Foreign Direct Investment and Economic Revitalization in Japan: The Role of the Foreign Firm in Niseko

Abstract

Foreign direct investment has traditionally played a marginal role in Japan’s economy and business structure.1 In recent years, however, official policy has become more liberal, and the government now actively promotes inward FDI and foreign participation in the economy (Dolles and Takahashi, 2011). The result has been an increase in annual flow and accumulated stock of FDI, although these remain modest in absolute and relative terms. An assumption underlying this policy trend has been that the tangible and, more importantly, intangible assets that such investments can bring would stimulate the domestic economy and promote structural reform. This chapter investigates these claims with reference to FDI in Niseko, a ski resort on the Northern island of Hokkaido where foreign investment and/or ownership has dramatically increased in recent years, leading to the so-called Niseko boom. Strikingly, this boom has been led largely by foreigners (as investors and tourists) and is notable for the relatively minor role played by domestic firms. Two questions thus guide this chapter: (1) to what extent is foreign direct investment contributing to the economic revitalization of the local and regional economy, and (2) what, if at all, are the implications of the Niseko experience for FDI-led economic revitalization elsewhere?