JETRO Invest Japan Report 2016 (Summary) 1. Steadily Increasing Investment in Japan

End of 2015 sees new record for Japan’s inward FDI stock at 24.4 trillion yen

  • Japan’s inward FDI was 24.4 trillion yen and renewed the record high in 2015.
  • The ratio of FDI in Japan to its nominal GDP was 4.9%, the same as the previous year and still low by international standards.
  • Comparing inward and outward investment stock, the inward-outward ratio was 1:6.2, as it was in the previous year, still maintaining a large gap.
  • Inflow was abundant during the first half of the year in 2016. The preliminary estimate of the FDI stock at the end of 2016 is 26.7 trillion yen (announced by MOF in Sep 2016).

The stock of inward FDI and its portion in the nominal GDP

This is a chart showing the stock of inward FDI and its share of the nominal GDP. It covers data from 2000 to preliminary estimates at the end of June 2016. At the end of 2015, Japan’s inward FDI stock was 24.4 trillion yen, and the ratio of FDI in Japan to its nominal GDP was 4.9%. The preliminary estimate of the FDI stock at the end of 2016 is 26.7 trillion yen.

[Source] "Balance of Payments"(Ministry of Finance), "National Accounts of Japan" (Japan Cabinet Office)

Increase in Asia’s share of inward FDI

  • By region, Europe has the largest direct investment stock in Japan at 11.2 trillion yen (46%) followed by North America (7.0 trillion yen, 28.8%) and Asia (4.3 trillion yen, 17.6%).
  • The ratio of investment from Asia in particular increased more than 2 percentage points from 15.5% in 2014. From Asia, Singapore and Hong Kong joined the top 10 countries. Other Asian countries and regions including Taiwan, South Korea and China moved up compared with 10 years ago and stepped up their presence.

Stock of inward FDI into Japan by region (as of the end of 2015)

This is a chart showing the stock of inward FDI into Japan by region. Europe has a direct investment stock in Japan of 11.2 trillion yen (or 46%) followed by North America (7.0 trillion yen, or 28.8%), Asia (4.3 trillion yen, or 17.6%), Latin America (1.5 trillion yen, or 6%), and Oceania (0.3 trillion yen, or 1.3%).

[Source] "Balance of Payments" (Ministry of Finance)

Stock of inward FDI by region (growth ratio when the stock as of 2000 is 100)

This is a chart showing the stock of inward FDI between 2000 and 2015 by region and it indicates the growth ratio with the stock as of 2000 set to 100. The ratio in 2007 was: 272 for North America, 238 for Europe, and 216 for Asia. The ratio in 2015 was: 830 for Asia, 366 for North America, and 354 for Europe. Countries in Asia have stepped up their presence.

[Note] The stocks for 2014 and after are calculated based on BPM6. The stocks before 2013 were recalculated from BPM5-based to PBM6-based by JETRO
[Source] "Balance of Payments" (Ministry of Finance)

Negative flow in 2015 for first time in four years, but great abundance in 2016

  • In 2015, the total inflow dipped negative for the first time in the four years since 2011 with a net amount of minus 16.4 billion yen.
  • In gross amount, both the amount of investment and amount recovered due to withdrawal decreased about 45%. Overall, activity decreased during the year.
  • By region, negative flow was higher by 1.04 trillion yen for investment from Europe (caused by large-scale capital recoveries such as Suzuki’s buying back of its stake held by Volkswagen of Germany), whereas inflow was higher by 683 billion yen for investment from Asia and by 634.2 billion yen for that from North America.
  • In 2016, direct investment in Japan is growing more lively. Direct investment for the period from January to June was 2.6 trillion yen, increasing by 709% compared to the same period last year.

Changes in the inward FDI flow by region (Billion yen)

Region 2013 2014 2015 2016
Jan.-Jun. (P) Year-on-year growth (%)
Asia 86 687 683 1,313 383%
China 14 80 67 -3 n/a
Hong Kong 17 246 154 90 17%
Taiwan 18 118 74 29 11%
Korea 4 58 100 25 10%
ASEAN 32 185 286 1,173 796%
Singapore 33 155 234 1,132 1060%
North America 136 725 634 378 92%
USA 132 724 631 382 100%
Latin America -131 67 -257 41 49%
Oceania 37 61 -75 28 n/a
Europe 97 317 -1,042 827 n/a
EU 128 268 -1,003 786 n/a
World 225 1,924 -16 2,596 709%

[Note] Because of the changes in the calculation method of the balance of payments, there is no continuity between the data before 2013 and the data after 2014. The data for 2016 is provisional.
[Source] "Balance of Payments" (Ministry of Finance)

Changes in the quarterly flow of inward FDI

This is a chart showing the changes in the quarterly flow of inward FDI. The total of flows was 1.05 trillion yen in 2013, 1.92 trillion yen in 2014, and -16.4 billion yen in 2015. Direct investment for the first half year in 2016 gained momentum with 2.60 trillion yen.

[Note] Q1(Jan. ~Mar.), Q2(Apr. ~Jun.), Q3(Jul. ~Sep.), Q4(Oct. ~Dec.)
[Source] "Balance of Payments" (Ministry of Finance)

M&A in Japan slow in 2015. Number of large projects increased in 2016 with expanded entry into service market.

  • M&A in Japan in 2015 (completed) was 919.6 billion yen (decreasing 27.0% from 2014).
  • It significantly increased in 2016. M&A in Japan during the first half of the year reached 2.7 trillion yen, which is second to the record high (3.6 trillion yen) in 2007.
  • In recent years, M&A in Japan in the service sector is expanding (e.g., acquisition of USJ by NBC Universal of the US (183 billion yen) in 2015, acquisition of the operating rights of Kansai and Osaka International Airports by VINCI Airports and ORIX Corporation (2.25trillion yen) in 2016, etc.) .
  • In recent years, a trend of cooperation between Japanese companies and Asian companies is taking root in terms of M&A.

Top inward M&A deals (2015 to June 2016)

No. Date effective Target name Industry sector Acquirer name Parent nation Industry sector Value (Billion ¥) % Owned after transaction
1 Apr. 2016 New Kansai Intl-Op Concession Transportation & Infrastructure Kansai Airports, a SPV formed by ORIX-VINCI Airports consortium Japan, France Transportation & Infrastructure 2,250.00 100
2 Nov. 2015 USJ Co Ltd Recreation & Leisure NBCUniversal Media LLC United States Broadcasting 183 51
3 Feb. 2016 One M Logistics 2 G.K Real Estate LaSalle LOGIPORT REIT United States Real estate investment trusts 117.2 100
4 Apr. 2016 Astellas Pharma-Dermatology Pharmaceuticals LEO Pharma A/S Denmark Pharmaceuticals 89.2 100
5 Mar. 2015 MC Aviation Partners-15 Business Services (Leasing) Cheung Kong(Holdings)Ltd Hong Kong Real Estate 83.3 100
6 May. 2016 Takeda Pharm-Respiratory Pharmaceuticals AstraZeneca PLC United Kingdom Pharmaceuticals 69.2 100
7 Mar. 2016 Nissin Kogyo-Brake Business Automobiles & Components Autoliv Holding Inc Sweden Automobiles & Components 65 100
8 Mar. 2015 Pioneer Corp-DJ Equipment Electronics KKR & Co LP United States Investor 59 85.1
9 Aug. 2015 ORIX Corp-Kirarito Ginza Real Estate SOFAZ Azerbaijan Investor 52.3 100
10 Oct. 2015 Bit-isle Business Services (Data Center) Equinix United States Business Services (Data Center) 52 96.8

[Note]
1) As of June 2016, 2) Ranking according to single transaction amount, 3) Acquirer Name is the name of the final acquirer (including corporate group), 4) Acquisition of less than 10% of the stocks is not included in the Balance of Payments statistics.
[Source]
Thomson Reuters

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