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Investing Essay

1311 words - 6 pages


In the era of globalization, international trade and international investments are expanding at exponential rates. Almost all developed countries are involved in Foreign Direct Investment processes, both in the form of outward and inward FDI. Among those developed countries there is the case of Japan that is different; Japanese attitude towards FDI has always been, in fact, very cautious. One one hand, Japanese outward foreign investment and exports have played a fundamental role in the postwar period of economic rise; on the other hand, the accesses to the domestic market by foreign investors, the so called Inward FDI, has been very limited. (Paprzycki, Fukao, 2008).
Japan is a highly industrialised country, it has a large-sized market, its labour force is very well-educated and the political situation is much more stable than almost all other East asian countries, then why is inward foreign direct investment rate so small in Japan? ( Frank, 1975).
As a study of Hara and Razafimahefa (2003) highlights: “in 1999, inward FDI amounted to 0.7% of the GDP whereas the ratio reached 9.3%, 9.5%, 11.7% and 23.3% for Germany, The United States, France and England, respectively”.
Even if the level of inward FDI is still very low, from the second half of 1990 its level is steadily increased; it's passed, in fact, from 3,837 millions US$ to 28,276 millions US$ in 2000. (Hara, Razafimahefa, 2003). Japanese government has promoted some policies to help Inward FDI to rise such as a new legislation facilitating the acquistion of Japanese firms by foreign Companies and the creation of the Japanese External Trade Organisation (JETRO) (Head, Ries, 2005). By analysing the attitude of Japanese government towards inward FDI, it can be noted that some changes have occurred in the 60s and 70s with the capital liberalization; but the real policies promoting inward investment have been promoted throughout the 90s and are continuing also nowadays.
From the end of 1960 to the mid 1970s, Japan gradually opened its economy to inward FDI. In 1964 Japan was accepted as a member of OECD and was forced to accept the OECD's Code of Liberalization of Capital Movements. Therefore, it has been obliged to deregulate foreign-exchange controls by observing article 8 of the IMF (International Monetary Fund) charter. Despite all this, Japanese government at that time considered inward foreign investment as a threat for local market; in 1967, in fact, the Gaishi Shingikai (Foreign Investment Deliberation Council) highlighted the negative points of the liberal capitalization, defining the domination of foreign firms as negative for Japan's economy. (Suginohara, 2008).
From 1960, with the approval by the government of the Basic Plan for Liberalization of Trade and Foreign Exchange, a major number of sectors was liberalized; Japan subsequently liberalized imports, capital transactions and financial sector. Starting from the second half of the 1960s Inward and outward FDI...

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