Alluring Investors Japan’s Effort to Attract Foreign Businesses

Alluring Investors Japan’s Effort to Attract Foreign Businesses

[INTERVIEW]

Mr. Hirobumi Iida
Director of Trade and Investment Facilitation Division, Trade and Economic Cooperation Bureau
Ministry of Economy, Trade and Industry

Since the creation of the “Japan Revitalization Strategy—Japan is Back” on June 14, 2013, there has been a stream of promotional activities to lure foreign direct investment (FDI) to Japan. JAPAN and the WORLD magazine talked with Mr. Hirobumi Iida from the Ministry of Economy, Trade and Industry on the country’s recent efforts to increase foreign direct investment.


With the Olympics approaching, ongoing changes will upgrade the business environment and make it more appealing for investment.

—Please tell us about the background and the current conditions relating to foreign direct investment (FDI) in Japan.

Until recently, Japan didn’t consider deeply FDI to boost economic development, partly because of the abundant domestic capital. So, expansion of export was a higher priority than that of foreign investment. However, people gradually recognized the necessity of foreign investment, and the Koizumi Cabinet (2001-2006) pushed reforms that facilitated the persuasion of foreign investors. Yet, FDI in Japan was still very low, at only 3.7 percent of its GDP in 2013 according to the United Nations Conference on Trade and Development (UNCTAD) statistics.

Japan, however, proves to be an attractive country for investment. The 2013 survey by the Ministry of Economy, Trade and Industry (METI) of companies in Europe, North America and Asia showed Japan as their number one choice as potential R&D and sales bases.

With the Olympics approaching, ongoing changes will upgrade the business environment and make it more appealing for investment.

—What are the attractions for investment in Japan?

On a general scale, they include the huge market, which is third in the world, meticulously developed infrastructure like transportation, electricity and water systems, well-educated high quality human resources and great social stability and safety. For R&D, we have well-equipped research facilities and a great accumulation of outstanding achievements. Also, consumers’ high standards for product quality make Japan a great test market—if Japanese consumers are satisfied, so are clients anywhere in the world.

—What needs to be overcome for further expansion of FDI?

There are two main issues. Firstly, we have to improve various conditions to suit the foreign investors; according to a survey by METI, foreign companies find the business cost too high and want further deregulations. To meet these challenges and to promote new businesses, we are gradually decreasing corporation tax and relaxing some restrictions on a sector by sector basis.

Secondly, we need to strengthen our promotion. It is very important to appeal to foreign corporations and to show support to individual projects. Last year, we hosted “Invest Japan” seminars in London and New York, and Prime Minister himself promoted foreign investments in Japan.

—Can you tell us about the “Five Promises to Attract Foreign Businesses to Japan” announced on March 17 this year?

These are improvement measures to boost up foreign investment. For each issue discouraging them to invest here, improvement plans are listed as the “Five Promises”.

Five Promises

  1. Multi-lingual services in shops, transportation services and hospitals.
  2. Better Wi-Fi environment.
  3. Upgraded regional airports able to receive international business jets.
  4. Enriched educational services for expatriate children, and better support for job searching for foreign students in Japan.
  5. Stronger support for investing foreign companies.

—Can you tell us about the aim and the achievements of the METI-REITI (Research Institute of Economy, Trade & Industry) Symposium “Impact of Inward FDI and its Promotion for Japan’s Economic Growth” held on March 10, 2015?

In Japan, the importance of FDI is still underappreciated. For the Japanese economy to keep growing, foreign businesses are absolutely necessary to strengthen domestic investment and to take up their outstanding skills and managerial know-how. So, for the effective persuasion of foreign investors, all parties involved need to fully understand the importance and the challenges of FDI promotion. Therefore, we invited experts in domestic policy making, academia and industry to give lectures at the symposium to share their knowledge.

—Who is in charge of FDI promotion in the government?

FDI is promoted through multiple ministries, lead by the Council for Promotion of Foreign Direct Investment in Japan made up of six ministers of the Cabinet Office, METI, Ministry of Foreign Affairs, Ministry of Internal Affairs and Communications. Inside METI, many departments are involved as well, and my division, the Trade and Investment Facilitation Division, works in cooperation with them to promote FDI.

—The Japanese government has announced plans to double its FDI to JPY 35 trillion by 2020. Why such a high target?

Plans to double FDI was carried out twice in the past, both during the Koizumi Cabinet period. The first time was in 2001, when plans were announced to double the then JPY 6.6 trillion FDI in five years, which they almost achieved, boosting it up to JPY 12.8 trillion by 2006. The second time was in 2006, when they tried to double the FDI ratio of 2.5 percent of GDP. With the Lehman Brothers shock in 2008, this was not accomplished (3.6 percent at the end of 2013). So, the current aim is not easy by any means, but definitely not impossible. We just try our best.

In addition, the current FDI ratio of GDP is around 3.7 percent, and this is still very low compared to other countries. According to UNCTAD statistics, it is low among other developed countries like England (63.3 percent) and the United States (29.4 percent) as well. This means there is enough space for growth.

—Are there any specific sectors of focus for FDI promotion?

There are various sectors, in particular, the medical sector, including regenerative medicine, the energy sector, including renewable energy, Information Technology, and tourism. The markets of these sectors are growing in Japan and the skills and business models of foreign businesses lacking in Japan will hopefully boost further development in these sectors.

—What are the incentives for foreign businesses to invest in Japan?

There are special tax measures, like the ones for domestic businesses that can be applied to foreign businesses. For example, in 2014, the special tax measures for facility investment for better productivity was installed and so was the special tax measures for business expansion in regional cities this year. In addition, some municipalities have incentive measures like grants and special tax measures.

—Please tell us about the “National Strategic Special Zones” in relation to FDI.

There are six designated areas and each of them has special deregulations designed to attract foreign businesses at a local level. The six areas designated as National Strategic Special Zones are; Tokyo area, Kansai area, Niigata city, Yabu city, Fukuoka city and Okinawa. In addition, Senboku city, Sendai city and Aichi prefecture are designated as Regional Vitalization Special Zones. They each have a special focus in business development.

—Please tell us about the Tokyo One-Stop Business Establishment Center opened on April 1 this year.

The Tokyo One-Stop Business Establishment Center is where the necessary administrational procedures can be done in one stop when a foreign company is starting a business in Japan. Staff from various ministries assist you with the registration, the notifications of taxes, pension and social security and immigration documents necessary for establishing a company.

In addition, located on the same floor is the “Business Development Center TOKYO” matching businesses to companies considering to establish a business in Tokyo, and consulting on life in general in the city. There is also the “Tokyo Employment Consultation Center” helping to ensure smooth business development. I highly recommend any companies looking to start a business in Tokyo visit these centers.

—Lastly, you have been working on diverse issues in various ministries. How does this affect your work in terms of promoting FDI?

From 2010 until last year, I was working as an economic councilor at the Japanese Embassy in China. There, I witnessed a number of leaders from regional governments competing for foreign businesses. This made a huge impression on me. China is a country that has been growing rapidly due to foreign investment through economic reforms since the 1970s. Today, when all countries are competing to attract global corporations, it was eye-opening to re-acknowledge the importance of the roles regional governments play, in addition to the central one.

The National Strategic Special Zones

Tokyo area

International business development

Kansai area

Medical and healthcare innovation

Niigata city, Niigata

Agriculture and food

Yabu city, Hyogo

Agricultural innovation in mountainous area

Fukuoka city, Fukuoka

Entrepreneurship

Okinawa

Tourism

The Regional VITALIZATION Special Zones

Senboku city, Akita

Agricultural and medical tourism

Sendai city, Miyagi

Female enrollment in business and entrepreneurship

Aichi prefecture

Fostering personnel to support industries

See More

For more information, please visit the organization’s respective websites at the addresses below:


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