Japanese Foreign Direct Investment Research Articles

The influence of Japanese automotive industry investment in East Nógrád

This study explores Japanese-Hungarian economic relations, specifically focusing on foreign direct investments (FDI) in Hungary. The analysis delves into the historical development and current state of Japanese capital flow into Hungary, with a particular emphasis on the automotive industry. Foreign direct investments are shown to enhance productivity throughtechnology transfer and foster positive impacts on corporate relationships, contributing to economic growth. The study demonstrates the mutual benefits of Japanese FDI in the Hungarian automotive industry and includes a case study on the activities of a Japanese company in Hungary, examining its role in the regional labour market.

Implikasi Foreign Direct Investment Jepang melalui Toyota terhadap Perekonomian Indonesia Periode 2016-2022

This article focuses on cooperation between Japan and Indonesia through the development of a Toyota subsidiary in Indonesia as an instrument for Japanese Foreign Direct Investment. Japan is a country that has quite an important role in the international world because of its development in the economic sector, where currently Japan can dominate the international market through advances in automotive technology. The rapid development of the automotive industry has encouraged Japan to invest in Indonesia. This article aims to find out what the results of Indonesia-Japan FDI cooperation are through the development of Toyota in Indonesia in 2016-2022. In order to approach this problem, references to the theories of liberalism, bilateral cooperation and Foreign Direct Investment are used. Data was collected through secondary data as a data source, as well as using desk review and analyzed qualitatively. This study concludes that Japanese FDI through the Toyota company has enabled Indonesia to improve its economy through a high increase in the value of exports to several countries, expanding employment opportunities, as well as providing a positive impact on improving environmentally friendly technology.

Japanese Foreign Direct Investment and ASEAN Trade Development

Japanese Foreign Direct Investment and ASEAN Trade Development

State-level Location Determinants of Japanese Automotive FDI in Mexico

Foreign Direct Investment (FDI) location theories highlight the regional factors that influence the location and spatial distribution of the investment project. The study employs a state-level spatial panel econometric model to empirically contrast the main location factors that influence the spatial distribution of Japanese companies. The main results indicate that state characteristics related to the presence of infrastructure, lower wages, agglomeration, and development of the automotive industry influence the presence of Japanese automotive firms in Mexico. The results also highlight the presence of negative spatial externalities for the wages, population, industry agglomeration, and education variables. This shows that neighboring states compete for the arrival of Japanese automotive firms and spatial effects are present. Positive spatial externalities were observed from the market size variable, which can reflect the presence of production networks in the automotive industry, especially for the case of Japanese firms.

Regional healthcare infrastructure disparities and foreign direct investment into Europe

This study examines the impact of sub-national healthcare infrastructure heterogeneity on the location choice of inward foreign direct investment (FDI). We do so by employing an augmented gravity model on Japanese firm-level FDI into European NUTS-2 regions during the period 2000-2017. Differences in each region's per capita number of hospital beds and practicing physicians highlight the healthcare infrastructure heterogeneity across Europe. Our negative binomial estimation results indicate that both hospital beds and practicing physicians significantly positively attract inward FDI, with physician density having the more significant impact. The findings are consistent with the hypothesis that the quality of local institutions is a determinant of FDI attraction.

Japanese FDI and Development Vision of Bangladesh: Lessons from Thailand

Bangladesh is aspiring to become a developed country under the ‘Vision 2041’. However, materialization of this development vision requires huge amount of fund. Regrettably, country’s dependency on foreign aid is still more than 35%. Internal borrowing is also increasing considerably, where as Foreign Direct Investment (FDI) can make a significant contribution to the financial basket of the country. Nonetheless, government has set a target to increase the contribution of FDI to 3% of the GDP in the 8th Five Years Plan (FYP) which was 1% in 7th FYP. Being one of the most trusted friendly nations, Japan continued its support towards Bangladesh since the independence. Japan has the tendency to shift FDI to a country after improving the infrastructure through Official Development Assistance (ODA). The same trend is also appearing in Bangladesh. Bangladesh has become the number one recipient of Japanese ODA in 2020 and the amount of Japanese companies is also increasing in Bangladesh which is curtly around 320. With a view to mitigating the gap between aspiration and reality while succeeding to accomplish development goals, countries with limited resources like Bangladesh can be hugely benefited by the Japanese FDI. The ASEAN nation Thailand, with more than 6000 Japanese companies, is one of the economies that has been significantly benefited by the Japanese FDI. Therefore, this qualitative research investigates the case of Thailand based on key stakeholders’ interviews and analysis of documents. The major findings of this paper in terms of main challenges Bangladesh is facing to attract Japanese FDI are national image crisis, lack of infrastructure, skilled human resources, local procurement of raw materials, frequent change in law and policies, uncongenial regulations regarding VAT, tax and customs and port clearance. The main lessons Bangladesh can learn from Thailand to attract FDI from Japan includes lower corporate tax, port facilities, easier port clearance and participation in economic partnerships, such as RCEP. This paper contributes to the literature in the area of business studies, economics, development studies, international relations, public policy studies and Japanese Studies.

Macroeconomic risk factors and Chinese FDIs in real estate: evidence from the Asia-Pacific public real estate markets

PurposeThe aim of this study is to shed light on the relative importance of Chinese (Mainland China and Hong Kong: CH-HK) foreign direct investments (FDIs) in real estate (FDIRE) on the dynamics of Asia-Pacific (APAC) public real estate markets after the Global Financial Crisis.Design/methodology/approachUsing a parsimonious real estate asset-pricing model including macroeconomic risk factors, the authors develop a metric to measure FDIs in the real estate sector. The authors use a panel VAR approach based on robust econometric methodology (generalized method of moments) and deal with potential endogeneity and an eventual causality problem. The authors also compute multiple metrics to measure the Chinese, US and Japanese FDIs in the real estate sector.FindingsThe study results report a positive significant impact of CH-HK FDIRE on APAC public real estate returns, while FDIRE originating from outside China are not significant. The authors also show that Chinese investors use the channel of FDIs in Diversified Listed Property Companies (LPCs) and Hotel and Family LPCs to gain exposure to the APAC real estate markets. The study results suggest that APAC property markets are mainly impacted and emphasize the importance of an intercontinental diversification strategy for investors in LPCs in the APAC region.Practical implicationsContrary to Bond et al. (2003) who identified that APAC public real estate markets were overwhelmingly idiosyncratic in the decade preceding China's WTO membership (1990–2001), the study findings underline that Chinese FDIRE became a common factor affecting all eight markets in this study in the decade following the global financial crisis (2007–2017). The results emphasize the importance of an intercontinental diversification strategy for investors in LPCs in the APAC region.Originality/valueThe authors use a parsimonious model, introduce metrics to measure FDIRE and apply a panel VAR approach based on a robust econometric methodology to shed light on China's economic globalization strategy on Asia-Pacific public real estate markets after the GFC. The study results highlighting the major impact of CH-HK FDIRE on securitized real estate market returns dynamics, identify the existence of an Asian common factor driven by Chinese FDI inflows into neighbouring countries.

Brexit and Japanese foreign direct investment in the UK: a sectoral analysis

AbstractPolitical and economic stability significantly affect the economic performance of a country and its ability to attract inward investment. This article investigates Brexit-associated uncertainty and Japanese foreign direct investment (FDI) inflows into the UK. In contrast to most previous studies that use pre-vote behaviour to model post-vote outcomes, we include both pre- and post-announcement and post-vote data on Japanese firm-level FDI activity into Europe. In a Knowledge-Capital framework, we examine the annual count of newly established Japanese foreign affiliates into 80 countries between the years 1995 and 2019. Results from a negative binomial model reveal a statistically significant relationship between the Brexit announcement and decreased FDI in the UK. Our results identify significant sectoral heterogeneity, indicating the difficulty in making broad claims as to Brexit’s effect on the British economy’s future.

Determinants of German and Japanese Exports: A Comparative Study

This study investigates the determinants of German and Japanese exports in a comparative fashion. By estimating an autoregressive distributed lag model for each country, we find that the income elasticity of Japanese exports is three times as large as that of Germany’s exports. This relative insensitivity to external demand explains why Germany has maintained its export growth whereas Japanese exports started to stagnate after the global financial crisis. Because Germany adopted the euro in 1999, it was able to maintain large trade surpluses. If Germany had instead kept the Deutsche Mark (DM), the DM would have appreciated owing to the Central Bank of Germany’s consistent preference for a tight monetary policy, and Germany’s trade surpluses would have dissipated. A sharp increase in Japanese foreign direct investment after 2011 has also played a role in reducing Japanese exports after the global financial crisis.

Governance, Once Removed: Shareholder Rights Effectiveness vs. Expatriate Deployment

We investigate the impact of host-country shareholder rights protection on location and governance modes of Japanese foreign direct investment (JFDI). Agency theory predicts that strong shareholder rights protection in host countries should not increase location attractiveness nor impact entry and governance mode decisions, as foreign shareholders are outside the jurisdiction of host country laws. However, informal institutional mechanisms, including managerial bonding and isomorphic pressures, as predicted by institutional theory, may create indirect control over host country managers which reduces agency costs. Hence, we predict that higher shareholder rights protections will enhance a potential host country’s JFDI attractiveness, and that subsidiaries established in host countries with higher shareholder rights protection will employ fewer Japanese expatriates. We find support for our predictions based on a sample of JFDI established between 1986 and 2012.

The Success of Japanese Foreign Market Investments in Hungary

This study examines the recent history and current state of a special area of Japanese-Hungarian economic relations, foreign direct investments (FDI) in Hungary. We reviewed the flow of Japanese capital into Hungary. Foreign direct capital investments can improve productivity on the one hand via technology transfer, and one the other hand, they may have further positive effects through corporate relationships, such as market access or improved financing conditions. Through these means, they strengthen economic growth. When analyzing the data on the historical development of Japanese investment, we showed that the automotive industry plays a dominant role. Based on our results, the influx of Japanese FDI into the Hungarian economy is mutually advantageous to both parties. The most important result for Hungary was economic growth and for Japan, the easier access to the EU markets. Japanese-Hungarian relations are not limited to economic cooperation, they are present in everyday life and continue to grow closer.

Sister cities, cross-national FDI, and the subnational FDI location decision

We investigate how intergovernmental ties at subnational levels between home and host countries influence the intensity and location of foreign direct investment (FDI) inflows. We focus on an intriguing type of subnational tie, namely, International Friendship (Sister) Cities. A sister city is a decentralized form of intergovernmental relationship that provides a platform by which a multinational corporation (MNC) can approach a local government, customers, and clients to acquire localized information and political capabilities. We argue that cities with a sister-city relationship attract more FDIs than other similar cities within a host country. The benefit extends to the national level as MNCs have higher FDI levels in host countries with a greater number of sister cities with their home country. We further investigate whether the effect of sister cities on an MNC’s country selection is greater when host-country subnational governments have a higher degree of autonomy relative to the national government, and lesser when governments have a higher level of policy uncertainty. Using data from the 1990–2009 period, we find consistent support for our ideas as tested at two levels of analysis: a city-level matched sample analysis on Japanese FDI inflows, and a country-level analysis on Japanese MNCs’ country selection.

Japanese Foreign Direct Investment in the Visegrád Four: Trends, Characteristic and Driving Forces

Japan continues to be the most important Asian investor in Poland and Czechia, and the second most important player in Hungary and Slovakia (after South Korea). Japanese multinationals, operating in the automotive, electronics and other industries, as well as in certain services, play an important role in the Central and Eastern European economies, enhancing the performance of the respective V4 economies. Although compared to, for instance, German MNCs’ investment, Japanese MNCs represent a rather minor share in the total FDI stock of these countries, the number of companies increase year-on-year. The paper briefly presents the history and main trends of Japanese investment in the V4 region, maps out the main characteristics of Japanese investment flows, and identifies the driving forces of Japanese FDI within the V4 region. The last section of the paper also sheds light on a new opportunity for the V4 countries to attract more investment from Japanese companies, that is the Japanese companies’ possible relocation to the V4 region from the United Kingdom, as a result of Brexit.

Brexit and the location of Japanese direct investment in European regions

This paper investigates how the Brexit announcement affects Japanese direct investment into Europe at the regional NUTS-2 level. Political and economic uncertainty is an important factor affecting the economic performance of a country and its regions. In this study, Japanese annual firm-level data between the years 2000 and 2018 for 31 European countries is used. Negative binomial estimations indicate a significant negative relationship between uncertainty associated with the Brexit announcement and Japanese foreign direct investment (FDI) in the UK regions. Strong FDI path dependence currently acts to dampen this effect. However, depending upon future European Union Single Market access rules, such path dependence could act to magnify Brexit’s effect on inward-UK FDI. JEL Classification Codes: F23, R12.

The Local Labor Market Effects of Korean Automotive Investments in the United States

This study investigates the local labor market effects of automotive foreign direct investment (FDI) in Alabama in the wake of the North American Free Trade Agreement (NAFTA). Of particular interest is the effect of FDI originating from a nontraditional source country in comparison to investments by European and Japanese firms. Using 2005–2011 American Community Survey (ACS) data, we compare changes in employment rates and median weekly wages in three area types: areas with Korean FDI, areas with German and Japanese FDI and areas without FDI. Results show that Korean FDI leads to increased employment rates but decreased median weekly wages. We attribute these findings to price competitive strategies of Korean firms.

Revisiting Complementarity between Japanese FDI and the Import of Intermediate Goods: Agglomeration Effects and Parent-firm Heterogeneity

This study revisits the nexus between foreign direct investment (FDI) and international trade in the dynamic perspective, focusing on intermediate goods imports of affiliates of Japanese firms operating in China. To examine the effect of the formation of the agglomeration and the recent FDI made by small firms, both of which have been overlooked in the literature, we construct a unique parent-affiliate matched panel data set of trade in intermediate goods, and estimate a discrete-time hazard model over the 2000–06 period. We found that affiliates owned by firms in agglomerated regions in Japan have a shorter duration of trade in intermediate goods compared with affiliates owned by smaller Japanese firms.

Análisis de los principales determinantes de la aglomeración industrial: el caso de la IED japonesa automotriz en México

The current research analyses the agglomeration behavior of Japanese Foreign Direct Investment in Mexico’s automotive sector in the Bajio region. The study employs unpublished data obtained from Mexico’s Secretariat of Economy. The database is used to carry out the empirical analysis using spatial econometric techniques and test the presence of spatial dependence in the variables of the model. According to the results, Gross Domestic Product (GDP) per capita, labor force, transportation infrastructure, and geographical distance explain Japanese FDI agglomeration in Mexico’s Bajio region. The results also elucidate that economic similarities within entities may help attract investment in similar proportions to neighboring states. Additionally, positive spatial effects from Japanese FDI were found, suggesting that an increase in Japanese FDI in one state is followed by increments of Japanese investment in neighboring states. This may be evidence of horizontal cooperation and a result of Japanese firms taking advantage of scale economies and the development of specialized labor markets and suppliers in the Bajio region.

Análisis de los Efectos Productivos de la Inversión Extranjera Directa de Japón sobre la Industria Electrónica de México

Introducción: La Inversión Extranjera Directa (IED) se considera una fuente para aumentar la productividad de industrias manufactureras en países en desarrollo. México, desde su proceso de apertura comercial ha facilitado la llegada de empresas extranjeras esperando beneficios económicos en forma de derrames. El caso de análisis de la IED de Japón en México resalta ya que, desde la entrada en vigor del Acuerdo de Asociación Económica en 2005 entre estos dos países, los flujos de IED se han incrementado de manera considerable sobre todo con presencia en la industria electrónica. Estudios previos han demostrado que debido a las características intrínsecas de la IED japonesa, se encuentran impactos positivos y relevantes para la productividad de diferentes industrias manufactureras en diferentes contextos. El objetivo de este estudio es el análisis de los efectos productivos de la Inversión Extranjera Directa (IED) de Japón sobre el crecimiento en producción de la industria electrónica de México durante el periodo de 2000 al 2016.Método: Se utilizó la metodología KLEMS como base para el modelo econométrico. Se presentan dos modelos de regresión de series de tiempo donde, a nivel agregado, se relacionan factores de producción (capital nacional, capital extranjero o IED, mano de obra, energía, materiales y servicios) como variables independientes para observar sus efectos en la variable dependiente: producción de la industria electrónica. La hipótesis general de trabajo es: la IED de Japón tiene un efecto positivo y representativo en la producción de cada una de las ramas de la industria electrónica de México. Ambos modelos son estimados en términos logarítmicos desde 2000 al 2016, el primero analizando la industria en su totalidad y el segundo dividido por ramas específicas de la industria. A su vez, los resultados se contrastan con un tercer modelo que sigue una función de producción tipo Cobb-Douglas, con dos factores (capital y trabajo) para comparar y corroborar los resultados encontrados.Resultados: Los resultados señalan efectos positivos y significativos para tres de las seis ramas analizadas de la industria electrónica.Discusión o Conclusión: De los resultados obtenidos se concluye que la IED Japonesa tiene efectos productivos positivos en las ramas electrónicas de computadores y equipo periférico y en la de audio y video. Bajo ciertas especificaciones se encuentran efectos adicionales en la rama de equipos magnéticos y ópticos. El análisis sugiere que los efectos de la IED deben ser analizados por rama y/o clase económica industrial dentro del país receptor. Así mismo, bajo la metodología KLEMS, se encuentra una fuerte relación entre los consumos intermedios de los factores de producción, principalmente materiales, con el crecimiento de la producción de esta industria.

Japan’s foreign direct investment in Russia: a big return from a small opportunity

ABSTRACTIn this paper, we demonstrate the trends and prospects of Japanese foreign direct investment (FDI) in European Emerging Markets (EEMs) against the background of the recent development of emerging markets in the world FDI flows and explore the specificities of the Russian market, the biggest EEM in terms of market size and inward FDI received. More specifically, we overview foreign capital flows from Japan to Russia and describe the achievements and problems of Japanese investors as related to business with Russia. We find that the Russian market seems to be a lucrative option for Japanese firms, despite limited institutional freedom afforded to outsiders and unfavorable investment conditions, including the language barrier due to the wide usage of Russian in the business field – factors that have been reflected in higher transaction costs.

The impact of the Turn to the East Policy on foreign direct investment in the Russian Far East

This study aims to measure the effectiveness of Russia’s Turn to the East Policy, addressed by the federal government in 2012, on the economic development of the underdeveloped Far Eastern regions, in terms of foreign direct investment (FDI) inflows data. To do so, this paper analyzed the results of the representative policy mechanisms - designed to promote the Far Eastern investments - of the Turn to the East Policy, comprised of the Eastern Economic Forum (EEC), Advanced Special Economic Zones (ASEZs), and Vladivostok Free Ports (VFPs), based on the secondary data from the governmental organizations. From the study, in spite of the previous contentions on those policy mechanisms amongst policymakers, we elucidate the incremental growing FDI - majorly contributed by the East Asian countries: China, Japan, and South Korea - propensity in the Far East. The three Eastern Asian countries promote investments in the Russian Far East for different eco-political purposes. And it further analyzed that for Russia, despite the remarkable magnitude of Chinese and Japanese FDI compared to South Korea, South Korea is still the most attractive partner, in terms of lack of threats: The Chinese expansionism, and the Kuril Island dispute with Japan.