Japanese direct investment in Asia-Pacific and other regions: Empirical analysis using MITI survey data

Abstract

Japanese foreign direct investment (FDI) increased significantly in recent years. In North America and Europe Japanese FDI is set up primarily to serve the local market while in Asia Japanese FDI exports considerable amounts of their products to Japan and other countries. In this paper the effects on profitability, among other firm performance measures, of intra-firm and foreign-trade behavior by Japanese firms and their overseas subsidiaries are investigated empirically using the data published by the Japanese Ministry of International Trade and Industry. Our findings indicate that intra-firm trade is an important source of profits for both parent and subsidiary firm. The impact of intra-firm trade on firms taxes payable and other related issues are also discussed.