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Invest in Japan 29 September, 2005 Hiroshi Yoshikawa (University of Tokyo) 1 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 government’s Efforts 2 Current FDI into Japan Stock of FDI into Japan: 9.6 trillion yen (2003) Ratio of FDI stock to nominal GDP: 2.0% (2002) Japan’s 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. 3 (1) Stock of FDI into Japan (by regions, trillion yen) (Unit: trillion yen) 13.2 14 Canada Cayman Island (2001-) Other Latin America 12 9.4 10 8 5.8 9.6 Netherlands France Germany Other Western Europe Others 6.6 Target 4.7 6 4 Asia United States 3.0 2 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Regional Direct Investment Position and Regional Portfolio Investment Position (Disseminated by Ministry of Finance) 4 (2) Inward FDI in Major Countries (stock / nominal GDP) 45% 50% 40.9% 38.3% 40% France 33.0% 35% 40.9% 38.3% 40% U.K. 30% 25.7% 25% 33.0% 30% 25.7% U.S. 19.2% 20% 20% 10% 10% 2.0% 19.2% Germany 15% 5% Australia 0.7% 1.0% 1.1% 1.2% Japan 2.0% 1999 2000 2001 2002 0% 0% Japan U.S. U.K. Germany France Australia 1998 Source: IMF "International Financial Statistics" (2003) by far the lowest level among industrialized countries. Note: U.S., France and Australia: Current Price 5 (3) The number of Foreign-capital companies in Japan, sales, profit and employees (2001) Foreign-capital companies Manufacturing Share Share Companies 546 1.94% 261 1.97% Employees 514,124 4.71% 291,268 5.78% 35,079 5.95% 25,240 10.28% 1,886 11.92% 1,426 18,59% Sales (billion yen) profit (billion yen) 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 6 establishment of Manufacturing, Mining and Commerce. (4) Increasing Foreign Shareholders Foreign Shareholdership is rapidly getting to a higher level, where Japanese business corporations reduce their shares. Foreign – owned share’s ratio (Market Value; Sep. 2003) TOYOTA 18.2% HONDA 32.2% Renault S.A. NISSAN 63.9% DaimlerChrysler AG MITSUBISHI 42.3% MAZDA Ford Motor Co. 39.5% General Motors Corp. SUZUKI 43.7% General Motors Corp. 37.6% Fuji (SUBARU) ISUZU General Motors Corp. Distribution of Shareholders (Market Value) Govt. & Local Govt. 100 LTCB, City & Regional Banks Trust Banks 80 Other Fin. Institutions Business Corps. 60 Securities Companies, Individuals Foreigners (Cos. + Indiv.) 40 17.6% 20 0 18. 61 8. 818. 317. 721. 8 10. 151. 91 3. 414. 1 7. 7 8. 1 6. 0 6. 3 4. 2 4. 7 1989 1991 Source: 1993 1995 1997 1999 2001 2003 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. 7 Goal of “Doubling the Stock of Inward FDI” (Prime Minister’s 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) 8 Japan Investment Council (JIC) On July 1994, the JIC was established as a ministeriallevel 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. 9 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 FDI’s 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 10 (1) Provide Information in Japan and Abroad The Prime Minister welcomed inward FDI in a television spot commercial, broadcasted throughout America and Europe. DVD version in five languages produced and distributed. 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. 11 (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). 12 (3) Review Administrative Procedures “Invest Japan” established as unified contact point to provide foreign investors with comprehensive information and consultation on direct investment in Japan. 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). 13 (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. 14 (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. 15 Why Japan? 1. The world's second-largest market 2. Key market to succeed in Asia 3. Abundant highly skilled human resources 4. 5. 6. 7. Innovative technologies Efficient infrastructure Reformed legal framework for investment High performance of Foreign Companies in Japan 8. Lowered business costs 9. Abundant market opportunities 10. Living environment 16 (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) Others Country Nominal GDP (million $) Per Capital ($) 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 Italy 1,186.1 20,441 Asia Japan 12.5% Europe Italy United Kingdom France Germany United States 32.6% Canada Central South America North America Source: Cabinet Office 17 - 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”. Rep. of Korea Hiroshima (Hiroshima Pref.) Fukuoka, Kitakyusyu 900km (Fukuoka Pref. and Yamaguchi Pref) Comparison of GDPs of major regions in Japan with those of selected Asian nations (2001) <Source> Japanese figures; Prefectural Citizens' Economic Accounts, 2001 (Cabinet Office) Asian nations figures; Foreign Economic Data (Cabinet Office) 600km 427 billion Kansai Metropolis Nagoya 553 1,271 404 billion billion billion Osaka, Kyoto, Kobe (Kansai region; Osaka Pref., Nagoya Kyoto Pref. and Hyogo Pref.) (Nagoya region; Aichi Pref. and Shizuoka Pref.) 900km Sapporo (Hokkaido) 600km 300km Sendai (Miyagi Pref.) Tokyo, Saitama, Kawasaki, Yokohama (Metropolis; Tokyo, Saitama Pref., Chiba Pref. and Kanagawa Pref.) China 1,191 billion 18 (2) Key market to succeed in Asia Japan’s 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. 19 (3) Abundant highly skilled human resources Japan’s competitive advantages are supported by its highly-skilled workforce. Even among developed nations, Japan has the highest rate of advancement to higher education. Specialized traning College 80% Part-time Full-time 60% 23.1% 1.2% 12.7% 40% 49.8% 47.7% 41.0% 20% 33.2% 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. 0% Japan United States France (1999) (2000) (2003) Germany (2000) 20 - Changing “Lifetime Employment” Foreign companies have chances to hire competent Japanese business people. More and more Japanese are changing their job. Socalled ”Lifetime Employment” does not prevail any longer. (milion) 4 3 voluntary non-voluntary unemployment (after graduation) Other unknown 2 1 Number of job-searchers Source; Ministry ob Public Management, Home Affairs, Posts and Telecomunications 0 1986 1991 1996 2001 21 (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. 250 To Japan To U.S. 200 To EPO To Rep. of Korea To China 150 To Oters 100 50 The Number of Patent Registrations According to Nationality (2000) Source; WIPO Statistics 0 From Japan From U.S. From EPO From Rep. of Korea From China From Others 22 (5) Efficient infrastructure Japan’s high-speed telecommunications network reaches 10 million households, and offers a superb platform for cutting-edge information-based businesses and distribution systems. 4.42 4.0 15% Hong Kong Iceland Sweden 5% U.K. Japan 1.0 Germany 0.0 5 10 15 20 Total Broadband Subscribers (million subscribers) 3.53 2.21 2.0 U.S. 0% 0 3.07 3.0 ar k Canada Taiwan Belgium Netherlands en m 10% International Comparison of Broadband Fees per 100 kbit/s (July 2003) 5.0 Rep. of Korea 20% D Broadband subscribers per 100 inhabitants International Comparison of Total Broadband Subscribers and Subscribers per 100 Inhabitants (2002) 25% 25 0.09 Japan 0.25 Rep. of Singapore China U.S. Germany Korea Source: ITU Internet Reports 2003 “Birth of Broadband” 23 (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. 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. Number of primary international communications licenses foreign companies. 1998.01 1998.09 0 4 10 1999.03 18 1999.09 24 2000.03 37 2000.11 0 10 20 30 40 24 - 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 25 (7) High performance of Foreign Companies in Japan Foreign Companies in Japan enjoy much higher profits than Japanese companies. Japan ( 2001) Japan ( Forei gn- capi t al com pani es, 2001) G erm any ( 1998) United States (2000) 0% Germany (1998) 3% Japan (Foreign-capital companies, 2001) Profits / Sales (Part for Manufacturing) 6% Japan (2001) Low profits in Japanese companies are not applicable to Foreign companies in Japan. 9% U ni t ed St at es ( 2000) Source; Cabinet Office 26 (8) Lowered business costs The costs of doing business in Japan—land prices, office rents, and labor costs, among others—have dramatically decreased. 120 Residential Commercial Industrial Average for all Purposes 100 80 60 48.2 43.0 40 40.5 20 Published Land Prices (Sept. 1992 =100) the Metropolitan Areas Shown in Published Land Prices in 2002 0 1992 23.4 1994 1996 1998 2000 2002 2004 27 (9) Abundant market opportunities Life Science The Market size of medicine and medical device will be 8.4 trillion yen in 2010. 40% 35% Sweden Japan 30% Germany United Kingdom 25% 36.5% 27.0% United States 20.0% 20% 15% 10% 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. 5% 0% 1950 Percentage aged 65 or over (%) 1970 1990 2010 2030 2050 Source; “World Population Prospects, 2002” (UN) 28 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. ICT market size and share of all industry in Japan 12.2%12.0% 13% 11.8% 120 12% 11.2% 10.9% 119 116 11% 110 115 10.1% 107 9.3% 100 10% 104 8.6% 98 130 90 9% 89 80 70 79 8% market size (trillion yen) share of all industry (%) 60 7% 6% 1995 1996 1997 1998 1999 2000 2001 2002 Source: WHITE PAPER Information and Communications in Japan (2004) Environmental Services Industry market size in Japan 140 111.9 120 100 76.9 80 47.2 60 40 58.4 29.9 market size (trillion yen) 20 0 Environment 123.6 size of employees (10 thousand) 2000 2010 2020 Source: Ministry of the Environment (May 2003) The environment related industry is a highly-growing market, and it is estimated to be 47.2 trillion yen (430 billion $) in 2010. 29 (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. 30 7. Invest Japan Window (1) 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) Window’s 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) 31 (3)Any inquiries and troubles We are waiting for your contact! Cabinet Office: [email protected] http://www5.cao.go.jp/access/english/jic_main_e.html JETRO: [email protected] http://www.jetro.go.jp/ 32