Japan’s FDI strategy is to diversify away from China
Japan’s foreign direct investment (FDI) position nearly tripled over the past decade, even as domestic investment stagnated. Currently, 40% of FDI income comes from Asia, thanks to the high rate of return, especially in China.
What you will learn:
- In the 2000s, Japanese firms invested in Asia as a low-cost producer. More recently, however, serving local demand has become the driving force behind investment in both manufacturing and service sectors.
- While China remains the most popular destination due to promising returns and local demand, ASEAN 5 (Thailand and Vietnam, in particular) will continue to benefit from the diversifying of supply chains beyond China. Developed Asia (especially Singapore) will remain attractive as a regional hub for services.
- In addition to growth prospects of local markets, Japan’s FDI allocation in Asia will feel the effects of the decoupling pressures stemming from the US-China confrontation. And with sustainability rising on companies’ agendas, emissions reduction in each economy will increasingly determine Japan’s FDI allocation.
Tags:
Related Services

Post
The UK’s fiscal adjustment is at risk of failure
The UK is planning one of the largest fiscal consolidations of any advanced economy over the next two years. We expect it to result in much weaker GDP growth than the Office for Budget Responsibility forecasts and think the government's balance sheet is still likely to deteriorate.
Find Out More
Post
Autos and machineries in Japan are most vulnerable to US tariffs
Our analysis of industry and trade structure between the US and Japan reveals the auto and non-electrical machinery sectors are most vulnerable to tariffs by the US. For both sectors, the US accounts for a sizeable share of total exports as well as gross output, and particularly so for auto.
Find Out More