Japanese Investment in Asia Changing in 2013/2014

Japanese Investment in Asia Changing in 2013/2014

According to the Japanese External Trade Organization (JETRO), Japanese companies invested 2.33 trillion yen (US$22.8 billion) in Singapore, Thailand, Indonesia, the Philippines and Vietnam in 2013 with 887 billion yet invested in China. Investment doubled in Southeast Asia and fell 18 percent in China over 2012. In 2013, Japanese capital flow to China dropped to $6.50 billion, less than half the $13.48 billion Japanese investment China attracted in 2012. Further JETRO reported that Japanese companies planning expansion in China fell to the lowest number ever at 55 percent. According to JETRO Chairman Hiroyuki Ishige, "Viewed from the Japanese companies headquarters, China's economy and China's political situation present a considerable amount of risk".

Sino-Japanese ties have been very much hurt by a territorial dispute over the Diaoyu Islands in the East China Sea and over Japanese Prime Minister Shinzo Abe's new less apologetic tone about China's wartime history and past apologies. Rising wages and other costs in China are also having an impact in addition to the political aspects. In China, salaries are rising at fifteen percent or more per year and wages in China now exceed those in Thailand and are considerably more than those in Vietnam, the Philippines and Indonesia.

In Southeast Asia, things are also changing. Japanese investment in Thailand in 2011 amounted to $7 billion, while in 2013 that number dropped to $2.5 billion, according to the Business Times, a Vietnamese newspaper.

Vietnam, on the other hand, experienced an opposite trend. Foreign investment increased from just $169 million in 2010 to $4.45 billion in 2013. This investment included a number of high-profile projects backed by Japanese companies like the $2.8 billion Nghi Son petrochemical oil refinery, the $650 million Bridgestone’s project, and the $175 million Panasonic Industrial Devices project and were on top of the Tokyu's large real estate joint venture with Vietnamese company Becamex. An additional high profile project was in late 2013 was Fuji Xerox decision to site a $120 million printing machine and photocopier factory in the Vietnam-Singapore Industrial Park (VSIP) in the Vietnamese city of Hai Phong City.

Demonstrating Japanese investors interest in Vietnam is confirmed by a 2013 survey by JETRO which indicated that 70 percent of 435 Japanese businesses in Vietnam have plans to expand their Vietnamese operation and make the market a major base for future efforts in Southeast Asia.

In 2013, Japanese investment in China and Southeast Asia went through an important transition. Prior to 2013, Japan had invested considerably in China and also to a lesser extent in Thailand but as political disputes between China and Japan increased in 2012 and 2013 and as prices for labor and other supply chain items surged in China in 2012-2013, Japan started to reduce investment in China. At the same time, Japanese investment in Thailand - in a way the center of Japanese investment in all of Southeast Asia - also started to be cut back as Japanese companies became increasingly concerned about political stability in the Thai capital.

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