JETRO Invest Japan Report 2016 (Summary) 3. Trend of Investment in Japan

R&D field

  • In recent years, there has been a movement by foreign-affiliated companies to take advantage of Japan’s outstanding technologies and knowhow by establishing R&D centers in Japan.
  • Reflecting Japan’s excellent reputation as a hub of R&D and for government support, there are many cases of research collaboration between foreign-affiliated companies with Japanese universities, research institutes and other groups, as well as the establishment of R&D bases in Japan.
Field Company Overview
Manufacturing Tenneco Japan (US) A Japanese subsidiary of American global supplier of auto parts Tenneco began full-scale operations of its Yokohama Technical Center in April 2016. Tenneco Japan supports the development and design capabilities of Japanese corporations operating globally, and is strengthening its support system for customers’ domestic and overseas production. In addition to the automotive sector, it aims to expand its presence in the Japanese market in the ships, vessels, agricultural machinery and construction machinery sectors.
ICT Rocket Software (US) A global business software developer set up an office in Yokohama in April 2015 to respond to the demand for high quality by Japanese customers. It was followed by an R&D center in Sapporo, an IT cluster regions in Japan where it is easy to find talented people. Rocket Software aims at expanding their share of mainframe software in Japan, one of the world’s largest IT markets.
Life Science Pierre Fabre Dermo-cosmétique Japon (France) As a Japanese subsidiary of Pierre Fabre, a leading French manufacturer of pharmaceutical products and dermatological cosmetics, Pierre Fabre Dermo-cosmétique Japon has established the group’s first R&D center outside France, Asia Innovation Center PFDC, in Tokyo to develop products targeted at Japanese and Asian markets.
Manufacturing Caterpillar (US) It strengthened its R&D function to develop new products for the global market in Akashi, Hyogo, which is a global center for manufacturing and R&D of hydraulic shovels. Their R&D was subsidized by METI in fiscal 2014.
Life Science Johnson&Johnson (US) It’s “Tokyo Science Center” was established in the International Strategic Zone in Kawasaki, in August 2014. The center, equipped with a surgery simulation system, is expected to be utilized by healthcare professionals of Asian countries as a research and training facility.
  • In “the Survey on Attitudes of Foreign-Affiliated Companies toward Direct Investment in Japan Report 2015” published by METI in February 2016, Japan ranked top as R&D center among investment destinations in Asia, which shows a high evaluation given to Japan by foreign companies.
Locational competitiveness by countries and type of base
(most attractive Asian countries/regions for foreign companies as investment destination by type of business location)
Type of base Number of respondents Japan China Singapore Hong Kong
R&D base 105 companies 1 43% 4 10% 2 15% 7 2%
Regional headquarters 172 companies 2 20% 4 10% 1 42% 3 13%
Sales base 162 companies 1 32% 3 18% 2 20% 5 5%
Financial base 73 companies 3 10% 5 1% 1 51% 2 30%
Back office 69 companies 2 19% 7 4% 4 13% 5 12%
Distribution base 73 companies 4 10% 2 18% 1 36% 3 16%
Manufacturing base 90 companies 6 4% 1 46% 6 4% 12 1%

Tourism field

  • With the rapid increase in tourists visiting Japan, investment in Japan by Asian countries is especially conspicuous in tourism-related businesses.
  • Investment in Japan is increasing in hotels, airlines (LCCs), tax refund services, etc.
  • Because tourism benefits a broad range of industries from transportation and accommodation to retail, restaurants, entertainment and other services, expanding the tourism market will also revitalize regional economies.
  • The trend of Asian investment in Japan’s tourism business is expected to continue.

Cases of FDI into Japan in tourism

Company name Nationality Business
Juneyao Airlines China Flight services
Shanghai Spring Investment Management Co. Ltd. China Operating hotels
Global Tax Free South Korea Tax refund services
Koraku Japan Corporation China Publishing magazines
Ctrip China Operating online travel booking services
Travelex Japan UK Foreign exchange services
Trip Advisor US Providing information on trips
USJ US Management of entertainment park

Partnership between foreign-affiliates and Japanese companies

  • There are many cases of foreign companies collaborating with Japanese companies to take advantage of Japan’s outstanding R&D strength and other resources.
  • Foreign-affiliated and Japanese companies, based on an understanding of their respective strengths, are building win-win relationships to benefit from one another with an eye on global business development.

Example of collaboration (Foreign-affiliated: New service ☓ Japanese: Network)
Neopost (France) ☓ Yamato Transport(Service/joint venture)

Neopost, a major player in shipping solutions, and Yamato Transport Co., Ltd, a Japanese leader in transportation and parcel delivery, formed a joint venture in May 2016. Unsuccessful home deliveries represent about 20% of total parcel deliveries, which requires solutions, including addressing a driver shortage and environmental impact. To address these issues, Yamato Transport aims to provide a new high-quality and convenient home delivery solution that is also open for use by other delivery companies in Japan by using Neopost’s knowhow in infrastructure of lockers for delivering parcels.

Example of collaboration (Foreign-affiliated: Preceding process ☓ Japanese: Post-process)
PRISMADD (France) ☓ Yamaichi Special Steel (Manufacturing/joint venture)

PRISMADD, a French company manufacturing products through 3D printing for the aviation and automobile industries, and Yamaichi Special Steel of Japan established PRISMADD Japan. The joint venture aims to enter the global market by combining PRISMADD’s 3D printing technologies and design optimization knowhow with Yamaichi’s post-process technologies including precision making.

Example of collaboration (Foreign-affiliated: Overseas sales channel ☓ Japanese: Technology)
Mahindra and Mahindra (India) ☓ Mitsubishi Heavy Industries (Manufacturing/capital tie-up)

M&M is a prominent conglomerate of India which formed a capital tie-up with Mitsubishi Agricultural Machinery under Mitsubishi Heavy Industries in October 2015. M&M is the 5th largest agricultural machine company in the world and the 1st in agricultural tractors, but is relatively obscure in rice planting machines and light-weight tractors where Mitsubishi Agriculture Machinery is strong. Through this tie-up, the companies intend to combine the technical strength of Mitsubishi and procurement and sales strength of M&M to enhance their operations with a focus on Asia where food demand is increasing.