Why (Almost) Nobody Invests in Japan - VisualPolitik EN

Summary

The video script highlights Japan's resurgence in economic and political influence, underscored by its strategic alliance with the US and leadership in the CPTPP. Despite challenges like demographic decline and yen weakness, Japanese firms have ascended the value chain, becoming indispensable in high-tech supply chains. However, Japan's paradoxical low foreign direct investment (FDI) is attributed to its closed corporate ecosystem, legacy policies, and Keiretsu structure. Recent shifts in social attitudes, demographic pressures, and corporate governance reforms may signal an impending transformation, raising questions about Japan's future as a hub for multinationals.

Takeaways

• 🌏 Japan is regaining prominence in both economic and political spheres, highlighted by its strategic importance to US security policy in Asia.
• 🤝 High-level visits from US officials Antony Blinken and Lloyd Austin, and the reception of Japan's then Prime Minister Yoshihide Suga, underscore the strengthening Tokyo-Washington ties.
• 📈 Japan's economic strategy includes leading the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), positioning it as a trusted power in Southeast Asia.
• 💼 Despite demographic and currency challenges, Japanese companies have adapted by moving up the value chain, becoming key suppliers of high-tech materials and components globally.
• 🔍 Japanese firms' market dominance in advanced tech components often goes unnoticed by consumers but is crucial to the high-tech industry.
• 📊 Japan's real per capita growth has been on par with the US since 2009, outpacing countries like France and the UK, despite a shrinking working-age population.
• 💼 Japan's economy is attracting multinational attention as the third-largest consumer market, yet it lags in attracting Foreign Direct Investment (FDI).
• 🏆 The UN ranks Japan near the bottom for FDI as a percentage of GDP, primarily due to historical restrictions and corporate structures that deter foreign takeovers.
• 🔒 Post-WWII policies and Keiretsu conglomerates have created a closed ecosystem in Japan, limiting foreign corporate footholds and affecting productivity and innovation.
• 🌐 Changes in social attitudes, demographic pressures, and corporate governance reforms may soon alter Japan's stance on FDI and international talent.
• 🔑 Japan's low immigrant population contributes to its demographic crisis and labor shortages, with potential implications for economic growth and multinational interest.

Q & A

Why is Japan considered the linchpin of US security policy in Asia?

Japan is considered the linchpin of US security policy in Asia because it has a strong alliance with the US, as evidenced by high-level visits from US officials like Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin, and the Japanese Prime Minister Yoshihide Suga being the first foreign guest received by President Joe Biden at the White House.

What is the significance of the Trans-Pacific Partnership Agreement (CPTPP) in Japan's economic strategy?

The CPTPP is significant in Japan's economic strategy as it is one of the largest free trade and economic integration agreements in the world, which Japan is leading. This positions Japan as a key player in the global economy and enhances its influence in the fastest-growing economic region, Southeast Asia.

How have Japanese companies adapted to increased competition from South Korea, Taiwan, and China?

Japanese companies have adapted to increased competition by moving up the value chain and focusing on producing high-tech, highly innovative materials and components that are indispensable in the global production chain.

What is the role of Japanese companies in the high-tech industry's advanced components and supplies?

Japanese companies control more than 50% of the market share in many of the advanced components and supplies of the high-tech industry, including specialty glass, semiconductor manufacturing equipment, and complex chemicals.

How has Japan's real per capita growth compared to other developed countries since 2009?

Since 2009, Japan's real per capita growth has grown almost at the level of the United States and risen above countries like France or the United Kingdom, despite its overall GDP growth being relatively low due to a shrinking working-age population.

Why does Japan rank second to last in the world in terms of Foreign Direct Investment (FDI) received as a percentage of GDP?

Japan ranks second to last in terms of FDI received as a percentage of GDP due to its closed ecosystem of corporate operations, legacy restrictions on FDI post-World War II, cross-shareholdings, and the influence of large conglomerates known as Keiretsu, which make it difficult for foreign corporations to gain a foothold.

What is the average percentage of FDI in GDP for developed countries, and how does Japan compare?

The average percentage of FDI in GDP for developed countries is 44%. In contrast, FDI accounts for just over 4% of Japan's GDP, indicating a significantly lower level of foreign investment.

What are the three main reasons that could lead to a change in Japan's FDI situation?

The three main reasons that could lead to a change in Japan's FDI situation are increasing social acceptance of foreign control of local companies, the demographic decline forcing many SMEs to close due to lack of successors, and changes in corporate governance policies to raise economic growth and profitability.

How does Japan's immigrant population compare to other developed countries, and what implications does this have?

Japan has a fairly small immigrant population, barely 2% of the total, compared to over 13% in the United States. This has implications for the country's talent pool and contributes to the deepening demographic crisis, with a shrinking working-age population and labor shortages.

What measures has the Japanese government introduced to address the labor shortage and encourage foreign labor?

The Japanese government has introduced changes to encourage the arrival of foreign labor, although it is indicated that more rapid changes may be necessary in the future to address the labor shortage, which is projected to reach about 6.5 million workers by 2030.