JETRO Invest Japan Report 2024
Chapter2. Trends in Inward FDI to Japan Section4. Trends in Greenfield Investment in Japan

In Saga Prefecture, industry, academia and government are working together to promote a sustainable cosmetics industry, introducing new products and technologies.

One of the projects is the Karatsu Cosmetics Initiative, which aims to create a cluster of beauty and health industries centered around the Karatsu/Genkai region around northern part of Kyusyu.

It all started in 2012, when a group from a French cosmetics manufacturer, a member of which was the former chairman of the French Cosmetic Valley Association*1, visited Karatsu.

On that occasion, it was suggested that Karatsu could become a “Japanese version of the Cosmetic Valley” due to the geographical advantage of its proximity to East Asia, the existence of a mini-cluster of cosmetics-related companies (currently Karatsu Cosmetic Park), the abundance of raw material resources from its rich natural environment and agricultural technology, and other factors. This led to the discovery of the potential for promoting the cosmetics industry through the supply chain of cosmetics using locally produced materials, and in 2013, Karatsu City and the French Cosmetic Valley Association signed a Memorandum of Understanding (MOU) and the Japan Cosmetic Center (JCC) has established .

With the JCC as the driving force, this initiative aims to revitalize economic activities and create jobs by making the most of regional resources through industry-academia-government collaboration, and is still being promoted strongly with the "Made in Japan" brand, taking advantage of its geographical location.

The JCC signed MOUs with Barcelona, Spain and Crema, Italy in 2015, with Tainan, Taiwan in 2016, with Bangkok, Thailand in 2017 each. They promotes investment in Karatsu by overseas cosmetics companies. In February 2023, the JCC signed an MOU with IBITA, a South Korean cosmetics industry cluster association, and has been holding business meetings and other events to pursue business opportunities between the two countries.

Private-sector capital investment, which declined to 87 trillion yen in 2020 due to the impact of Covid-19 pandemic, recovered as the disaster subsided and exceeded the 100 trillion yen, marking 102 trillion yen in 2023.

At the 2nd Public-Private Partnership Forum on Increasing Domestic Investment (April 2023), Keidanren Chairman Tokura said, "It is important to shift the 'signs of change' from the current strong capital investment to 'dynamism' and restore the dynamism of the Japanese economy. The private sector is committed to achieving the goal of '115 trillion yen in capital investment in fiscal 2027' through the public-private partnerships."

Looking at the changes in private-sector capital investment since 1994 (see Chart), the "ratio to GDP" fell sharply in the three years following the Lehman's collapse in 2008, but then it has gradually recovered, remaining at the 16% level since 2015, which is the level before the Lehman's collapse. Recently, the consumer price inflation rate, the wage increase rate in "Shunto" (spring labor offensive), and the Nikkei Stock Average have reached their highest levels in about 30 years, indicating a change in the situation toward an exit from the deflationary economy. Companies also appear to be more willing to make capital investments.

According to the Cabinet Office's survey on corporate behavior (as of January 2024), the percentage of companies planning to increase capital investment over the next three years exceeded 70% for the third consecutive year, while those planning to decrease it fell below 10% for the second consecutive year.

In addition, of the 1,537 companies that responded to the Survey on Business Operations of Foreign-affiliated Companies in Japan conducted by JETRO in October 2023, a majority of the companies reported year-on-year revenue growth, with business performance rising for the second year in a row. Regarding future business plans in Japan, 60.6% responded that they will "strengthen/expand," up 4.5 points from the 2022 survey and up 8.0 points from the 2021 survey, indicating that foreign-affiliated companies are also increasingly inclined to strengthen or expand their businesses.

Recognizing this changing trend, the government has announced that it will utilize the Domestic Investment Promotion Package^*1, which was formulated from an inter-ministerial and cross-sectoral perspective, to achieve the Keidanren's target of "115 trillion yen in capital investment in fiscal 2027" through public-private partnerships.