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Global Japan
NOV 1, 2017

Foreign Investment in Japan: Why Now Is the Time

By Moon Jerin
iStock photo/EduLeite

It’s a watershed moment for global business. The market—indeed, the world—is 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.

Any investor can tell you that such perceived chaos is often a harbinger of great opportunities.

That’s where Japan comes in. The country is more important for foreign investors today than ever before, considering their position in this era of geopolitical and economic restructuring (Brexit, NAFTA), not to mention their 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 Japan’s progression in high-tech fields and the various 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 (75% of the market total).

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. Rumors of its death as a high-tech leader and luminary were, needless to say, greatly exaggerated.

As a point of comparison, consider American tech fields. 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 development of many kinds of electronics. Japan also creates the most advanced optics machines and technology, which can be applied to many industries. 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 or autonomous vehicles. As Japan is equipped with the most efficient manufacturing practices, the next breakthrough is only a matter of time and focus.

This is where creative investors come in.

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.

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.

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 and communications (data centers, cloud, AI, FinTech, and IoT, to name a few). 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, as evidenced in part by the Japan Aerospace Exploration Agency (JAXA)’s investment in Earth and planetary observation satellites. Niche opportunities, as demonstrated by the popularity of IT funeral robots, shouldn’t be ignored, either.

Whether it’s 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.