms, five regions that formulated pathbreaking and region-specific plans for
activities to elicit FDI and are equipped with a structure to effectively receive foreign capital were
selected in April 2003 (Fig. 3.1.16). Through this program, the government aims to rejuvenate the
Japanese economy by spreading the activities of eliciting inward FDI throughout the country. This will
be realized through the government’s support for the activities by the five regions to elicit foreign capital
that harnesses the distinct features of each region based on their plans and subsequently stimulating
efforts in other regions.
Figure 3.1.16 Overview of Advanced Areas to Promote Foreign Direct Investment
1
2
Proposing party
Osaka Prefecture,
Osaka City,
Higashi Osaka
City, Ibaraki City,
Osaka Chamber of
Commerce and
Industry
Sendai City
Region
1) Northern Osaka area
centered around Saito
(International Culture
Park)
2) Osaka City (eastern
wards and downtown,
Cosmo Square area) and
Higashi Osaka City
Proposal outline
The Osaka Business and Investment Center
(OBIC) would provide free support to foreign
businesses to overcome bottlenecks in investment
such as immigration and business start-up
administrative procedures, employment and tax
procedures, starting this fiscal year. It would also
advance a groundbreaking initiative to use
computers for the process of online applications to
the prefecture, and work on the simplification and
speeding up of bureaucratic procedures. The OBIC
is also preparing a support menu that includes
higher ceilings on subsidies and five-year rent
holidays for land in industrial parks, and would
run a campaign to attract investment in
conjunction with the four proposing local
governments and the Osaka Chamber of
Commerce and Industry.
Features of proposal
Osaka hosts a range of firms which contribute to
competitiveness such as Matsushita Electric, Sharp
and Sanyo, and it is also the focus of a cluster of hitech industries such as IT and nanotech which have
sprung up in the cutting edge fields of satellites and
robots. Furthermore, Osaka is home to Osaka
University, a world leader in biomedical research, as
well as top firm Takeda Chemical and other
pharmaceutical companies, with the subsequent
buildup of dense intellectual infrastructure and
industries. The prefecture is promoting investment
by providing foreign firms with business
opportunities flowing from these clusters.
Sendai City
In order to give birth to new industries, Sendai
would support an international R&D project with
Finland, a leader in IT and welfare, to generate
high value-added medical welfare devices and
services, harnessing IT. It would direct
development that reflected the needs of the elderly
and care staff, in conjunction with nursing welfare
facilities and R&D facilities. This internationally
competitive project would provide the momentum
for companies from the EU region to invest in
Sendai, with Finland as the gateway.
Aiming for intellectual foreign investment that
harnesses the “academia” resource of Tohoku
University and institutions with proven success as
part of academia-industry cooperation would
strengthen international competitiveness through
partnerships with industrial clusters overseas.
Proposing a medical welfare device development
project as its specific theme, rather than a
comprehensive investment promotion, will make
Sendai more attractive to the firms targeted.
Companies participating in the project will be
encouraged to invest in the city, and the support for
joint R&D with local businesses and universities
will strongly facilitate their interaction with the
region.
agencies to supplement the BSC.
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Proposing party
4
Hiroshima
Prefecture,
Hiroshima City
5
Fukuoka
*）Prefecture,
（
Kitakyushu City,
Fukuoka City
Region
Proposal outline
Features of proposal
Hiroshima City, Kure
City, Higashi Hiroshima
City (R&D and New
Enterprise Special Zone)
The automotive-related industry in Hiroshima
Prefecture resembles a “corporate town-type
industrial cluster” which has Mazda (Ford) at its
peak. In the midst of global economic competition,
the industry is facing new changes. This proposal
seeks progressive development of Hiroshima’s
automotive industry as a “general mobility
industry” that attracts foreign investment to the
region through inviting foreign seed business and
intellectuals, and pursues advancement and
efficiency in harmony with society in terms of
environment, energy and safety.
Hiroshima Prefecture is proposing an R&D and
New Enterprise Special Zone (harnessing overseas
human resources) in cooperation with Hiroshima
City, one of the ordinance-designated major cities.
The proposal aims to link the cutting-edge
technologies emerging from the automotive industry
and the “technological prowess of the
manufacturing industry,” a local resource, in order
to create a general mobility industry cluster.
Fukuoka Prefecture
(Kitakyushu City and
Fukuoka City)
This project proposes the wide-ranging overseas
promotion of the competitive advantages of
northern Kyushu, including a spirit of innovation
which is stronger than in other international
shipping special zones as evidenced by the
Fukuoka Silicon Sea Belt Project which aims for a
regional division of labor with Asia, an
environmental exchange with Germany, the
unique industrial cluster in the region, its R&D
capabilities and its excellent business
infrastructure. The proposal envisages focusing on
target companies, invitations to company
executives and top-level sales, and the region
would join together to provide one-stop service
support for foreign companies investing in Japan.
Northern Kyushu is located 90 minutes from Seoul,
Shanghai and Tokyo, and with business
infrastructure such as an international airport and
ports that serve Asia, it possesses a strong
competitive advantage in distribution. The region
hosts a cluster of IT and automotive firms such as
Sony, Nissan and Toyota, as well as 23 universities,
system LSI colleges and high-level IT human
resources academies which provide talented human
resources. The proposal aims to establish one-stop
support systems for foreign companies investing in
Japan, thereby making northern Kyushu an Asian
business hub surpassing Singapore.
Yamaguchi
Shimonoseki City
Prefecture,
Shimonoseki City
Shimonoseki City, linked to the current world
Harnessing its prime location in the Pan Yellow
Sea Economic Zone, Yamaguchi Prefecture, which growth centers of Shanghai and Qingdao via the
Yellow Sea, is a hub in the middle of the Pan
has been promoting exchange with East Asia,
would under this proposal undertake a campaign Yellow Sea Economic Zone that connects East Asia
and Japan. Harnessing its competitive advantage in
to attract businesses mainly from Qingdao City
transport infrastructure, including the harbor
and the fast-growing Chinese province of
functions of Shimonoseki Port as part of the
Shandong. Promoting Shimonoseki City and
Kitakyushu City as one area would contribute to northern Kyushu international shipping hub, its
regular international ferry connections to Pusan and
business with Asia; this proposes implementing
joint promotional activities based on the various Qingdao and its access to Japan’s expressway
network, Shimonoseki City will provide business
partnerships established between the cities.
opportunities to businesses looking to develop their
operations across a wide area focusing on Japan and
the East Asian region.
* Indicates the two parties that proposed to carry out PR activities as an integrated region that traverses the prefectural boundary. In regard to “support
for a business investment promotion campaign” that develops, creates and disseminates publicity materials, both proposing parties would carry out
these activities in partnership.
Source: METI.
(c) Development of a favorable living environment for foreigners
With a view to promoting inward FDI and drawing excellent human resources from abroad, the
revisions to the tax system in FY2003 included elements to develop an educational environment for
foreign children living in Japan. As a result, school juridical persons, who are primarily designated to
establish certain international schools, were added to the scope of designated public-service promotion
corporations. In addition, the tax revisions established that contributions by individuals or corporations
are covered by preferential tax treatments, including contribution deductions.
(d) Bilateral and regional cooperation aimed at promoting investment into Japan
<United States-Japan Investment Initiative>
The United States-Japan Investment Initiative was established together with the launch of the United
States-Japan Economic Partnership for Growth, which was announced at the Japan-US Summit Meeting
in late July 2001. It was set up as an opportunity for dialogue to be held on measures to improve the
environment with a view to promoting FDI in both Japan and the US. This initiative is co-chaired by
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METI and the US Department of State and is composed of high-level meetings and working group
meetings. The high-level meetings are chaired by vice-ministerial officials of both countries, while the
working group meetings are attended by working-level officials. Opportunities are provided, as
necessary, for private sector members of both countries to participate and provide their opinions so that
their opinions can serve as a reference for intergovernmental discussions.
The United States-Japan Investment Initiative 2003 Report, which was released in May 2003, includes
the status of FDI in Japan and the US, recent trends in Japan to promote FDI into Japan and the results of
discussions that were held at this initiative between 2002 and 2003. At this initiative, discussions are
being held with a view to the development of an investment environment in Japan and the US. In the
course of discussions about Japan’s FDI environment, the US government raised concerns such as
increasing ways for foreign companies to perform M&A in Japan and promoting foreign investment in
education and medical services, which will become more important in the future as Japan faces a
declining birthrate and aging population. The US also mentioned improving accounting standards and
real estate appraisals to facilitate due diligence of partner companies with which to perform M&A,
increasing assets in which foreign investors can invest and facilitating labor mobility. In response, the
Japanese government explained its recent efforts to improve the FDI environment, such as the revisions
to the Law on Special Measures for Industrial Revitalization to allow triangular mergers and cash-out
mergers.
Furthermore, this initiative has held public programs to explicate the mutual benefits of FDI to the
people of Japan and the US. Specifically, in April 2003 Investment Initiative Seminars were held in
Osaka and Sapporo, in which the Japanese and US governments, JETRO, local governments, regional
business circles and US companies participated. At these seminars, an exchange of views was held on
the effects of FDI including M&A on regional economies as well as on measures to attract foreign
companies and investors into local regions. In addition, in June 2003, an Investment-in-Japan
Symposium was held in Chicago and another in San Francisco in the US, at which US companies and
investors learned about Japan’s status of progress in developing an environment for FDI as well as
examples of US companies that had successfully entered the Japanese market.
Through these schemes, the United States-Japan Investment Initiative is striving to promote the
development of an environment for FDI in both Japan and the US and foster mutual understanding on
the significance of FDI and the investment environments of Japan and the US.
<Japan-EU Initiatives on Investment>
At the Japan-EU Summit that was held in May 2003, Japan and the EU released the Japan-EU
Initiatives on Investment with the aim of raising the mutual awareness of their respective markets and
boost two-way FDI between Japan and the EU. In this context, through mutual cooperation, Japan and
the EU plan to aggressively endorse activities to elicit investment into Japan, through efforts such as: (i)
holding investment symposia; (ii) having exchanges and encouraging cooperation between investment
promotion bodies; and (iii) holding publicity events.
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