Development of inward FDI to JapanWhile Japan is among the largest investors of FDI in the world, inward FDI flows to the country have remained low. Over the past decade, the government has created a range of incentives to attract investment from overseas and promote Japan as a destination for FDI.
Measured by the FDI Regulatory Restrictiveness Index, Japan can be considered as open towards FDI and ranks above the OECD average. Financial services, such as banking and insurance, were among the most open industries with regards to FDI regulations, while the air transportation industry was considered the most restricted industry. In recent years, Japan has followed the example of other economies in tightening the regulations on inward FDI in certain industries with an amended version of the Foreign Exchange and Foreign Trade Act.
Inward FDI by region and industryIn 2022, inward FDI flows to Japan surged to a record 32.53 billion U.S. dollars, the highest amount in the last ten years. Japan’s inward FDI position amounted to 225.37 billion dollars, accounting for 5.24 percent of the GDP.
Equity represented the largest component of FDI flows to Japan in 2022, followed by reinvestment of earnings and debt instruments. Inward FDI was largely directed at non-manufacturing industries, with the finance and insurance industry receiving the highest amount of FDI inflows. Transportation and electric machinery were other main target industries.
North America and Asia were among the leading investing regions of FDI to Japan. Broken down by economy, the highest amounts of inward FDI flows came from the United States, Singapore, the Cayman Islands, and Canada.