How big is FDI in Japan and Taiwan?

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  • 1 decade ago
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    Foreign direct investment into Japan, which began increasing in the second half of the 1990s, has

    gained in momentum considerably in the recent years, as evident from the following trends.

    While FDI outflows1 from Japan had reached a historical peak (7352 billion yen) in 1990, FDI

    inflows into Japan had recorded only about 262 billion yen. At this point, (net) inward investment

    into Japan was some 28 times lower than outward investment by Japan. However, the surge in

    inflows in 1992 and their subsequent linear growth during 1996-99 led to a drop in this gap to as

    low as 1.8 times in 1999. This was also aided by the massive drop in outflows from 1991 onwards.2

    Although the gap between net inflows and outflows increased again to 3.5 times in 2002,3 inward

    FDI into Japan grew at about 53% in 2002 and marked the second highest value on record. This

    rising trend in FDI inflows into Japan is all the more significant, when considered against the

    fact that following the historical boom during 1999-2000, global FDI flows fell sharply in 2001

    and 2002 -- the largest decline in at least three decades.4

    Thus, Japan’s share in global FDI inflows, which was an average of only 0.5% during 1990-95,

    increased to 1.2% in 1999.5 When compared to the share of the US, which accounted for about

    26% of global FDI inflows in 1999,6 Japan’s share does look miniscule. However, for a country

    which began courting inward FDI only recently, Japan’s share is comparable to that of the EU

    countries of France, Germany and the UK, with their shares in global FDI inflows at 4.3%, 5% and

    8% respectively in that year.7 Further, among these major global outward investors, a comparison

    of the gaps between their respective shares in global outward FDI and inward FDI between 1990-

    95 and 1999 clearly reveals that for both France and the UK, this gap had actually increased

    reflecting the fact that inflows into these countries were growing less faster than outflows from

    them. It is only for the US that has become a net FDI recipient and for Germany that this gap

    declined, mirroring a faster growth in inflows relative to outflows. On the other hand, since the

    early nineties, on an average inflows have grown much faster than outflows for Japan, except for

    the two years 2000 and 2001.

    1 On balance of payments basis, or actual net flows. There are two sets of statistical data available on Japan's FDI. The

    FDI data in the BoP statistics compiled by the Bank of Japan shows actual net transactions (that relate to a lasting

    interest held by a direct investor) that took place in the amount of 5 million yen or more and cover not only new

    investments (equity and loans) but also additional working capital and expenses incurred to existing close and/or

    contract operations. Acquisitions of real estate are also included in this data. Further, dividends from affiliated

    companies are recorded as reinvested earnings. While the BOJ data cover through to small investments (up to five

    million yen), it is on a net basis (inclusive of withdrawals, repayment of loans, and profit repatriations in a particular


    Taiwan: In order to promote foreign investment in Taiwan, the Ministry of Economic Affairs (MOEA) formed the MOEA FDI Task Force, which aims to integrate cross-agency resources on foreign investment and create an effective mechanism to facilitate foreign investment in Taiwan. The Task Force also provides a "total solution" service network for foreign investors covering all stages of investment, from pre- to post-investment. This service is expected to effectively expand FDI in Taiwan.

    According to statistics from the MOEA Investment Commission, from Jan. to Aug 31, 2006, approved foreign direct investment (FDI) totaled NTD 8.541 billion – an increase of 369.56% over 2005. Not accounting for Philips' purchase of shares in Taiwan Semiconductor, which amounted to USD 3.765 billion, FDI in 2006 increased by 207.65%, or a total of USD 47.76 billion. These figures clearly reflect the results achieved by the MOEA Task Force. FDI in Taiwan in 2006 is expected reach a record high, and FDI from Jan. to Aug. 2006 has already surpassed USD 4.5 billion figure projected by the Economist Intelligence Unit.

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