The Impact of Foreign Direct Investment in Japan: Case Studies of the Automobile, Finance, and Health Care Industries

Abstract

Having historically received very little foreign direct investment, Japan has experienced a substantial increase in such inflows in recent years. This paper analyzes the impact of the growing presence of foreign firms on the Japanese economy through detailed case studies on the automobile, finance, and health care industries. The wholesale & retail and the telecommunications sector are also briefly examined. The case studies show that in the sectors considered, foreign firms in one way or another are contributing to a greater degree of competition, are exposing domestic firms to global best practice, and are increasing the range of products and services available in Japan. In many of the sectors, they are also contributing to changes in industry structure and employment practices. The case studies thus illustrate that foreign direct investment - even at its present levels, which, although large by Japanese standards, are still low in international comparison - can be an important catalyst for change and hence help to reinvigorate the Japanese economy.