Japanese Investment in Asia Soaring

The Ministry of Finance recently reported that the share of Japan's direct investment in the developing economies of Asia, particularly the members of the Association of Southeast Asian Nations, grew rapidly during fiscal 1994 (April 1994 to March 1995). Investment in Indonesia, for example, was more than double its fiscal 1993 level, and triple growth was recorded in the case of the Philippines and Vietnam. These statistics indicate that in response to the most recent appreciation of the yen, which jumped to an exchange rate of approximately one dollar to 80 yen, Japanese companies are increasingly making Asia the centerpiece of their global manufacturing operations.
According to the Finance Ministry, Japanese foreign direct investment in fiscal 1994 increased 14% over the previous fiscal year, totalling $41.1 trillion and registering double-digit growth for the first time in six years (since fiscal 1989). Breaking down this figure by region, Japanese enterprises invested $17.8 billion in North America, making it the leading recipient of Japanese direct investment for the thirteenth consecutive year. Asia ranked second at $9.7 billion, followed by Europe at $6.2 billion. In terms of percent growth over the previous fiscal year, however, Japanese investments in Asia came in first at 46.1%, followed by North America (16.6%) and Europe (where investments fell 21.5%).
In the case of investment by Japanese manufacturers, spending in Asia in fiscal 1994 jumped approximately 40% over the previous fiscal year to $5.18 billion, surpassing the figure for North America ($4.76 billion) for the first time in 14 years. Whereas growth was marked among the six ASEAN countries as well as Vietnam and China (which registered a 51.7% surge), investment by Japanese producers in the East Asian newly industrialized economies is slowing, falling 8.5% in Hong Kong and 4.8% in Taiwan.
The direct investment activities of Japanese firms show that they are expanding the scope of their operations to take advantage of opportunities in parts of the globe where costs are lower and goods can be produced more competitively.