Chapter 1 Macroeconomic and Inward Foreign Direct Investment Trends in the World and Japan

Despite the increase in global inward FDI in 2019, up to 40% decline expected in 2020

  • According to United Nations Conference on Trade and Development (UNCTAD), the inward FDI in 2019 increased by 3.0% from the previous year to $1.5 trillion. Global FDI increased for the first time in four years.

Trends in Global Inward FD

The bar chart shows global inward foreign direct investment with a breakdown by developed economies and developing economies in billion dollars from 2000 to 2020.The amount dropped from about 1400 billion in 2000 to about 500 billion in 2003, and increased to about 1900 billion by 2007, followed by a decline to about 1250 billion by 2009.After a significant increase to over 2000 billion in 2015, the amount shrank to about 1600 billion by 2019.It is forecasted to drop to below 1000 billion in 2020.The line chart also shows year-over-year percentage changes.20% increase in 2000, 40% decrease in 2001, 50% increase in 2006, 20% decrease in 2008, more than 40% increase in 2015, 10% decrease in 2017, and a slight increase in 2019.The forecast for 2020 is a 40% decrease.
  1. Note:

    1) The year-over-year change in 2020 is estimated to be negative 30-40%. The graph shows an assumption where FDI declines by 40% in 2020.

    2) "Developed economies" is as defined by UNCTAD. The amount of inflow to developing economies is computed by subtracting that of developed economies from that of the world.

  2. Source:

    "World Investment Report 2020"(UNCTAD)

  • Due to the impacts of COVID-19, global inward FDI is forecasted to decline 30 to 40 % year-over-year in 2020. Inward FDI in the first half of 2020 decreased by 49%, compared to the same period of 2019.

FDI Growth (forecast)

The chart shows inward foreign direct investment forecast growth for 2020 in percentages with a breakdown by host regions.Worldwide -40 to -30%, developed economies -40 to -25%, Europe -45 to -30%, North America -35 to -20%, developing economies -45 to -30%, Africa -40 to -25%, Asia -45 to -30%, Latin America -55 to -40%.
  1. Note:

    Classification of each region is as defined by UNCTAD.

  2. Source:

    "World Investment Report 2020" (UNCTAD)

FDI flow to Japan in 2019 was the second largest. Although the flow has been steady, close monitoring required in 2020.

  • In 2019, inward FDI to Japan increased 37.3% from the previous year to 4.0 trillion yen, the second largest since 2014, for which comparable data is available.
  • Investment from the US was 1.9 trillion yen, up 141.5% from the previous year, continuing to be the largest investor by country. Investment from major Asian countries and regions remarkably increased as well.

FDI Flow to Japan

The bar chart shows the amount of foreign direct investment flow to Japan from 1996 to Q3 2020.The amount was about 1.5 trillion yen in 1999 ad 2002, 2.5 trillion yen in 2007 and 2008, and reached 4.5 trillion yen in 2016.It further increased to 6.5 trillion yen during Q1-Q3 in 2020.
  1. Note:

    The figures before 2013 are calculated based upon a different principle.

  2. Source:

    "Balance of Payments" (Ministry of Finance, Bank of Japan)

  • Although the FDI flow from January to September 2020 has increased from the same period of the previous year, close monitoring for the flow after 2020 is required, given the recent trends in statistics, such as greenfield investment.
FDI Flow to Japan: Top 10 Countries and Regions（100 million Yen, %）
2019
Ranking		 Change
in		 Investor
Country/		 2019 Share YoY 2020
Jan-Sep
1 → US 19,140 48.3 141.5 22,204
2 → UK 3,122 7.9 -35.6 31,577
3 ↗ Hong Kong 2,519 6.4 192.9 1,327
4 ↗ Singapore 2,141 5.4 - 3,410
5 ↗ China 2,090 5.3 135.9 170
6 ↘ Cayman 1,445 3.6 -65.1 -1,214
7 ↗ Luxemburg 1,387 3.5 - -318
8 ↘ France 1,370 3.5 -48.0 1,357
9 ↘ Thailand 1,135 2.9 -13.9 1,216
10 ↗ Taiwan 1,114 2.8 170.4 763
- - World 39,637 100.0 37.3 65,210

Source: "Balance of Payments" (MoF, BoJ))

FDI Flow to Japan: Top 10 Industries（100 million Yen, %）
2019
Ranking		 Change in
Ranking		 Sector 2019 YoY 2020
Q1-Q2(P)
1 → Finance&insurance 8,875 41.8 3,955
2 → Electric machinery 3,877 -29.3 1,968
3 ↗ Transportation Equipment 3,813 76.6 2,114
4 ↘ Chemicals&pharmaceuticals 3,359 28.5 90
5 ↗ Services 1,289 3827.9 976
6 ↗ Food 610 556.8 4
7 ↘ Real estate 349 -57.3 619
8 ↗ Construction 267 - -14
9 ↘ Transportation 170 38.3 -37
10 ↘ Iron, non-ferrous&metals 109 52.5 -4

Note: 1) Based upon diferent principles from statistics for FDI by region. 2) Negative amount indicates withdrawal exceeds flow.
Source: "Balance of Payments" (MoF, BoJ)

FDI stock in Japan increased to 33.9 trillion yen at the end of 2019

  • The FDI stock in Japan at the end of 2019 reached a new high of 33.9 trillion yen, up 10.4% from the previous year. The ratio of the balance to GDP increased from 5.6% in the previous year to 6.1%. The stock at the end of the second quarter of 2020 was estimated to be 39.2 trillion yen.

FDI Stock in Japan

The graph shows foreign direct investment stocks in Japan in trillion yen and as a percentage of GDP from 2000 to Q2 2020.It grew from about 5 trillion yen in 2000, 33.9 trillion yen by 2019, to almost 40 trillion yen by Q2 2020. As a percentage of GDP, it rose from about 1% in 2000 to 6.1% in 2019.
  1. Source:

    "International Investment Position of Japan" (Ministry of Finance, Bank of Japan), "National Accounts of Japan" (Cabinet Office)

  • By country and region, the FDI stock of the US in 2019 was 8.0 trillion yen or 23.6% of the total, more than twice larger than France (4.0 trillion yen), which was the second largest.
FDI Stock in Japan by Country and Region（100 million Yen, %）
Rank Country/Region Stock Share
1 US 79,801 23.6
2 France 39,284 11.6
3 Netherlands 39,067 11.5
4 Singapore 35,618 10.5
5 UK 24,960 7.4
6 Cayman Isl. 19,485 5.8
7 Switzerland 14,725 4.3
8 Hong Kong 12,365 3.7
9 Luxembourg 9,727 2.9
10 Germany 9,576 2.8
- Others 54,103 16.0
- Total 338,711 100.0

Source: "International Investment Position of Japan" (MoF, BoJ)

  • By industry, non-manufacturing industry accounted for 59.2%. Looking at detailed industries, the stock of finance and insurance was 9.5 trillion yen, accounting for 39.4%.
FDI Stock in Japan: Top 10 Industries（100 million Yen, %）
Rank Industry Stock Share
1 Finance&insurance 94,995 39.4
2 Transportation equipment 35,990 14.9
3 Electric machinery 26,638 11.1
4 Chemicals&pharmaceuticals 20,161 8.4
5 Communications 15,550 6.5
6 Services 12,712 5.3
7 General machinery 5,247 2.2
8 Real estate 5,121 2.1
9 Transportation 4,079 1.7
10 Glass&chemicals 3,371 1.4
- Others 17,056 7.1
- Total 240,920 100.0

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