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Japans Outward FDI in Globalization
Japans Outward FDI in Globalization
What does determine outward FDI
What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
1. What does determine outward FDI
2. New Asian economic landscape: trade pattern inside Asia has changed
2. New Asian economic landscape: trade pattern inside Asia has changed
2. New Asian economic landscape: Import relation between Japan and
2. New Asian economic landscape: Import relation between Japan and
2. New Asian economic landscape: Import relation between China and
2. New Asian economic landscape: Import relation between China and
2. New Asian economic landscape: overseas market is increasing share
2. New Asian economic landscape: overseas market is increasing share
2. New Asian economic landscape: overseas market is increasing share
2. New Asian economic landscape: overseas market is increasing share
3. Distribution of Japans outward FDI
3. Distribution of Japans outward FDI
3. Distribution of Japans outward FDI
3. Distribution of Japans outward FDI
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia
4. Japans outward FDI inside Asia: the rise of China
4. Japans outward FDI inside Asia: the rise of China
4. Japans outward FDI inside Asia: Resurgence of ASEAN, the so called
4. Japans outward FDI inside Asia: Resurgence of ASEAN, the so called
In the mid 1980s, SMEs who afforded enough had in human resources and
In the mid 1980s, SMEs who afforded enough had in human resources and
Japan will increase investment in Japan; the so-called return to
Japan will increase investment in Japan; the so-called return to

: Japans Outward FDI in Globalization. : Daisuke. : Japans Outward FDI in Globalization.ppt. zip-: 1331 .

Japans Outward FDI in Globalization

Japans Outward FDI in Globalization.ppt
1 Japans Outward FDI in Globalization

Japans Outward FDI in Globalization

25-26 April, 2007

Daisuke Hiratsuka Director General of Development Studies Center Institute of Developing Economies, JETRO 81-43-299-9676, Fax. 81-43-299-9763 daisuke_hiratsuka@ide.go.jp

2 What does determine outward FDI

What does determine outward FDI

New Asian economic landscape Distribution of Japans outward FDI Japans outward FDI inside Asia Evolution of global presence by Japanese firms International expansion by Japanese SMEs Perspective of Japanese outward FDI in further economic integration

Contents

2

3 1. What does determine outward FDI

1. What does determine outward FDI

1. Agglomeration and dispersion forces are sources of FDI.

Country A

Country B: A new frontier

Presence of transport cost

Increase of factor prices In country B

Increase of profits

Agglomeration Force (FDI in country A)

Dispersion Force (FDI in country B)

Fall of transport cost

Increase of profits

Increase of factor prices In country A

Decrease of profits

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4 1. What does determine outward FDI

1. What does determine outward FDI

The differences in factor prices makes the flying geese pattern in terms of FDI. development

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5 1. What does determine outward FDI

1. What does determine outward FDI

Industry have agglomerated in many Asian countries, and they have been linked to produce a good: most of suppliers are Japanese affiliates.

USA

Mexico

China

Japan

Taiwan

Thailand

Malaysia

Hong Kong

Philippines

Singapore

Indonesia

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DISK: HGST HEAD: HGST SUSPENSION:HTI

HEAD: GDL

SPNDLE MOTOR: NIDEC, NMB BASE: WEARNS CARRIAGE: FUJIKURA, SANEI FLEX CABLE: NOK PIVOT: NMB SEAL: KOKOKU VCM: SMT,TDK TOP COVER: NOK, NHK PCBA: SSCI HGA:UTC HAS:UTC

PCBA:GBM,SSCI CARRIAGE:TDK HGA: HSPC BASE: BPI HEAD: HGST SUSPENSION:NHK

COVER: NHK DISK:HOYA SCREW: KATAYAMA SEAL: KOKOKU, TOKAI RAMP: DAICHI TOP CLAMP: BPI, SOODE LATCH: NOK PLATECASE: BRIDGESTONE LABEL: SANSAI FILTER: SSRETEK PCBA: SSCI SUSPENSION: NHK

TOP CLAMP: GML

FILTER CAP: GML

BASE: KENSEISHA PIVOT: NSK SPACER:KENSEISHA VCM:SHINETSU BASE:ASAHI CARD:SCI, CELESTICA TOP CLAMP: SCL, CELESTICA, SOODE DISK: KOMAG

DAMPING PLATE: IMEAS COIL SUPPORT: TOTOKU PCBA: IONIX

COVER: KURODA, CHEUNGWOH SCREW:TIORMAC, SPURWAY PIVOT: NSK PC ADP: JST DISC: HOYA

W.SUSPENSION: SUMITOMO VCM: SHINETSU PCBA: SOLECTION

6 1. What does determine outward FDI

1. What does determine outward FDI

Production process is becoming sequential stages of production, and instead of final products, parts and components within the same industry are traded. Assuming the two country case, a good across border four times: at the exported from the country A; imported into the country B; exported from the country B after processing , and imported back to the country A. In the actual sequential production, one good crosses borders many times to produce a final good. It implies that the reduction of trade costs, such as trade liberalization and facilitation measures, would develop the sequential production, increasing FDI flows.

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7 2. New Asian economic landscape: trade pattern inside Asia has changed

2. New Asian economic landscape: trade pattern inside Asia has changed

from inter-industry to intra-industry that has traded parts and components.

Note: Asia contains the ASEAN five countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand), China, Japan, Korea, and Hong Kong. Imports of China are available after 1998. Source: IDE-JETRO/RIETI

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8 2. New Asian economic landscape: Import relation between Japan and

2. New Asian economic landscape: Import relation between Japan and

ASEAN

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9 2. New Asian economic landscape: Import relation between China and

2. New Asian economic landscape: Import relation between China and

ASEAN

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10 2. New Asian economic landscape: overseas market is increasing share

2. New Asian economic landscape: overseas market is increasing share

in sales and profits.

Table 1 Share of sales for TSE-listed firms (by region)

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Notes: 1. Above chart shows results of firms listed on the Tokyo Stock Exchange (TSE), whose fiscal year ends between December to March, and who release sales and operating profits by region. (Firms in banking and insurance industries are excluded.) Note 2: Year-on-year growth rates for sales/operating profits are calculated to include the same group of firms (to allow for comparison). Note 3: Europe includes Africa and the Middle East. Others includes answers wih multiple regions combined (e.g. Europe and the US). Source: prepared by JETRO based on Toyo Keizai Shimposhas Kigyo Zaimu Karte 2007

11 2. New Asian economic landscape: overseas market is increasing share

2. New Asian economic landscape: overseas market is increasing share

in sales and profits.

Table 2 Share of profits for TSE-listed firms (by region)

11

Notes: 1. Above chart shows results of firms listed on the Tokyo Stock Exchange (TSE), whose fiscal year ends between December to March, and who release sales and operating profits by region. (Firms in banking and insurance industries are excluded.) Note 2: Year-on-year growth rates for sales/operating profits are calculated to include the same group of firms (to allow for comparison). Note 3: Europe includes Africa and the Middle East. Others includes answers wih multiple regions combined (e.g. Europe and the US). Source: prepared by JETRO based on Toyo Keizai Shimposhas Kigyo Zaimu Karte 2007

12 3. Distribution of Japans outward FDI

3. Distribution of Japans outward FDI

Figure 6. Japan's Outward FDI (based on reports and notifications) by Country/Region (Million US$)

1st boom 1985-92

After the crisis

2nd boom 1993-97

Inactive up to 1985

Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.

12

13 3. Distribution of Japans outward FDI

3. Distribution of Japans outward FDI

Fiigure 7. Share of Japan's Outward FDI (based on reports and notifications) by Country/Region (%)

Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.

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14 4. Japans outward FDI inside Asia

4. Japans outward FDI inside Asia

Fiigure 8. Japan's Outward FDI (based on reports and notifications) inside Asia by Country/Region (Million US$)

After the Plaza Accord

Before the crisis

After the crisis

Before the Plaza Accord

Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.

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15 4. Japans outward FDI inside Asia

4. Japans outward FDI inside Asia

Fiigure 9. Share of Japan's Outward FDI (based on reports and notifications) inside Asia by Country/Region (%)

Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.

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16 4. Japans outward FDI inside Asia

4. Japans outward FDI inside Asia

Fiigure 10. Share of Japan's Outward FDI (based on reports and notifications) inside ASEAN 6 (Million US$)

After the Plaza Accord

Before the crisis

After the crisis

Before the Plaza Accord

Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.

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17 4. Japans outward FDI inside Asia: the rise of China

4. Japans outward FDI inside Asia: the rise of China

Figure 11 Japan's outward FDI inside Asia (based on balance of payments basis, net flow, US$ million)

ASEAN Was the major host

The rise of China: the entry in the WTO

Sources: Prepared by JETRO from Ministry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates

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18 4. Japans outward FDI inside Asia: Resurgence of ASEAN, the so called

4. Japans outward FDI inside Asia: Resurgence of ASEAN, the so called

China olus one

Figure 12 Japan's outward FDI inside Asia (based on balance of payments basis, net flow, US$ million)

The rise of Thailand under the China plus one

Sources: Prepared by JETRO from Ministry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates

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19 In the mid 1980s, SMEs who afforded enough had in human resources and

In the mid 1980s, SMEs who afforded enough had in human resources and

capitals, went to overseas, in particular to ASEAN, exporting back goods to Japan. SMEs have suffered from the decreasing demands. As a breakthrough in severe business environments, Japanese SMEs have advanced to operate in Asia, in order to participate in the production networks. After the Chinas entry in WTO in 2001, a large number of SMEs have advanced to China, seeking market. SMEs have at least two overseas production sites; one in ASEAN and another in China.

6. International expansion by Japanese SMEs

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20 Japan will increase investment in Japan; the so-called return to

Japan will increase investment in Japan; the so-called return to

Japan. Production and distribution networks have been self-organizing, meaning that Japan will continue outward FDI at high level. But, the presence of Japans FDI in Asia will be down, because most of Japans FDIs are the expansion of existing facilities, meanwhile FDIs by other Asia are new investments. Japan will increase FDIs in the new frontiers such as Vietnam, India, and other emerging economies.

6. Perspective in further economic integrationn

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