Invest in Japan

1
Invest in Japan

• 29 September, 2005
• Hiroshi Yoshikawa
• (University of Tokyo)

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INDEX

• Current FDI into Japan
• Goal of Doubling the Stock of Inward FDI
• Japan Investment Council (JIC)
• The Program for the Promotion of FDI into Japan
• Why Japan?
• Examples of Active Companies in Japan
• Local governments Efforts

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Current FDI into Japan

• Stock of FDI into Japan 9.6 trillion yen (2003)
• Ratio of FDI stock to nominal GDP 2.0 (2002)
• Japans ratio of inward Foreign Direct Investment
  (FDI) stock to nominal GDP is by far at a lower
  level than those of US and European countries.
• According to IMF statistics, the ratio in 2002
  was only 2.0 in Japan, while it was 19.2 in the
  US, 40.9 in the UK, and 25.7 in Germany.

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(1) Stock of FDI into Japan(by regions, trillion
yen)
5
(2) Inward FDI in Major Countries(stock /
nominal GDP)
Source IMF "International Financial Statistics"
(2003) Note U.S., France and Australia Current
Price
by far the lowest level among industrialized
countries.
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(3) The number of Foreign-capital companies in
Japan, sales, profit and employees (2001)
Foreign-capital companies
Manufacturing
Share
Share
Companies
1.94
1.97
546
261
Employees
4.71
5.78
514,124
291,268
Sales (billion yen)
5.95
10.28
35,079
25,240
profit (billion yen)
11.92
18,59
1,886
1,426
Source Trial calculation of the Cabinet Office
based on a report Results of the basic survey of
business structure and activity Note An object
is companies, which are 50 or more employees and
capital of 30 million yen or more, with business
establishment of Manufacturing, Mining and
Commerce.
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(4) Increasing Foreign Shareholders

• Foreign Shareholdership is rapidly getting to a
  higher level, where Japanese business
  corporations reduce their shares.

Foreign owned shares ratio (Market Value Sep.
2003)
Distribution of Shareholders (Market Value)
TOYOTA
18.2
HONDA
32.2
NISSAN Renault S.A.
63.9
MITSUBISHI DaimlerChrysler AG
42.3
MAZDA Ford Motor Co.
39.5
SUZUKI General Motors Corp.
43.7
Fuji (SUBARU) General Motors Corp.
37.6
Source 2003 Shareownership Survey (All domestic
stock exchanges(Tokyo, Osaka, Nagoya, Fukuoka and
Sapporo)in Japan) Notes 1. Survey has been
conducted on a "Unit-of-Share" basis since 1985
Survey. 2. The market value of
Financial Institutions excludes that of
Investment Trusts and Annuity Trusts.
ISUZU General Motors Corp.
17.6
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Goal of Doubling the Stock of Inward FDI(Prime
Ministers initiative)

• General Policy Speech by Prime Minister Junichiro
  Koizumi to the 156th Session of the Diet (January
  31, 2003)
• Foreign direct investment in Japan will bring new
  technology and renovative management methods, and
  will also lead to greater employment
  opportunities. Rather than seeing foreign
  investment as a threat, we will take measures to
  present Japan as an attractive destination for
  foreign firms in the aim of doubling the
  cumulative amount of investment in five years.
• 6.6 trillion yen 13.2 trillion yen (by
  the end of 2006)

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Japan Investment Council (JIC)

• On July 1994, the JIC was established as a
  ministerial-level council, chaired by Prime
  Minister.
• View-point of promoting foreign direct investment
  into Japan.
• The Expert Committee operates under the JIC.
• On March 27, 2003, the JIC decided The Program
  for the Promotion of Foreign Direct Investment
  into Japan.
• The Program asks for the implementation of 74
  measures under the five categories.

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The Program for the Promotion of FDI into Japan

• (1) Provide Information in Japan and Abroad
• Communicating Japan's Appeal and Welcoming Stance
  to abroad
• Enhancing recognition of FDIs importance inside
  of Japan
• (2) Improve Corporate Business Environment
• Environment to Facilitate Participation and
  Business Activity
• (3) Review Administrative Procedures
• Make Them Clearer, Simpler, Faster
• (4) Create Favorable Employment and Living
  Environment
• Ease Entry of Personnel and Provide More
  Comfortable Living Conditions for Foreigners
• (5) Improve Local and National Structures and
  Systems
• Facilitate Ingenious Approaches at Regional Levels

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(1) Provide Information in Japan and Abroad

• Overseas symposia and seminars are showing
  Japan's market environment, success cases, etc.
• Through Domestic seminars, regional people come
  to understand that FDI is beneficial for both
  Japan and investing countries.

• The Prime Minister welcomed inward FDI in a
  television spot commercial, broadcasted
  throughout America and Europe. DVD version in
  five languages produced and distributed.

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(2) Improve in the Corporate Business Environment

• Conclusion of the Japan-US Tax Treaty reduces tax
  burdens on Japanese and US companies.
• Improve transparency through corporate
  information disclosure, and promote
  internationalization of accounting standards.
• Expand opportunities for private-sector
  participation in public services and other such
  sectors by measures including amendment of the
  Local Autonomy Law (September 2003).

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(3) Review Administrative Procedures

• Service became significantly faster, and most
  investment-related inquiries are responded within
  three days.
• More than 1,000 potential investor companies were
  uncovered in FY2003, largely by JETRO, and
  approximately 100 of them made a decision to
  invest (twice of the previous fiscal year).

• Invest Japan established as unified contact
  point to provide foreign investors with
  comprehensive information and consultation on
  direct investment in Japan.

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(4) Create Favorable Employment and Living
Environment

• Extend the upper limit on period of stay from
  three to five years for qualified foreign
  researchers and other personnel by utilizing
  special zones for structural reform.
• Japanese universities accept international school
  graduates under certain conditions.
• Foreign students are allowed to extend their stay
  for a maximum 180 days following graduation in
  order to seek employment in Japan.
• The Japan-US and Japan-Korean agreements on
  social security were signed. They will resolve
  the double payment of pension contributions.

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(5) Improve Local and National Structures and
Systems

• National government supports actively providing
  support to leading regions that enthusiastically
  promote inward FDI.
• Investment environment is improved by using
  special zones for structural reform.
• As on June 2004, 386 projects were authorized.
• Study on nation-wide application of special
  deregulative measures in the zones.

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Why Japan?

• The world's second-largest market
• Key market to succeed in Asia
• Abundant highly skilled human resources
• Innovative technologies
• Efficient infrastructure
• Reformed legal framework for investment
• High performance of Foreign Companies in Japan
• Lowered business costs
• Abundant market opportunities
• Living environment

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(1) The world's second-largest market

• Japanese GDP (value base) accounts for about one
  eighth (1/8) of the World GDP, and Japan
  positioned as the 2nd biggest GDP country after
  the United States.

Nominal GDP Ratio () by regions (2002)
Nominal GDP (million )
Country
Per Capital ()
United States
10,383.1
36,121
Japan
3,983.5
31,277
Germany
1,986.1
24,079
United Kingdom
1,563.1
26,401
France
1,431.2
23,374
China
1,236.7
955
1,186.1
20,441
Italy
Source Cabinet Office
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- The adjoining major economic regions

• Almost all the million cities are located within
  one-hour train ride (300km) from their
  neighboring major city.
• It is almost the same as the distance from New
  York and Boston.
• It is only 1 hour and a half by the superexpress
  Shinkansen.

Comparison of GDPs of major regions in Japan with
those of selected Asian nations
(2001) ltSourcegt Japanese figures Prefectural
Citizens' Economic Accounts, 2001 (Cabinet
Office) Asian nations figures Foreign Economic
Data (Cabinet Office)
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(2) Key market to succeed in Asia

• Japans economic power makes itself a hub for
  Asia, a center of trade, transport and markets.
  It is an ideal site for investment oriented to
  the entire Asian market.

Number of direct flights between Narita and major
cities in Asia roundtrips per week, as of March
2003, shortest required flight time in hours
denoted by h Source Prepared from information
on airport and airline websites.
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(3) Abundant highly skilled human resources

• Japans competitive advantages are supported by
  its highly-skilled workforce. Even among
  developed nations, Japan has the highest rate of
  advancement to higher education.

Advancement rate to institutions of higher
education Source International Comparison of
Educational Indicators (2004 edition), Ministry
of Education, Culture, Sports, Science and
Technology Notes Part-time in Japan is the
University of the Air and others. The rates of
France is an estimation value.
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- Changing Lifetime Employment

• Foreign companies have chances to hire competent
  Japanese business people. More and more Japanese
  are changing their job. So-called Lifetime
  Employment does not prevail any longer.

Number of job-searchers Source Ministry ob
Public Management, Home Affairs, Posts and
Telecomunications
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(4) Innovative technologies
(thousands)

• Japan is the second largest patent registration
  country in the world. Currently the legal
  framework protecting intellectual property rights
  is being further strengthened.

The Number of Patent Registrations According to
Nationality (2000) Source WIPO Statistics
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(5) Efficient infrastructure

• Japans high-speed telecommunications network
  reaches 10 million households, and offers a
  superb platform for cutting-edge
  information-based businesses and distribution
  systems.

International Comparison of Broadband Fees per
100 kbit/s (July 2003)
International Comparison of Total Broadband
Subscribers and Subscribers per 100 Inhabitants
(2002)
Broadband subscribers per 100 inhabitants
Source ITU Internet Reports 2003 Birth of
Broadband
Total Broadband Subscribers (million subscribers)
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(6) Reformed legal framework for investment

• Japan has been reforming domestic regulations and
  legal framework in various sectors, including
  telecommunications, to attract foreign business
  and FDI.

Number of primary international communications
licenses foreign companies.

• February 1998
• Abolition of foreign-capital prohibition.
• Primary international communication license to
  foreign carriers, such as Worldcom and BT.

• November 1998
• Abolition of communications fees permission
  system.

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- Special Zones for Structural Reform

• Schools by Public companies
• Special zones allow public companies to open
  colleges and professional graduate schools.

• Farming by Business companies
• Business companies are allowed to farm land by
  renting the land.
• Management of Special Nurcing Home for the Aged
  by Corporation

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(7) High performance of Foreign Companies in Japan

• Foreign Companies in Japan enjoy much higher
  profits than Japanese companies.
• Low profits in Japanese companies are not
  applicable to Foreign companies in Japan.

Profits / Sales (Part for Manufacturing) Source
Cabinet Office
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(8) Lowered business costs

• The costs of doing business in Japanland prices,
  office rents, and labor costs, among othershave
  dramatically decreased.

Published Land Prices (Sept. 1992 100) the
Metropolitan Areas Shown in Published Land Prices
in 2002
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(9) Abundant market opportunities

• Life Science
• The Market size of medicine and medical device
  will be 8.4 trillion yen in 2010.
• Expanding market of medicines and medical devices
  reprecting advanced biotechnology.
• Increasing awareness of health care in the going
  society promotes consumption of healthy
  functional food.
• Growing health information services and creation
  of high-income employment.

Percentage aged 65 or over () Source World
Population Prospects, 2002 (UN)
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• Information and Communications Technology (ICT)
• ICT has been a leading and fast-growing industry.
  Its market is more them 10 of that of all
  industries.
• Environment
• The environment related industry is a
  highly-growing market, and it is estimated to be
  47.2 trillion yen (430 billion ) in 2010.

ICT market size and share of all industry in Japan
Environmental Services Industry market size in
Japan
Source WHITE PAPER Information and
Communications in Japan (2004)
Source Ministry of the Environment (May 2003)
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(10) Living environment

• Those moving to Japan will find that everything
  needed to make life satisfying is already in
  place.
• Japan has a first-rate medical system that has
  begun accepting more foreign doctors.
• International schools are widely available for
  children.
• Foreign-language sources of information are easy
  to find.
• Numerous amusement parks, other leisure
  facilities, and fascinating buildings. Japan is
  rich in culture and nature.
• Expatriates stationed in Japan will find a
  comfortable, convenient and safe living
  environment, all in a vibrant cultural setting.

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7. Invest Japan Window

• What Is Invest Japan Window?
• Unified contact point to foreign investors
  (located at each ministry and JETRO, etc.)
• Established in May 2003 (Over 1,000 contacts in
  the first year)
• (2) Windows Functions
• Provide comprehensive information and
  consultation on FDI into Japan
• Inquire ministries in charge from each window
  (one-stop window)
• Answer in ten days (ave. 3 days)

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• Any inquiries and troubles
• We are waiting for your
  contact!
• Cabinet Office invest-japan_at_mfs.cao.go.jp
• http//www5.cao.go.jp/acces
  s/english/jic_main_e.html
• JETRO invest-japan_at_jetro.go.jp
• http//www.jetro.go.jp/