We kick off a new column written by G1 Global Conference participants. Moon Jerin, cosmetics entrepreneur currently living in between New York and Toronto and a writer on sustainable fashion, shares her perspective on Japan as a premier investment destination.
It’s a watershed moment for global business.
The markets and, indeed, the world are primed for upheaval. The political turmoil in Russia, China, and the Middle East coupled with the dynamics of Brexit and related phenomena ensure there’s both uncertainty and the promise of substantive change on the horizon.
But as investors understand, such perceived chaos is often a harbinger of great investing opportunities.
That’s where Japan comes in. When participating in the G1 Global Conference last month, I realized that Japan is more important for foreign investors today than ever before, considering their position in this era of geopolitical and economic restructuring (Brexit, NAFTA) and their advantage of being in close proximity to China and Singapore.
Why Should Foreign Investors “Bank” on Japan?
In 2015, the Japanese government outlined policy that allowed for an increased flow of foreign investment into the country. Coupled with the country’s progression in high-tech fields and the various emerging foreign investment success stories shared by the Japan External Trade Organization (JETRO), we see many reasons for optimism in this sector.
Consider the following: Japan has a generously-sized market with one of the world’s greatest purchasing powers, exceeding 127 million consumers. The high Japanese GDP represents an uncommonly elevated economic and technological standard. Prospective investors should be mindful of Japan’s dominance over the Asiatic market, where their productivity comprises 75% of the market total.
And this is not to idly invoke the promise of high-tech investing opportunities, either. Japan has recovered from the market crash that ravaged it a quarter century ago, and rumors of their death as a high-tech leader and luminary were, needless to say, greatly exaggerated.
As a point of comparison, we can examine the United States’ tech fields with Japan’s. Immediately following World War II, the U.S. was the dominant global figure leading advanced industries. Fast forward to the present day, and the same can hardly be said for nearly any American high-tech industry. Conversely, Japan has gained a footing and is currently building evident momentum in a number of advanced industries, including the robotics, automotive and optics industries (the last two categories export values increased 38% and 25%, respectively, between 2012-2016). Within the broad optics industry, Japan creates the highest grades of silicon, required for maintenance and improvement of many kinds of electronics. Japan also creates the most advanced optics machines and technology, which can be applied to many industries. The recent development of Corning Fibrance Technology is but one example of this latest innovation, which seamlessly merges art and science.
In the automotive industry, Japan has what it takes to build another Toyota or Honda, only for electric vehicles or autonomous vehicles for the future. As Japan is equipped with the most efficient manufacturing practices—being able to excel at innovation via kaizen—the next breakthrough is only a matter of time and focus (this is where the creative investors come in).
Michael Sekora, former U.S. Defense Intelligence Agency Director and analyst, believes that a proper determination of Japan’s strength in high-tech must be found beneath the economic surface.
“Those who think that America is doing better than Japan view things solely in financial terms,” says Sekora. “That is at best a very limited view and they are not looking at the substance of economic competition. What matters ultimately is technology. Japan has continued to perform superlatively on that measure. America’s performance has been disastrous.”
The hard numbers bear this out. Figures from 2014 show a U.S. deficit of $411 billion. Meanwhile, Japan observed an account surplus of $22 billion that year, due in large part to high-technology product exports.
Who Should Invest in Japan?
Simply put, opportunistic investors not deterred by the prospect of linguistic and cultural barriers should heavily consider foreign direct investment in the island nation.
What can Foreign Investors Expect from Japan in the Near Term?
While the natural disasters of 2011 and environmental concerns over the Fukushima Daiichi nuclear power plant initially slowed financial investment growth, the Japanese economy’s recent surplus of savings and Prime Minister Shinzo Abe’s pledge to double 2012’s FDI stock value by the year 2020 are encouraging.
Moreover, the high-tech sectors of healthcare, medical devices, pharmaceuticals, and related fields are poised to erupt with growth and activity, as the country’s aging population heavily leans on such products and services. (Approximately a quarter of Japan’s population is 65 or older!)
What are the Next Steps for Foreign Investors?
Investors not wishing to be sidelined should consider investment in Japan’s high-tech fields, specifically.
Additionally, initial investment opportunities lie in Japanese life sciences, where there is substantive potential for foreign contribution. Furthermore, Japan’s emerging technological might suggests great promise in IT & Communications (data centers, cloud, AI, FinTech, Internet of Things, and others). Softbank, for example, is working towards its goal of becoming the "No. 1 mobile internet core company."
The country has renewed its focus on progressive sciences, too. These include the cybersecurity and space technology fields, as evidenced in part by the Japan Aerospace Exploration Agency (JAXA)’s investment in Earth and planetary observation satellites. And niche opportunities as demonstrated by the popularity of IT funeral robots shouldn’t be ignored, either.
Whether it is healthcare, pharmaceuticals, life sciences, telecommunications, or space technologies, diverse high-tech foreign investment opportunities in Japan await. In my opinion, what sets Japan apart from any other country is its ability to create and blend the line between art and science successfully. For those who appreciate that chemistry, this place is for you. Good luck!
Editor's note: In the following weeks, the following related 2017 G1 Global sessions will be released: Autonomous Vehicles, AI, and Cybersecurity; Business in Asia; Space Business; and ESG Investing.