Japan External Trade Organization (JETRO)

2014 JETRO Global Trade and Investment Report

On making Japan a base for international businesscirculation
Overview
August 7, 2014
Overseas Research Department, JETRO
Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 1

The world economy, trade and direct investment

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 1: World Economy and the Issues It Faces

Japan External Trade Organization (JETRO)

Global economy continues to recover gradually○The IMF has revised the world’s real GDP growth for 2014 downward by 0.3 points to 3.4% from the previous estimate. While growth in emerging anddeveloping economies lack momentum, advanced economies such as the United States, United Kingdom and Germany are expected to experience stronger
recovery.
○After 2014, the world economy is confronted by risks including long-term deflation in Europe, fund outflows from emerging and developing economies causedby the Untied States’ exit from monetary easing policy, and geopolitical factors.
Figure I-1: GDP growth by country and region

(%)
2012

2013

2014 (July projections)2015 (July projections)Difference fromDifference from

Percent change Percent change Percent change April projections Percent change April projections

World
Advanced economies
United States
Euro Area
Germany
France
Italy
Spain
Japan
United Kingdom
Emerging and developing economies
Emerging and developing Europe
Russia/Commonwealth of Independent States
RussiaEmerging and developing Asia
China
India
ASEAN 5Latin America and the Caribbean
BrazilMexicoMiddle East and North Africa
Sub-Saharan Africa
South Africa

3.5
1.4
2.8
-0.7
0.9
0.3
-2.4
-1.6
1.4
0.3
5.1
1.4
3.4
3.4
6.7
7.7
4.7
6.2
2.9
1.0
4.0
4.9
5.1
2.5

3.2
1.3
1.9
-0.4
0.5
0.3
-1.9
-1.2
1.5
1.7
4.7
2.8
2.2
1.3
6.6
7.7
5.0
5.2
2.6
2.5
1.1
2.5
5.4
1.9

3.4
1.8
1.7
1.1
1.9
0.7
0.3
1.2
1.6
3.2
4.6
2.8
0.9
0.2
6.4
7.4
5.4
4.6
2.0
1.3
2.4
3.1
5.4
1.7

-0.3
-0.4
-1.1
0.0
0.2
-0.3
-0.3
0.3
0.3
0.4
-0.2
0.4
-1.0
-1.1
-0.2
-0.2
0.0
-0.4
-0.5
-0.6
-0.6
-0.2
0.0
-0.6

4.0
2.4
3.0
1.5
1.7
1.4
1.1
1.6
1.1
2.7
5.2
2.9
2.1
1.0
6.7
7.1
6.4
5.6
2.6
2.0
3.5
4.8
5.8
2.7

Notes: The definitions of advanced/emerging and developing countries follow the World Economic Outlook. The ASEAN5 refers to Indonesia,
Malaysia, the Philippines, Thailand, and Vietnam. Middle East and North Africa includes Afghanistan and Pakistan.
Source: "WEO, July 2014″ (IMF).
3

0.0
0.1
0.1
0.1
0.1
-0.1
0.0
0.6
0.1
0.2
-0.1
0.0
-1.1
-1.3
-0.1
-0.2
0.0
0.2
-0.3
-0.6
0.0
0.2
0.2
0.0

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 1: World Economy and the Issues It Faces

Japan External Trade Organization (JETRO)

Emerging and developing economies lead global economy but risks exist○Emerging and developing economies are predicted to continue driving the growth of the global economy.
○However, it must be noted that each emerging country is confronted by risks such as current account deficit, excessive dependence on investment,high inflation, the unemployment situation, and political risks.
Figure I-3: Risks for emerging and developing economies based on(%, index applies only to "Political risk")
economic indicators

Figure I-2: Emerging and developing economies’ contribution to global
economic growth and disparity with advanced economies(Year-on-year, %)Emerging and developing economies
Advanced economies
Growth difference(right axis)

6.0(Difference in growth rates [Emerging anddeveloping economies - Advanced economies])

7.0
Projections

5.0

6.0

4.0

5.0

3.0

4.0

2.0

3.0

1.0

2.0

0.0

1.0

-1.0

0.0

-2.0

-1.0

-3.0
85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15

17

-2.0
19 (Year)

Note for figure I-2: Contribution is calculated using the weighted PPP (Purchasing Power
Parity) for 2013. Source: "WEO, April/July 2014" (IMF).
Notes for figure I-3: (1) Countries with large nominal GDP have been selected from among
BRICS and middle-income countries defined by the World Bank. (2) The shaded cells refer tothe "Fragile 5" (according to Morgan Stanley). (3) Iraq's Investments/GDP and Nigeria's
unemployment rate are as of 2012. Other figures are as of 2013. (4) Political risk is higher thesmaller the index. Sources: World Bank, "WEO, April 2014" (IMF), and "Global Political
Risk Index" (Eurasia Group).
4

Current
Investments/ Inflation Unemploy
account/
GDP
rate-ment rate
GDP
BRICS
China
2.1
Brazil
-3.6
India
-2.0
Russia1.6
South Africa-5.8
Other middle-income countries
Mexico-1.8
Indonesia-3.3
Turkey-7.9
Argentina-0.9
Thailand-0.7
Colombia-3.3
Malaysia
3.8
Nigeria
4.7
Philippines
3.5
Pakistan
-1.0
Iraq
6.7
Kazakhstan
0.1
Peru
-4.9
Algeria
0.4
Romania-1.1
Ukraine-9.2
Vietnam
6.6(Reference)
United States
-2.3
Japan
0.7

Political
risk

47.9
18.3
34.7
23.8
19.4

2.6
6.2
9.5
6.8
5.8

4.1
5.4
n.a.
5.5
24.7

67.0
65.0
47.0
62.0
50.0

22.2
33.6
21.6
24.2
29.3
24.2
26.3
24.6
19.4
14.2
20.3
25.6
27.6
32.9
23.2
15.1
26.6

3.8
6.4
7.5
10.6
2.2
2.0
2.1
8.5
2.9
7.4
1.9
5.8
2.8
3.3
4.0
-0.3
6.6

4.9
6.3
9.7
7.1
0.7
9.7
3.1
23.9
7.1
6.7
n.a.
5.2
7.5
9.8
7.3
7.4
4.4

67.0
51.0
59.0
59.0
47.0
63.0
75.0
39.0
62.0
33.0
n.a.
n.a.
63.0
49.0
n.a.
55.0
n.a.

19.5
21.0

1.5
0.4

7.4
4.0

n.a.
n.a.

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 2: World Trade and Japan’s Trade

Japan External Trade Organization (JETRO)

Sustained weak recovery for world trade in 2013
○World trade in 2013 (JETRO estimates based on merchandise trade and nominal exports) rose by 1.6% to US$18.2826 trillion year-on-year.
○Export prices fell by 0.3% year-on-year and consequently reduced exports. In particular, there was a prominent drop in prices for beverages, metals, andenergy.
○According to forecasts by WTO, world trade for 2014 is expected to increase by 4.7% (in real terms) and push ahead with recovery, against the backgroundof recovery amongst advanced economies.
Figure I-5: Changes in the growth rate of world merchandise price indices (year-on-year)

Figure I－4: World trade indicesWorld merchandise trade (export basis)
Nominal percent change
Real percent change
Price percent change
World merchandise trade (import basis)
Nominal percent change
Real percent change
Price percent change
World service trade (export basis)
Percent change
World service trade (import basis)
Percent change
World real GDP growth
Industrial production index growth (advanced economies)
Average price ($/barrel)
Crude oil
Quantity of demand (million bbl/day)

(%)

2009
12,402
-22.6
-11.7
-10.9
12,556
-23.1
-10.3
-12.8
3,548
-9.3
3,421
-8.8
-0.4
-13.1
61.8
85.1

2010
15,130
22.0
16.7
5.3
15,252
21.5
15.5
6.0
3,892
9.7
3,741
9.4
5.2
7.4
79.0
87.8

(US$ billion, %)
2011
2012
2013
18,072
17,991
18,283
19.4
-0.5
1.6
9.2
1.8
1.9
10.2
-2.3
-0.3
18,206
18,57718,924
19.4
2.0
1.9
6.9
3.3
3.3
12.5
-1.3
-1.5
4,364
4,459
4,701
12.1
2.2
5.4
4,178
4,280
4,455
11.7
2.4
4.1
3.9
3.5
3.2
1.8
0.6
0.5
104.0
105.0
104.1
88.9
89.9
91.3

2009
-30.0
-15.8
-14.8
1.6
-17.1
-19.2
-36.8

All Primary Commodities
Non-Fuel Primary Commodities
Food
Beverages
Agricultural raw materials
MetalsEnergy

2010
26.2
26.5
11.9
14.1
33.2
48.2
25.9

2011
26.3
17.9
19.9
16.6
22.7
13.5
31.8

2012
-3.2
-10.0
-2.4
-18.6
-12.7
-16.8
0.7

2013
-1.6
-1.2
1.1
-11.9
1.6
-4.3
-1.8

Source: “IFS, May 2014” (IMF)

Figure I-6: Long-term trends in metals and energy prices(2005 = 100)

700
600

Coal

CopperGold

Iron ore

Natural gas

Crude oil

500

Notes: (1) 2012 and 2013 trade values, and 2013 nominal growth rates, are JETRO estimates.
(2) Real percent change = Nominal percent change - Export price percent change(3) Real GDP growth based on purchasing power parity. Figures for 2009－2011 are those released in April, and figures for 2012－2013 are those revised in July.
(4) Definition of advanced economies follows IFS classification.
Sources: “IFS, May 2014” (IMF), "WEO, April 2014” (IMF), "WEO, July 2014" (IMF), WTO, BP plc., and statistics from individual
countries/regions.

400
300
200

100
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

(Year)

Source: “IFS, May 2014” (IMF)

5

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 2: World Trade and Japan’s Trade

Japan External Trade Organization (JETRO)

Trends in world trade by countries, regions, and products○Export value for EU28 (including exports within the region) rose 0.5% year-on-year. However, import value from outside the region declined by 3.2%, continuing to move at its
previous sluggish pace.
○China’s combined trade in merchandise, which includes both export and import value, exceeded US$4 trillion for the first time in 2013.
○Looking at world trade by product, exports of resources fell year-on-year across the board, while electrical equipment rose significantly with the growth in the exports of IT
equipment and integrated circuits to China.

Figure I-7: World trade value by country and region (2013)
Value

NAFTA
United States
CanadaMexicoEU28
Germany
The Netherlands
FranceUnited Kingdom
Italy
Belgium
Spain
AustriaJapan
East Asia
China
South Korea
Hong Kong
TaiwanASEAN6Singapore
Thailand
Malaysia
Indonesia
VietnamPhilippines
RussiaIndia
Australia
BrazilTurkeySouth Africa
World trade (estimate)
Advanced economies
Emerging and developing
economies
Notes:

Sources:

Exports
GrowthShare
rate

Figure I-8: World trade by product: exports (2013)(US$ million, %)Imports

Contribution

Value

Growthrate

Share

Contribution

2,417,984
1,579,593
458,295
380,096
6,079,540
1,452,984
672,061
579,738
547,371
517,740
469,431316,457
174,694
719,205
4,825,711
2,210,662
559,632
535,548287,259
1,232,610
410,368
225,182
228,395
182,552
132,135
53,978290,126
313,521
252,678
242,179
152,131
83,43718,282,590
10,908,514

1.9
2.2
0.7
2.5
4.3
3.3
2.6
1.8
12.9
3.2
5.1
7.0
4.7
-10.3
5.0
7.8
2.1
8.5
1.0
0.9
0.4
-1.3
0.3
-3.9
15.4
3.8
-17.7
5.5
-1.5
-0.2
-0.2
-4.4
1.6
2.1

13.2
8.6
2.5
2.1
33.3
7.9
3.7
3.2
3.0
2.8
2.6
1.7
1.0
3.9
26.4
12.1
3.1
2.9
1.6
6.7
2.2
1.2
1.2
1.0
0.7
0.3
1.6
1.7
1.4
1.3
0.8
0.5
100.0
59.7

0.3
3,111,268
0.2
2,268,321
0.0
461,7370.1
381,210
1.4
5,943,717
0.3
1,189,108
0.1
589,9910.1
681,1590.3
653,6780.1
477,4260.1
450,6900.1
339,0350.0
182,237-0.5
838,889
1.3
4,564,533
0.9
1,949,300
0.1
515,5860.2
622,276
0.0
269,306
0.1
1,208,064
0.0
373,1220.0
248,2380.0
206,1190.0
186,6290.1
132,1250.0
61,831-0.3
287,004
0.1
465,777
0.0
232,7280.0
239,6210.0
251,9450.0
100,398
1.6 18,923,814
1.3 11,428,523

0.1
-0.4
-0.1
2.8
0.5
2.1
-0.2
0.9
-5.7
-2.4
2.5
0.3
2.0
-5.6
4.8
7.3
-0.8
12.3
-0.5
1.1
-1.8
-1.4
4.8
-2.6
16.1
0.2
-1.2
-5.0
-7.2
7.4
6.5
-1.1
1.9
-0.1

16.4
12.0
2.4
2.0
31.4
6.3
3.1
3.6
3.5
2.5
2.4
1.8
1.0
4.4
24.1
10.3
2.7
3.3
1.4
6.4
2.0
1.3
1.1
1.0
0.7
0.3
1.5
2.5
1.2
1.3
1.3
0.5
100.0
60.4

0.0
0.0
0.0
0.1
0.1
0.1
0.0
0.0
-0.2
-0.1
0.1
0.0
0.0
-0.3
1.1
0.7
0.0
0.4
0.0
0.1
0.0
0.0
0.1
0.0
0.1
0.0
0.0
-0.1
-0.1
0.1
0.1
0.0
1.9
-0.1

7,374,075

0.9

40.3

0.4

5.0

39.6

1.9

7,495,291(1) Data for the world, EU28, advanced economies, and emerging and developing economies follow JETRO estimates.
(2) EU28 includes internal trade.
(3) ASEAN6 in this chart stands for the following six countries: Singapore, Thailand, Malaysia, Indonesia, Philippines, and Vietnam.
(4) East Asia in this chart are the following 10 countries/regions: China, South Korea, Hong Kong, Taiwan, and ASEAN6.
(5) Definitions for advanced economies and emerging and developing economies follow the World Economic Outlook (IMF).
Statistics from individual countries/regions

Value
Total
Machinery and equipment
General equipment
Electrical equipment
IT equipment
Electronic parts such as semiconductors
Integrated circuits
Transport equipment
Automobiles
Passenger vehicles
Two-wheeled vehicles
Automobile parts
Precision equipment
Chemicals
Chemical industrial products
Pharmaceuticals and medical supplies
Plastics and rubber
Food
Oils and fats, and other animal and plant products
Miscellaneous manufactured products
Iron ore
Mineral fuels, etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum products
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
Steel ingots
Nickel ingots
Aluminum ingots

618,282,590
6,800,850
2,068,970
2,295,142
487,403
610,438
504,411
1,823,522
812,217664,928
20,291
405,012613,216
2,366,727
1,584,308
485,301
782,418
1,233,184
202,426554,363
141,680
2,958,986
2,780,363
115,400
150,155
2,274,797
1,294,053
782,153
87,841
438,748
1,205,367
684,955
65,177
14,62949,787

Notes: Total value for 2013 and total growth rate follow JETRO estimates.
Sources: Statistics from individual countries/regions.

Growth
rate
1.6
3.0
0.4
6.3
11.7
11.3
14.8
2.6
2.7
3.5
3.1
4.3
1.5
1.7
1.3
3.0
2.5
5.4
-2.5
6.8
13.4
-5.2
-5.3
-11.5
1.8
-6.1
-11.3
6.7
2.1
8.8
-2.8
-4.4
-5.6
-2.6
-2.0

(US$ million, %)

Share
100.0
37.2
11.3
12.6
2.7
3.3
2.8
10.0
4.4
3.6
0.1
2.2
3.4
12.9
8.7
2.7
4.3
6.7
1.1
3.0
0.8
16.2
15.2
0.6
0.8
12.4
7.1
4.3
0.5
2.4
6.6
3.7
0.4
0.1
0.3

Contribution
1.6
1.1
0.0
0.8
0.3
0.3
0.4
0.3
0.1
0.1
0.0
0.1
0.0
0.2
0.1
0.1
0.1
0.3
0.0
0.2
0.1
-0.9
-0.9
-0.1
0.0
-0.8
-0.9
0.3
0.0
0.2
-0.2
-0.2
0.0
0.0
0.0

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 2: World Trade and Japan’s Trade

Japan External Trade Organization (JETRO)Japan incurs trade deficit for third consecutive year
○For Japan’s trade in 2013 (on customs clearance basis), exports fell by 10.3% from the previous year to US$719.2 billion, while imports fell by
5.6% to US$838.9 billion. Japan incurred a trade deficit for the third consecutive year, with a trade balance in the red by US$119.7 billion.
○The deficit in trade in services decreased in 2013. The trade deficits in transportation and travel decreased. Receipts for maritime cargo services
from ASEAN increased, while receipts for travel from Taiwan, Hong Kong, and the ASEAN region also increased, contributing to reducing the
deficit in these sectors. It continued to enjoy increases in the surplus for royalties and license fees (including royalty deals between parent companies
and their subsidiaries).
Figure I-10: Japan’s service trade balance

Figure I-9: Japan’s trade (2012 – 2013)(Top row: Value, US$ million. Bottom row: Percent change, %)

2012

2013

Characteristics for 2013

Royalties and license fees expand trade surplus(US$ billion)

801,335-2.4
888,584
4.2-87,250-54,973
144,686-10.4
189,0193.0
129,7885.8

719,205
Exports
Export volume fell by 1.5%. Year-on-year decline for the third consecutive year.
-10.3
838,889
World
Imports
Import volume increased 0.3%. Growth for fourth consecutive year.
-5.6-119,684
Trade balance
Trade deficit for third consecutive year.
-32,435
129,851 In general machinery (15.8% fall), machine tools decreased by half.
Exports-10.3 In electric equipment (16.7% fall), poor performance for semiconductors, and visual equipment.
China
182,192 Shrunk for first time in four years since 2009. Year-on-year decline for chemicals, food, clothing, and steel, etc.
Imports-3.6 Steady performance by mobile phones in electric equipment (2.4% increase) as well as semiconductors.
111,671 Reconstruction demand after the floods have stabilized in Thailand (17.4% fall).
Exports-14.0 Significant decline in mining and construction machines, and passenger vehicles, for Indonesia (15.7% fall).
ASEAN
Minor decline for Malaysia (9.0% fall) due to fall in LNG prices, as well as decline for petroleum and petroleum
129,603
118,644
Imports
products.
4.0-8.5 Decline in LNG and crude oil for Indonesia (10.2% fall).
140,624
133,199 Returned to position as top export partner, overtaking China.
Exports
Despite the sustained positive growth for automobiles (0.7% increase), electric equipment (10.7% fall) and
11.9
-5.3
general machinery (10.1% fall) faced difficulties in achieving growth.
United States
76,46070,322 Overall decline for electric equipment, transportation equipment, chemicals, and food. Due to the impact of theImports
2012 drought, the United States' share in the import volume of corn dropped significantly from 90.1% in 2011 to
3.0-8.0
44.8% in 2013.
In Germany (8.7% fall), there was overall sluggishness in the machinery and equipment sector such as mining
81,742
72,173and construction machines, automobiles, etc.
Exports
The Netherlands (13.7% fall) struggled with growth for visual equipment, while the United Kingdom (16.5% fall)
-14.3
-11.7
faced difficulties in expanding the automobiles and automobile parts sector.
EU
While Germany (3.4% fall) saw a year-on-year decline in pharmaceutical products, there was strong
83,52078,995
performance in the passenger vehicle sector.
Imports
France (8.7% fall) also experienced poor performance for pharmaceutical products, but saw a growth in
4.0-5.5
transportation equipment with the import of large-scale aircraft.
Notes: (1) The dollar conversion rate was calculated based on rates posted by Japan customs, using the method announced by the Ministry of Finance until March 1996.
(2) The bottom row of trade balance indicates increase or decrease from the previous year.
(3) EU consisted of 27 countries in 2012, and 28 in 2013. The YoY changes for 2013 was based on the trade value of 29 countries.
Sources: "Trade Statistics" (Ministry of Finance)

7

20

10

Transportation
deficitnarrowed

0-10

Travel deficit
narrowed

-20

-30

-40

-50
05
06
07
Transportation
Insurance
Other business seiveces

08

09
10
TravelFinancial
Others (Notes)

11(Year)
12
13
Construction
Royalties and license fees
services balance

Notes: “Others” includes the communications, computer and information, personal, cultural and recreational, andgovernment services, n.i.e.
Sources: "Balance of Payments and International Investments Position" (Bank of Japan, Ministry of Finance), "Foreign
Exchange Rates" (Bank of Japan)

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 2: World Trade and Japan’s Trade

Japan External Trade Organization (JETRO)

Changes in trade structure make it difficult to generate surpluses○Comparing trade balance for 2008 and 2013, we see that Japan maintained its surplus for 2008, but incurred a deficit in 2013. Trade balance by product shows that there weredifficulties in generating surpluses for machinery and equipment such as transport equipment and electric equipment, while trade deficit was mostly generated by mineral fuels, etc.
○Changes in the trade structure for machinery and equipment have made it difficult to generate surpluses. These changes include the shift from export toward overseas production fortransport equipment, as well as the decline in price competitiveness and rapid expansion in the import of mobile phones (such as smartphones) for general and electric equipment.

Figure I-11: Japan’s trade balance by product (2008 and 2013)
2008(US$ billion)

2013

Changes from 2008→2013 (Figures in the brackets indicate change)change
Total
Exports
775.9
719.2
-56.7
Imports
756.1
838.9
82.8
Trade balance
19.8-119.7-139.5
Transportation equipment Exports
195.9
169.2
-26.7 Export volume for automobiles 8.29 million units → 5.82 million units (-2.48 million units)(Automobiles)
131.2
105.2
-26.1
Imports
22.6
28.9
6.3 (Reference) Volume of Japanese automobiles produced overseas:
Trade balance
173.3
140.2
-33.1
11.65 million units → 16.76 million units (＋5.1 million units)General Machinery
Exports
151.4
135.2-16.3 Export volume for printing machines (HS. 8443. excluding machine parts)(Printing machines)
17.8
12.5
-5.3
1.91 million units → 0.92 million units (-0.99 million units)(Mining and construction machines)
13.1
9.3-3.8 Export volume for construction machines (HS. 8429)(Machining center)
3.0
3.2
0.2
0.21 million units → 0.15 million units (-0.06 million units)
Imports
59.1
62.3
3.2 Export volume for machining center (HS.8457)
Trade balance
92.3
72.9
-19.5
12,000 units → 20,000 units (＋8,000 units)
Electric equipment
Exports
138.6
108.2-30.5 Export volume for video/digital cameras (HS. 8525.80)(Visual equipment)
16.2
7.5
-8.7
42.82 million units → 12.84 million units (-29.98 million units)
Imports
77.8
96.7
18.9 Import volume for mobile phones (HS. 8517.12)(Communication equipment)
10.8
27.4
16.6
7.95 million units → 34.58 million units (＋26.62 million units)
Trade balance
60.8
11.5
-49.3
Mineral fuels
Exports
18.6
16.6-2.1 Import volume for crude oil 240 million KL → 210 million KL (-30 million KL)
Imports
266.7
281.9
15.2
Import unit price US$101.9/barrel → US$110.5/barrel(Crude oil)
154.5
145.8
-8.7 Import volume for LNG: 69.26 million tons → 87.49 million tons (＋18.23 million tons)
(LNG)
45.2
72.5
27.3
Import unit price US$652/ton → US$828/ton
Trade balance-248.0-265.3-17.3
Notes: There are cases where the lowest digit may not match because of rounding error.Sources: "Trade Statistics" (Ministry of Finance), Japan Automobile Manufacturers Association.

8

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)World FDI shows signs of recovery○In 2013, global inward FDI increased by 9.1% year-on-year to US$1.452 trillion against the backdrop of economic recovery in advanced economies.
Despite the shift toward an increase in FDI, it nevertheless remained at approximately 70% of FDI levels of 2007 prior to Lehman Shock.
Figure I-12: FDI for major countries/regions (balance of payments basis,
net flows)(US$ million, %)Inward FDI
Outward FDI
Percent
Percent
Value
Share
Value
Share
changechangeUnited States
187,52816.8
12.9
338,302-7.8
24.0
Canada62,32544.9
4.3
42,636
-23.1
3.0
EU28
246,20714.0
17.0
250,460
5.3
17.8
Spain
39,16752.4
2.7
26,035
1.8
United Kingdom
37,101-19.0
2.6
19,440-44.4
1.4
Ireland35,520-7.3
2.4
22,85223.4
1.6
Luxembourg
30,075215.7
2.1
21,626606.0
1.5
Germany
26,721102.4
1.8
57,550-27.7
4.1
The Netherlands
24,389151.3
1.7
37,432 13906.1
2.7
Switzerland-5,252
59,961
33.1
4.3
Australia
49,826
-10.3
3.4
6,364
2.4
0.5
Japan
2,304
33.0
0.2
135,749
10.8
9.6
East Asia
341,8884.8
23.5
292,408
6.9
20.7
China
123,9112.3
8.5
101,000
15.0
7.2
Hong Kong
76,633
2.3
5.3
91,530
3.9
6.5
South Korea
12,22128.7
0.8
29,172-4.8
2.1
Taiwan
3,688
15.0
0.3
14,344
9.2
1.0
ASEAN
125,435
6.7
8.6
56,361
4.7
4.0
Singapore
63,772
4.3
4.4
26,967100.3
1.9
Indonesia
18,444
-3.6
1.3
3,676
-32.2
0.3
India
28,199
16.5
1.9
1,679
-80.2
0.1
Central and South America
182,389
8.1
12.6
32,258-28.5
2.3
Brazil
64,045-1.9
4.4-3,496
Mexico38,286117.2
2.6
12,938
-42.4
0.9
CIS
103,241
28.0
7.1
98,982
85.5
7.0
Russia79,262
56.7
5.5
94,90794.4
6.7
Middle East
44,282-8.6
3.0
31,10463.9
2.2
Turkey12,866
-2.7
0.9
3,114
-23.6
0.2
Africa57,2393.7
3.9
12,4183.5
0.9
Republic of South Africa
8,188
79.6
0.6
5,620
88.1
0.4
Advanced economies (39 countries/regions)
565,6269.5
39.0
857,454
0.6
60.8
Emerging and developing economies
886,3398.9
61.0
553,242
12.0
39.2
World
1,451,965
9.1
100.0
1,410,696
4.8
100.0
Notes: (1) The definition of advanced economies follows UNCTAD, and is the total for 39 countries/regions.
The figures for emerging and developing economies are obtained by subtracting the figures foradvancced economies from the total.
(2) Figures for East Asia are the total for China, South Korea, Taiwan, Hong Kong, and ASEAN.
(3) Figures for Japan are based on UNCTAD and thus do not correspond to the figures in "Japan's FDI".
(4) "-" denotes figures that could not be calculated.
Sources: UNCTAD

Figure I-13: Changes in global inward FDI（US$ billion)

(%)

2,500

70.0

60.0
2,000
50.0
1,500

40.0

30.0

1,000

20.0
500
10.0

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (Year)
FDI in emerging and developing economies
Share for emerging and developing economies

FDI in advanced economies

Notes: FDI is based on inward FDI.
Sources: UNCTAD

9

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)

Global cross-border M&A declines for the second consecutive year
○Global cross-border M&A for 2013 (completed M&A deals) dropped by 10.4% year-on-year to US$633.6 billion. The acquisition of Sprint
Nextel Corporation by Softbank was the largest M&A deal in the world during the year.
○With regard to greenfield investments, there was a large number of investment deals in the chemicals industry with the United States as thedestination for investment. One of the attributing factors for this was the fall in natural gas prices as a result of shale gas development.
Figure I-14: Top 10 M&A deals (2013)
Acquiring company

Acquired company

Date of completion
Country
Jul-13
SoftBank Corp
Jun-13
Anheuser-Busch Mexico Holding
Feb-13
CNOOC Canada Holding Ltd
Oct-13
Vodafone Vierte
Feb-13
Investor Group
Oct-13
Oak Leaf BV
Sep-13
Shuanghui Intl Hldg Ltd
Feb-13
TCC Assets Ltd
Dec-13Perrigo Co
Oct-13
Investor Group
Notes: (1) Deals that have been completed as of 2013.

Japan
Belgium
China

Industry

Country

Industry

Telecommunications

United States Telecommunications

Food

MexicoCanadaGermany
China

Sprint Nextel Corp
Grupo Modelo SAB de CV
Investment Nexen Inc
United Kingdom Telecommunications Kabel Deutschland Holding AG
Investment Ping An Insurance(Group)Co
ThailandInvestment DE Master Blenders 1753 BV
Austria
China
Food
Smithfield Foods Inc
Investment
ThailandFraser & Neave Ltd
United States Pharmaceuticals Elan Corp PLC
Investment Neiman Marcus Group Inc
CanadaFood
Oil and natural gas
Radio and television

Insurance

The Netherlands Food

United States FoodSingapore
IrelandFood
Pharmaceuticals

United States Retail

Value(US$ million)
21,64017,996
17,666
11,434
9,386
8,620
6,977
6,896
6,535
6,000

Ownership(% ) after
transaction
78.0
94.5
100.0
76.6
15.6
100.0
100.0
91.2
100.0
100.0

(2) Some company names have been abbreviated.
Sources: Thomson Reuters

10

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)Japanese outward FDI reaches record high○Japan’s outward FDI (balance of payments basis, net flows) for 2013 rose by 10.4% year-on-year to US$135 billion, achieving
an increase for the third consecutive year. It was recording a historical high since the last peak in 2008 (US$131 billion). The
United States was Japan’s largest investment partner with outward FDI value of US$43.7 billion (36.7% growth).
○Investment in ASEAN grew 2.2 times over the previous year to US$23.6 billion, marking historical high. In contrast, investment
in China fell 32.5% to US$9.1 billion.

Figure I-15: Japan’s outward FDI by country and region (net flows)

Figure I-16: Japan’s outward FDI: Comparison between China and ASEAN(US$ million)(US$ million)
25,000160,000

Other
EuropeCentral and South America
North America
Asia
World

140,000

120,000

100,000

ASEAN

20,000China
15,00080,00010,00060,00040,0005,000
20,000

0

01

02

03

04

05

06

07

08

09

10

11

12

13

14
1-5(P)

005(Year)

Note: 1) Yen-based values are converted to dollar-based values by JETRO. 2) Only the data for“world” was revised in 2011. Since detailed information has not been announced, original values areused for regional data. 3) Figures have been calculated based on the new standards set in the sixth
edition of IMF Balance of Payments Manual since January 2014.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

06

07

08

09

10

11

12

13

14 （Year）
1-5(P) （Month）

Note:1) Data excludes investment in the finance and insurance sectors of Thailand in relation to thefloods in the country. (Q4, 2011: US$3.924 billion, Q1, 2012: -US$3.674 billion)
2) Figures have been calculated based on the new standards set in the sixth edition of IMF
Balance of Payments Manual since January 2014.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan)

11

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)

Outward M&A deals reach second highest level ever
○The value of outward M&A deals for 2013 increased 24.6% to US$63.9 billion, reaching the second highest level ever after
2011. Compared to 2012, exchange rates were about 20% lower for the Japanese yen. However, Japanese companies showed nosignificant changes in their proactive attitude for M&A. The United States mostly remained consistent in its position as Japan’slargest partner for acquisition deals.
○Outward M&A from January to June 2014 increased 71.1% to US$34.4 billion. The conclusion of large-scale outward M&A
deals continue in 2014.
Figure I-18: Top deals for Japan’s outward M&A (2013 – June 2014)

Figure I-17: Value of Japan’s outward M&A and number of deals（US$ million）(No. of deals)

80,000600

United States
70,000

United Kingdom

500

Date ofcompletion
1 Jul-13
2 Apr-14

Australia

3 Dec-13

Other

4 Mar-13

60,000400

No. of deals (right axis)

50,00040,0005 Jan-14

Acquiring company

Industry

SoftBank Corp
Telecommunications
Suntory Holdings Ltd
Beverage
The Bank of TokyoBanking
Mitsubishi UFJ
Dentsu Inc
Advertising
LIXIL Corporation,
Housing equipment
Development Bank of Japan300

6 Jul-13

Marubeni Corp

Commerce200

7 Jul-13

ORIX Corp

Finance

8 Dec-13

Suntory Beverage & Food
LimitedBeverage

9 Apr-13

Itochu Corp

Commerce

10 Feb-14

Nippon Steel & Sumitomo Metal and metal
Metal, and other companies products (steel)

30,00020,000100
10,000

0
96

97

98

99

00

01

02

Source: Thomson Reuters

03

04

05

06

07

08

09

10

11

12

13

0
13 14 (Year)1-6 1-6

Sprint Nextel Corp
Beam Inc

United States
United States

Telecommunications
Beverage

Ownership(%) aftertransaction
21,64078.0
15,688100.0Bank of Ayudhya PCL

ThailandBanking

5,315

72.0

Aegis Group PLC

United Kingdom

Advertising

4,311

100.0

Grohe AG

Germany

Housing equipment

3,960

87.5

Food products

2,700

100.0

Finance

2,593

90.0

Beverage

2,122

100.0

Food products

1,685

100.0

Metal and metal
products (steel)

1,550

100.0

Acquired company

Country

Gavilon Group LLC(excluding the energy
United Statesdivisions)
Robeco Groep NV (Assetmanagement company
The Netherlands
under the umbrella of Dutch
company, Rabobank)GlaxoSmithKline (beverages
United Kingdom
brand)
Dole-Packaged Foods
United States
Business
ThyssenKrupp Steel USA
United States
LLC

Industry

Value (US$million)Notes: (1) Year and month indicate the date of completion of the deals. (2) The definition of M&A follows Thomson Reuters' definition. The deals are ranked for thetransaction value each time.
Source: Thomson Reuters

12

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)

Steady performance for rate of return on outward FDI○Japan’s outward FDI return for 2013 increased by 0.2% to US$68.2 billion. The composition ratio by region was Asia in the top at
37.1% (US$25.3 billion), followed by North America at 27.0% (US$18.5 billion), and Europe at 18.6% (US$12.7 billion). In 2013,
there was a significant rise in FDI return from ASEAN and the United States.
○Outward FDI rate of return for 2013 (world average) fell year-on-year by 0.2 points to 6.4%. It is important to further raise the rate of
return mostly in Asia, which is the largest source of earning, and to steadily increase FDI return.
Figure I-20: Changes in rate of returns on Japan’s outward FDI bycountry and region

Figure I-19: Changes in returns on Japan’s outward FDI by country and region(%)(US$ million)
80,000Other
EU
United States
China
ASEAN

70,00060,00050,000World average
ASEAN
EU

16.0
14.0

China
US

12.0
10.4

10.0
8.0

40,000

7.4

6.4
6.0

30,000

5.6
4.8

4.0

20,0002.0
10,000

0.0
2003

0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
（year）Note:1) (Rate of returns on Japan’s outward FDI) = (Current direct investment income credit) / (Stock ofoutward direct investment during the period) x 100 (%).
2) The number of EU member countries was 15 until 2003, 25 between 2004 and 2006, 27 between
2008 and 2012, and has been 28 since 2013.
Source: “Balance of Payment Statistics” , “International Investment Position” (Ministry of Finance,
Bank of Japan)

Note: The EU comprised of 15 countries up to 2003, 25 countries from 2004 to 2006, 27 countries from2008 to 2012, and 28 countries after 2013
Source: "Balance of Payments Statistics" (Bank of Japan, Ministry of Finance)

13

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)Japan’s inward FDI registers net inflow for second consecutive year
○Japan’s inward FDI for 2013 (balance of payments basis, net flows) increased 33.9% year-on-year to US$2.358 billion, registering a net inflow for thesecond consecutive year. Investments from North America underwent a reversal from net outflow in 2012 to net inflow in 2013 (US$1.4 billion). In Asia,
the fall in investment in the finance and insurance sectors made an impact, contributing to a significant drop in FDI (US$2.9 billion→US$0.9 billion).
○Inward FDI stock as of the end of 2013 was ¥17.9758 trillion (0.9% increase), while the ratio of inward FDI stock to nominal GDP remained mostly
unchanged at 3.8%. The rate of return against Japan’s inward FDI stock was 7.1% in 2013, moving in an upward trend after Lehman Shock andexceeding rates for South Korea, the United States, and Germany.

Figure I-21: Changes in Japan’s inward FDI by region

Figure I-22: International comparison of inward FDI rate of return（％）(US$ billion)

30

14.0

Asia
North America
Central and South America
Europe
Other
World

25
20

12.0
Japan

10.0

15
China

8.0

10
5

6.0

South
Korea

4.0

UnitedStates0-5Germany

2.0

-10
96

97

98

99 2000 01

02

03

04

05

06

07

08

09

10

11

12

13
(Year)

Notes: The yen-based value is converted to dollars by quarter, using the average quarterly Bank ofJapan interbank rate, and then the annual total is calculated.
Source; "Balance of Payments Statistics" (Bank of Japan, Ministry of Finance)

0.0
06

07

08

09

10

11

12

13

(Year)

Notes: (1) Rate of return on inward FDI = Payment of FDI earnings in the term / Average of inward FDI
stock at the start and end of the period ×100(%) (2) Figures for China are up to 2012.
Sources: "Balance of Payments Statistics", June 2014 (IMF), "Balance of Payments Statistics","International Investment Position of Japan"（Bank of Japan, Ministry of Finance)

14

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan External Trade Organization (JETRO)

Value of M&A deals in Japan fall for the first time in four years○The value of M&A deals in Japan in 2013 fell 35.7% to US$8.9 billion from 79 deals. This was the first decline in four years. M&A deals in the real estate sector
stood out amongst high-ranking deals in terms of deal value. Amongst the industries, the real estate sector also contributed the largest share to the value of M&A
deals at US$3.8 billion. Electronic and electrical equipment maintained its high position at US$3.2 billion with the conclusion of a large-scale deal, while the othersectors remained mostly the same with small fluctuations. There were 57 M&A deals in Japan for the first half of 2014 valued at US$4.6 billion (29.1% increase).
Both the number of deals and value rose when compared to same period in the previous year.
○Looking at M&A deals by country, the United States ranked highest for both the value (US$6.1 billion) and the number of M&A deals (41 deals) in Japan. In theelectronic and electrical equipment sector, the conversion of Elpida Memory, Inc. into a wholly-owned subsidiary of Micron Technology, Inc. was one of several
prominent M&A deals that reflected a trend in the reorganization and restructuring of business divisions in anticipation of profitability and growth potential.
Figure I-24: Top M&A deals in Japan (2013 – June 2014)

Figure I-23: Changes in value of M&A deals in Japan(No. of deals)（US$ billion)

250

30

No. of deals (right axis)

200

20

Acquired company

Industry

50

5

0

0
96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13(Year)

Source: Thomson Reuters (data as of 3 July 2014)13 14
1-6 1-6

Ownership(%) aftertransaction

2,516

100.0

1,680

100.0

1,203

100.0

Singapore Investment

591

14.8

Taiwan529

98.2

Industry

United States

Electronic and electric
equipment

Mar-14 Panasonic Healthcare

Medical equipment

Kohlberg Kravis Roberts & Co. United States Investment

Aug-13 Shiba Park Building

Real estate

Mar-14 Nippon Paint

Chemical products

Jun-14

Tokyo Star Bank

Banking

CTBC Bank

Sheraton Grande Tokyo Bay
Aug-13
Hotel

Real estate

Fortress Investment Group

United States Investment

502

100.0

Jan-14

MACROMILL, INC.

Business services(Online survey)

Bain Capital

United States Investment

407

93.5

Feb-13

SPC(Prologis Park Ichikawa 1)

Building management
Nippon Prologis REIT, Inc.
(Excluding residential buildings)

United States

Real estate investment
trusts381

100.0

Building management
Nippon Prologis REIT, Inc.
(Excluding residential buildings)

Real estate investment
United States
trusts

314

100.0

308

66.1

15

10

Value (US$million)Country

Micron Technology

Elpida Memory

150

100

Acquiring company

Electronic and electric
equipment

Jul-13

Value

25

Deal
completed

SPC
Feb-13(Prologis Park Zama 1)

Asia Pacific Land (Hong Kong),and other companies
Nipsea International Limited(unit of Singaporean paintcompany Wuthelam Group)-

Investors' group

BankingAkasaka Garden City
Westbrook Partners and other
Real estate
United States Other investment(Morgan Stanley (U.S.) equity)
companies
Notes: (1) Industries are classified according to Thomson Reuters classification. transaction.
(2)The name of acquiring company are the final parent company of the acquiring company. (3) Ranking for a single transaction.
Source: Thomson Reuters
Apr-1315
Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 2
Trends in the development of world trade rules

Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 2 Section I: Present status and outlook of FTAs for the world and Japan

Realization of FTAAP through the promotion of TPP and RCEP○The number of free trade agreements in the world (FTAs in force) stands at 264 as of July 25, 2014.
○The TPP serves as a driving force behind other mega FTAs. There is a need to speed up negotiations toward the establishment of the respective mega FTAs by the end of 2015. The TPP isoriented toward the establishment of high-level rules, while the RCEP seeks to create a business-friendly framework in aspects such as supply-chains.
○The mutual complement of the TPP and RCEP contributes toward the realization of a Free Trade Area of the Asia Pacific (FTAAP). To that end, it is important to raise the levels of
liberalization of RCEP, introduce new rules into the TPP such as the certification of standards, and promote the greater participation of Asian countries, including China, in the TPP.

Figure II-1: Number of FTAs in force across the world, by Figure II-2 Proportions of mega-FTAs in relation to the world in terms of economy and population
period and region (as of 25 July 2014)
Asia
Americas
Pacific

1955- 59
1960 - 64
1965 - 69
1970 - 74
1975- 79
1980 - 84
1985 - 89
1990 - 94
1995 - 99
2000 - 04
2005 - 09
2010 -

2
2
4
9
20
11

M iddleRussia CrossEurope East andand CIS regional
Africa

1

1
1

1

1

1
2
1
4
6
9
10

5
3
5
4
7

Year FTA camein force
unknown

Total

1
1

35

29

96

264

1

5

1

6

14

1

1

3

7

1

2

10

3

10

5

11

1
1

1

2002

1

2

2

2

2003

3

1

1

2

2004

3

2

1

2005

5

1

2006

4

1

2007

3

2008

6

1

2009

2

6

2010

5

1

6

2011

3

1

Economic scale (Note (1)) Population scale (Note (2))
Trillion dollars%
100 million people%
Trans-Pacific Partnership agreement (TPP)
27.8
37.5
8.0
11.4
Regional Comprehensive Economic Partnership (RCEP)
21.3
28.7
34.4
48.8
China-Japan-South Korea Free Trade Agreement
15.3
20.7
15.4
21.9
EU-Japan Economic Partnership Agreement（EUJ)
22.3
30.1
6.3
9.0
Transatlantic Trade and Investment Partnership (TTIP)
34.2
46.2
8.2
11.7

countries/regions
12
16
3
29
29

Mega FTAs that Japan is a member of(TPP+RCEP+CJK+EUJ)

59.0

79.8

44.6

63.4

49

Mega FTAs that the United States is a member of(TPP+TTIP)

45.1

61.0

13.0

18.5

40

Mega FTAs that the EU is a member of(EUJ+TTIP)

39.1

52.8

9.5

13.5

30

Mega FTAs that China is a member of(RCEP+CJK)

21.3

28.7

34.4

48.8

16

Mega FTAs that ASEAN is a member of (*3)((TPP)+RCEP)

41.6

56.3

39.5

56.2

21

Free Trade Area of the Asia-Pacific（FTAAP)
World

42.6
74.0

57.6
100.0

28.0
70.4

39.9
100.0

21
189

1

1

7

15

2

1

9

18

6

10

2

5

14

1

8

17

Notes: Note: 1) Figures were calculated based on nominal GDP in 2013. 2) Figures are from 2013.
3) Only four countries from ASEAN – Brunei, Malaysia, Singapore and Vietnam – participated in TPP. Cambodia, Laos and Myanmar did notparticipate in FTAAP (APEC). 4) Percentage values show the ratio in comparison to the world. The total of the percentages for each agreement
exceeds 100% since many countries are participating in more than one FTA.

1

14

Source: "World Economic Outlook", April 2014 (IMF)

10

14

6

14

7

11

3

4

1

1

6
2

6

29

2001

2012

2

27

2000

2013

6
16
3
2
2

4
48

2
2
6
19
35
27

2
3
0
4
3
3
5
19
36
52
74
57

2
1
1
1
7
10
4

Total

1

2

2014
1
Note: Unit: No. of cases
Sources: WTO, materials from individual governments.

1
1

17

Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Japan’s FTA coverage at 18.2%○Japan’s FTA coverage in 2013 was 18.2%. Japan is currently involved in negotiations for the TPP, RCEP, the Japan-EU EPA, the Japan-China-South Korea FTA, and other bilateral
FTAs. If the FTAs currently under negotiation become in force, Japan will increase its coverage to 84.2%., giving it one of the highest FTA coverage rates in the world.
○Japan has already put in force investment agreements with 28 countries and regions. After the mid-2000’s, the mainstream trend had tended toward the conclusion of liberalizationagreements. Japan’s coverage for investment agreements stands at 29.1%.

Figure II-3: Japan’s FTA coverage (2013)(%)
FTA coverage rate
Exports +Imports
Exports
Imports
In force
18.2
18.9
17.6
Singapore
1.8
2.9
0.9
Thailand
3.7
5.0
2.6
Malaysia
2.9
2.1
3.6
Indonesia
3.0
2.4
3.5
Philippines
1.2
1.4
1.1
Vietnam
1.6
1.5
1.7
Other ASEAN countries
0.5
0.2
0.7
India
1.0
1.2
0.9
Mexico
0.9
1.4
0.5
Peru
0.2
0.1
0.3
Chile
0.6
0.2
1.0
Switzerland
0.7
0.5
0.9
Signed4.4
2.4
6.1
Australia
4.4
2.4
6.1
In negotiations
61.6
59.4
63.5
China
20.0
18.1
21.7
South Korea
6.0
7.9
4.3
Mongolia
0.0
0.0
0.0
New Zealand
0.3
0.3
0.3
United States
13.1
18.5
8.4
Canada1.3
1.2
1.4
Colombia
0.1
0.2
0.1
EU28
9.7
10.0
9.4
GCC
11.1
3.1
17.9
Saudi Arabia
3.7
1.0
6.0
Kuwait1.0
0.3
1.6
United Arab Emirates
3.3
1.2
5.1
Oman
0.6
0.4
0.7
Bahrain
0.1
0.1
0.0
Qatar
2.5
0.2
4.4
Other
15.8
19.3
12.7
(Reference) In force + Signed
84.2
80.7
87.3
+ In negotiations
Total
100.0
100.0
100.0
Note: "In negotiations" include those that are agreed in principle (JapanMongolia EPA), postponed negotiations (GCC), and suspended
negotiations (Japan-Korea EPA)
Source: "Trade Statistics" (Ministry of Finance)

Figure II-4: Status for the conclusion of investment agreements with Japan
Protection agreement
Egypt (in force January 1978)
Sri Lanka (in forcce August 1982)
China (in force May 1989)
Turkey (in force March 1993)
Hong Kong (in force June 1997)
Bangladesh (in force August 1999)
Russia (in force May 2000)
Mongolia (in force March 2002)
Pakistan (in force May 2002)
Papua New Guinea (in force January 2014)
Iraq (in force February 2014)
China and South Korea (in force May 2014)☆Saudi Arabia (signed April 2013)

Figure II-5: Japan’s outward FDI
stock of partner countries that
Investment Agreements withJapan are in force

Liberalization agreement*Singapore (in force November 2002)
South Korea (in force January 2003)
Vietnam (in force December 2004)*Mexico (in force April 2005)*Malaysia (in force July 2006)*Chile (in force September 2007)*Thailand (in force November 2007)
Cambodia (in force July 2008)*Brunei (in force July 2008)*Indonesia (in force July 2008)
Laos (in force August 2008)*Philippines (in force December 2008)
Uzbekistan (in force September 2009)*Switzerland (in force September 2009)
Peru (in force December 2009)*India (in force August 2011)
Kuwait (in force January 2014)☆Colombia (signed September 2011)☆Mozambique (signed June 2013)☆Myanmar (signed December 2013)☆*Australia (signed July 2014)

Agreement in principle
Kazhakstan
Oman
Angola*ASEAN*Mongolia
In negotiations
UkraineAlgeria
Uruguay
Qatar
UAE
Kenya
Ghana
*GCC
*Canada*Japan-China-Korea
*EU
*RCEP
*TPP

Agreement to start negotiations*Turkey
In preliminary consultations
Morocco
Libya
Tanzania

Note: ☆ are signed
treaties. * refers to the
FTA investment chapter.
As for Taiwan, there isan agreement between
private organizations.
Source: METI.

(US$ million, %)In force
In negotiations/Signed
Other
Country/Region
FDI stock Percent Country/Region
FDI stock Percent Country/Region FDI stock Percent
ASEAN
136,258
12.2 United States
331,43929.7 Cayman Islands
48,352
4.3
China
98,1328.8 EU259,153
23.2 Brazil
33,402
3.0
South Korea
29,850
2.7 Australia*
54,112
4.8 South Africa
8,794
0.8
Hong Kong
19,8201.8 Canada
16,783
1.5 Iran
5
0.0
India
13,738
1.2 New Zealand
2,471
0.2
Taiwan11,808
1.1 United Arab Emirates
232
0.0
Switzerland
4,947
0.4 Notes: (1) Outward FDI stock is as of the end of 2013. (2) Investment agreements
Mexico4,241
0.4 include FTA investment chapters. (3) *: FTA with Australia has been signed. (4) Fifteen
Saudi Arabia
3,906
0.3 partner countries are excluded from the total since their statistics are not available. (5)Russia2,499
0.2 FTA investment chapter with ASEAN has been agreed, while bilateral investment
agreements with each ASEAN country are in force or have been signed.
Treaties in force:Total
325,19729.1 Source: "International Investment Position" (Bank of Japan)

18

Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Problems with procedures related to certificates of origin○Looking at the trend for FTA consultations handled by JETRO in fiscal 2013, the largest number of inquiries was related to the utilization of FTAs forexports from Japan and trade between third countries.
○Procedures for applying for a certificate of origin or satisfying rules of origin are a burden on Japanese companies using FTAs. Efforts to expand theutilization of self-certification systems of approved exporters need to be continued.

Figure II-6: Trend of FTA consultation handled by JETRO

(%)

Trade
Other
between
Total
Target region/destination
purposes
third
countries
76.3
6.6
35.1
29.1
5.5
Asia
19.2
0.9
5.4
11.9
1.0
Thailand
14.2
0.9
5.7
6.3
1.3
Indonesia
7.5
1.4
2.3
2.2
1.5
Vietnam
6.8
0.3
5.1
1.3
0.2
ASEAN
6.0
0.6
5.1
0.2
0.1
China
5.3
0.3
2.4
2.1
0.5
India
7.7
1.8
2.9
2.6
0.5
Central and South America
2.6
0.7
1.1
0.6
0.2
Europe
2.2
0.9
1.1
0.3
0.0
North America
11.2
2.2
1.6
4.5
2.8
Other regions
100.0
12.3
41.8
37.0
8.9
Total
Note: Figures are based on the breakdown of 1,523 cases from the data about inquiries
received by JETRO in FY2013. These cases were categorized under "International
Treaties/Agreements (FTA, etc.)" and included one or more of the following keywords:"FTA," "EPA," "free trade agreement/economic partnership agreement." This does notnecessarily mean that those who had submitted the inquiries had utilized or will utilize
FTAs in their respective business dealings. "Other purposes" includes investments toJapan, investments from Japan, invesstments between third countries, andstatistical/survey purposes, etc. "ASEAN" refers to inquiries for multiple countries
including Thailand, Indonesia, and Vietnam. "Other regions" includes inquiries for all
regions, and inquiries with unspecified regions or which could not be categorized.
Source: JETRO
Imports
to Japan

ExportsfromJapan

Figure II-7: Problems faced by exporters using FTAs
0.0

10.0

20.0

30.0

40.0

50.0

Certificate issuance application required on every
occasion of exporting
Administrative workload to meet rules of origin

42.8
35.8

Troublesome to deal with rules of origin which differ
across item goods

30.7Long period of time to obtain a certificate of origin

19.6
18.9
20.1

No particular problems

18.2
16.0
19.8

Other

42.5

11.3
12.7
10.2

No system set up in our company for using FTAs

There is little information on use of FTA/EPA

52.9
53.8
52.3
48.3
55.7

28.7
30.2
27.6

Charges for issuance of a certificate of origin

Experienced troubles with applying FTAs when
passing customs of destination countries

(%)
60.0

8.5
4.9
8.1
7.5
8.5
3.8
2.8
4.6

13.2
All(n=495)
Large-scale firms (n=212)
SMEs(n=283)

Note: Companies utilizing FTAs for exports from Japan were surveyed.
Source: "FY 2013 Survey on the International Operations of Japanese Firms " (JETRO)

19

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 2 Section 2: Importance of multilateral trade rules

Japan External Trade Organization (JETRO)

Issues in implementation of WTO Bali Package and progress of plurilateral negotiations○At the 9th Ministerial Conference held in December 2013, WTO members took a significant step reaching a multilateral agreement in specificissues. For concluding the entire round of negotiations, members agreed to prepare a work program by the end of 2014.
○Plurilateral agreements are also in progress. Expansion of the Information Technology Agreement (ITA) would generate significant advantages forthe electric and electronics industry, if concluded. Official negotiations have also began for environmental goods liberalization, where an increase inparticipating members is expected. Negotiations on the Trade in Services Agreement (TISA) have also been active as one of the plurilateralagreements outside the framework of the WTO.

Figure II-8: Overview of the Bali Package and declarations by developing
countries during negotiations
Area

Overview
Contents of the package
Expansion of trade Conclusion of the negotiation of a newby eliminating costly Agreement on Trade Facilitation("Trade
Tradebarriers to goods as Facilitation Agreement" or TFA).
facilitation
they crossinternational borders.
Until a permanent solution is found,members shall refrain from challenging
Public stockholding
via dispute settlement members’ foodfor food security
stockholding programs, so long as they
puroposeare maintained in accordance with thisdecision.
Establishing an understanding on tariff
Agriculture
rate quota administration provisions ofTariff rate quota
agricultural products, as defined in theAgreement on Agriculture.
Restates the Members’ commitment, toeliminate all forms of export subsidies,
Export competition
and to maintain disciplines on all export
measures with equivalent effect.
Development nd
Preferential rules of origin for LDC,
Least Developing
operationalization of the waiverCountries(LDC)
concerning preferential treatment toDevelopment Issues
services and service suppliers of LDC,
duty-free and quota-free market accessfor LDC, monitoring mechanism on
special and differential treatment.
Sources: WTO and METI documents.

Stance of developing economies
Some countries including Cuba areopposed to the agreement as it may
benefit only advanced economies. (After
2014, India and African countries put up
strong objections to the agreement.)
India has been insisting on a permanent
peace clause to prevent challenges to
India's gricultural subsidies for foodstockpiling beyond the 2017 deadline.

Assertion that the tariff quotas ofadvanced economies are not fully
utilized.
Developing economies such as Brazil
demand the abolishment of export
subsidies for U.S. and EU.

Figure II-9: Trade value of environmental goods (Imports basis)
6,000

85.0
（％）

(US$100 milion)

5,000
80.0
4,000

3,000

75.0

2,000
70.0
1,000

0

65.0
2000

(After 2014, Ecuador emphasized theneed of annual reviewfor the
implementation status of LDC issues. )

01

02

EU
United States
Japan
Others

03

04

05

06

07

08

09

10

11

12

13

(Year)

China
South Korea
Other countries involved in negotiations
Ratio of negotiating members in world total

Note: Negotiating members are Australia, Canada, China, Costa Rica, EU, Hong Kong,Japan, South Korea, New Zealand, Norway, Singapore, Switzerland, Taiwan, andUnited States.
Source: Trade statistics of each country.

20

Copyright (C) 2014 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 3
On making Japan a base forinternational business circulation

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3: On making Japan a base for international business circulation

Japan External Trade Organization (JETRO)On making Japan a base for international business circulation
In order to achieve the goals set out in the government’s growth strategy, and to ensure that the Japanese economy continues to grow in the future, it isvital for Japan to become a base for the circulation of global business activities, in both the outbound (exports, outward FDI, etc.,) and inbound (inward
FDI, tourism, etc.) directions. It is also important for this circulation to continue cycling in motion. Hence, going forward, Japan has to engage innationwide efforts to tackle global business, including all regions as well as small and medium-sized enterprises. Japan must create a well-functioning
cycle of international business where excellent human resources and technology gathered from abroad by offering attractive investments into Japan
creates innovation, which will then encourage Japanese companies to develop business overseas. It is necessary for Japan to develop the businessenvironment through economic partnerships such as the TPP or RCEP. Also Japanese society and companies must be reborn as a base for international
business circulation by means of new intellectual property strategies including protection of trade secrets, highly skilled Japanese professionals broughtin through brain circulation, and diversity of business encouraging active performance by foreign students. In line with the revised growth strategy,
JETRO will also review its achievements thus far and drive its initiatives toward a new stage.

1. Development of overseas markets by Japanese corporations

As of 2012, household consumption in Asia was1.5 times that of Japan’s. In China and the ASEAN region, the number of cities where per capita
GDP has exceeded US$10,000 is on the rise.
Amongst industries for which exports are expected to grow in the future, progress has been made in initiatives to develop overseas markets in the
agricultural, forestry and fishery product; food product; service; and medical equipment sectors. Export of agricultural, forestry, fishery and foodproducts in 2013 hit a record high of ¥550.5 billion.

2. Expansion of inbound business such as inward investmentForeign corporations view the high costs of operating a business in Japan as a problem. However, the gap in some costs, such as personnel and realestate costs, with other cities in Asia is shrinking. There has also been movements toward reducing corporate taxes.
The key countries put great importance on inward FDI, which contributes toward creating employment and revitalizing the economy. Presidents
and prime ministers of these countries are taking proactive efforts to develop inward FDI from the top. In addition to strengthening practical support,
it is also vital for the country to take on this task as a nationwide effort.

3. Toward further globalization for Japanese corporations
Japan ranks second in the world in the number of patent applications. However, as many as 40% of small and medium-sized enterprises have notformulated any form of intellectual property policy. There is a need to formulate comprehensive intellectual property strategies including theprotection of trade secrets.
In 2013, the number of foreign students in Japan was about 140,000. However, of these, only 20% of those who graduate each year take up
employment in Japanese corporations. Japanese corporations need to practice diversity management that includes the active utilization of diverse
human resources.

22

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Asian consumer markets becoming solid both in scale and quality○Household consumption in expenditures in Asia is 1.5 times that of Japan as of 2012. The proportion of Asia among emerging and developing
economies is also on the rise. The Asian market is continuing to expand due to the growth of population and an increase in income levels.
○Consumption in Asia is changing in quality as well as quantity. Expenditure is growing more sophisticated. The demand is shifting from basic
goods to durable consumer goods and further on to services.

Figure III-1: Household consumption expenditure in Asia (nominal)

Figure III-2: Consumption expenditure in Asia by purpose(%)(Japan=100）
150

40.0

ASEAN

350

(Japan's standard in each year=100)
Alcoholic Beverages and Tobacco
Pharmaceutical Products, Medical Appliances and Equipment

India

Cars, Motorcycles and Other Vehicles

China

125

300

Ratio of Asia in emerging and developing economies (right axis)

Audio-Visual, Photographic and Information Processing
Equipment
Package Holidays

35.0(Japan=100)

100

Education

250

Telecommunications services
Financial services

75

30.0

200

150

50

Japan=100

25.0
100

25

50

0

20.0
96

97

98

99

2000

01

02

03

04

05

06

07

08

09

10

11

12
(Year)
0Note: The definition of emerging and developing economies follows the United
Nations.
Source: "National Accounts Main Aggregates Database" (United Nations).

Note: On this page and the following, Asia represents three economies:
China, India and ASEAN.

95

96

97

98

99 2000 01

02

03

04

05

06

07

08

09

10

11

12

13 14* 15*(Year)

Note: * indicates predicted figures.
Source: Euromonitor International

23

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Asian cities gaining economic strength○Number of cities with per capita GDP of US$10,000 or more have been emerging, most of which are capital cities. There is an increasing
number of cities gaining economic power, including large Chinese cities with populations of more than 10 million, Thai provinces with industrial
parks, and Indonesian and Malaysian states where resource development is in progress.
Figure III-3: GDP per capita in major Asian cities (2010 / 2012)
Country
China

Indonesia

Malaysia

Philippines

City(National)
Shenzhen (Guangdon)
Guangzhou (Guangdong)
Tianjin
Shanghai
Beijing*
Wuhan (Hubei)
Chengdu (Sichuan)
Shijiazhuang (Hebei)
Chongqing
Linyi (Shandong)
Baoding (Hebei)
Nanyang (Henan)
Zhoukou (Henan)
Fuyang (Anhui)(National)
Jakarta*
East Kalimantan
North Sumatra
Banten(National)
Kuala Lumpur*
PenangSarawak(National)
Metro Manila*
Calabarzon
Central Luzon

GDP per
capita6,078
19,532
16,784
14,766
13,53013,863
12,596
9,132
6,902
6,167
4,724
3,812
3,659
2,811
1,999
3,591
11,947
11,683
2,831
2,025
10,387
17,376
10,39010,344
2,790
7,391
3,147
2,151

Population(US$, 10,000 people)

Country

135,404 India
1,055
1,284
1,413
2,380
2,069
1,012
1,418
1,039
2,945
1,012
1,135
1,166
1,126 Thailand
1,040
24,447
999
380
1,341
1,120
2,934
167
158 Vietnam
249
9,580
1,155 Cambodia
1,190 Myanmar
1,016 (Reference) Japan

GDP per
capitaCity(National)
National Capital Territory of Delhi*

Haryana
Maharashtra
GujaratTamil Nadu
KeralaPunjabAndhra Pradesh
KarnatakaWest Bengal
Rajasthan
Jammu and Kashmir(National)
RayongChachoengsao
Bangkok*
Chonburi
Ayutthaya
Prachinburi
Samut Prakan
Samut Sakhon(National)
Ho Chi Minh
Hanoi*(National)(National)
Tokyo*

24

1,515
3,280
2,200
1,976
1,870
1,839
1,660
1,623
1,455
1,436
1,119
1,103
1,042
5,390
31,211
14,187
14,044
13,404
12,138
11,873
11,735
11,310
1,753
4,117
2,253
926
876
91,537

Population
122,719
1,694
2,569
11,357
5,949
6,770
3,471
2,957
8,519
5,978
8,999
6,847
1,181
6,789
84
74
844
159
87
57
190
91
8,876
768
696
1,525
6,366
1,313

Notes: (1) * indicates the capital orregions where the capital is located.
(2) Cities for China and thePhilippines are restricted to thosewith population of 10 million andabove, for Thailand with per capita
GDP of US$10,000 and above, andfor India with per capita GDP of
US$1,000 and above. (3) In
Thailand, although there areprovinces with higher per capita
GDP than Bangkok, they are often
places with low population andconcentration of industrial parks.
For instance, Rayong has been aprosperous petrochemical industrial
complex, and has the largest
concentration of oil mining andrefining industries in the country.
(4) Data for Malaysia and thePhilippines (population only) is for
2010, while data for other countries
is for 2012. Tokyo's per capita GDP
is for FY2011, and population as of2013.
Sources: "WEO, April 2014" (IMF),
CEIC, IFS (IMF), Thailand National
Economic and Social Development
Board (NESDB), Hanoi Statistical
Yearbook 2012, Tokyo Metropolitan
Government.

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Agricultural, forestry, fishery and food exports reach historical high of ¥550 billion○The value of agricultural, forestry, fishery and food exports from Japan in 2013 reached a historical high of ¥550.5 billion (22.4% increase yearon-year). The value of exports to Asia including Hong Kong, Taiwan, China, and South Korea made up 72.7% of all exports. The top five products
exported were scallops, alcoholic beverages, tobacco, sauce condiments, and pearls. The rise in demand in the United States due to poor catches for
scallops, as well as other factors, contributed to the significant growth in scallop exports to 2.1 times above the previous year’s levels.
○The Ministry of Agriculture, Forestry, and Fisheries has formulated a “Country-Specific and Product-Specific Export Strategy of Japanese
Agricultural, Forestry, Fishery and Food Products” (August 2013). This strategy lays out the target of reaching ¥700 billion in yearly export valueof agricultural, forestry, fishery and food products by 2016 (interim target), and ¥1 trillion by 2020. In June 2014, it established an Export Strategy
Executive Committee to serve as the command center for promoting exports as a nationwide initiative. JETRO is focused on efforts to provide
market information to exporters.
Figure III-4: Japan’s agricultural, forestry, fishery and food exports(100 million yen)

（％）

6,000

30.0

Figure III-5: JETRO’s key agricultural, forestry, fishery and food export projects

JETRO's support
5,000

20.0

4,000

10.0

Information and skills

Project(1) Export consultation services, consultation services provided by overseas
coordinators; (2) Overseas surveys; (3) Provision of information through JETRO's
website; (4) Conducting seminars (introduction of export activities, businessnegotiation skills, marketing, etc.)

0.0

Support for the establishment of commercial
distribution systems (providing opportunities forbusiness meetings)(1) Trades fairs overseas; (2) Business meetings in Japan; (3) Business meetings
overseas

2,000

-10.0

Dissemination of information to overseas
professionals

Holding food demonstrations at trade fairs overseas, arranging for opportunities for
invited buyers to observe production sites and learn about cultural background,seminars for overseas professionals

1,000

-20.0

Support for individual corporations

Partial support by specialists for corporations that have products they wish to export,
and that are motivated and enthusiastic about exporting

0

-30.0

Accelerated, focused support

Focusing resources on potential cases from the program that provides support to eachprefecture, as part of efforts aimed at improving effectiveness

3,000

2009

2010

2011

2012

2013

Agricultural products

Forestry products

Fishery products

YoY comparison

Source: JETRO's Agriculture, Forestry, Fisheries and Food Department

Note: Includes alcoholic beverages, tobacco, and pearls
Source "Exports and Imports of Agricultural, Forestry and Fishery
Products" (MAFF)

25

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

The increasing overseas expansion of the service industry, and challenges in
the overseas markets○In the second Field Survey Concerning Overseas Presence in the Service Industry FY2013 conducted by JETRO, amongst
Japanese companies that have had experience in venturing into overseas markets (responses received from 546 companies), 73%
had already moved into their second country. The top five countries that companies were entering for the first time, in descendingorder, were China (37%), the United States (17%), Hong Kong (9%), Singapore (8%), and Taiwan (7%). These five countries
accounted for 78% of the total.
○From February to March 2014, JETRO implemented a “test kitchen” project in Bangkok, Thailand, on seven food service
companies that have not yet moved into the Thai market. JETRO is also injecting effort into providing support for the export ofproducts such as lifestyle goods, design products, apparel and textiles, and media content.
Figure III-7: Challenges faced by Japanese companies in theservice industry that are expanding overseas

Figure III-6: Number of local companies in the retail and service
industries, by country and region(1) Making the leap from developing several directly-managed retailstores or franchises that are dependent on partners, to developing a large
number of quality storesCompanies need to standardize and optimize operations (decentralizationand integrated management), as well as set up local franchise headquarters.

700

600

500

（Company）

400(2) Securing a leadership position in a specific area of trade byaccelerating the speed of expansion
After outstanding Japanese companies in the service industry have moved
into the market, their positions in the same region become threatened by the
rapid establishment of a large number of imitation stores by local services.

Other non-manufacturingindustries

300

Services
200
Retail100(3) Tight local marketing activities through the employment of local
human resources
Companies face limitations with the Japanese style if they wish to provide
smart and sensible services to local consumers. The key lies in striking abalance between standardization and localization.

Oceania

Central andSouth America

EU

North America

ASEAN4NIEs

ASEAN10China

0Source: "Survey of Overseas Business Activities (FY2012)" (METI). "Other non-manufacturing industries" refers to sectors such as productrental, accommodations, F&B, education, medical treatment, welfare, etc. "Service " refers to advertising, professional service, livingrelated service, amusement, etc. As the figures are for key regions, individual totals do not correspond with the world total.

26

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Effectively disseminating “Japan’s appeal” through content, and transforming it into
industries○Objectives of the “Cool Japan” strategy: Converting the appeal of Japanese culture and lifestyle, including food, clothing, and shelter, as well as
contents such as anime, drama, and music, into added value, acquiring a share of the strong overseas demand in emerging economies, andthereby contributing to the growth of the Japanese economy (revitalization of corporations, creation of employment).
○Three stages in acquiring a share of overseas demand: (1) Creating a “Japan boom” overseas by disseminating Japan’s appeal; (2) Sales ofrelated products and services in the local market; (3) Encouraging consumption by actually drawing foreign visitors who have an interest inJapan into the country, in line with tourism policies, etc. Support is provided at each of these stages.

【Strategic overseas expansion】(1) Creating a “Japanboom”(2) Earning locally(3) Consumption inJapan

Effectively disseminating the appeal of Japan

Building a platform forearning locallyEncouraging significant consumption
by attracting visitors to Japan

Figure III-8: JETRO’s strategy in the content sector

Film and video
Establishing “Japan Booths” in the key film and video markets in the world, andproviding support to small and medium-sized film/video
companies from Japan in their overseas expansion efforts.
・ Cannes Film Market (jointly organized by UNIJAPAN in Cannes, France)
・ American Film Market （Santa Monica, United States）
・ Hong Kong FILMART (jointly organized by UNIJAPAN Hong Kong)
Hong Kong FILMART

Games
Local coordinators are actively utilized in initiatives to provide support for overseas
expansion by small and medium-sized enterprises in the Japanese gaming industry. Hands-on
support is provided through support to participate in the world’s largest gaming trade fair,
Game Connection (San Francisco, the United States) as an exhibitor.

Music
With the Music Publishers Association of Japan (MPA) as a coorganizer, a Japan Booth is set up at MIDEM (Cannes, France), thelargest international music industry fair, and support is provided tosmall and medium-sized enterprises in Japan’s music industry for
their global expansion efforts.

MIDEM27

Strengthening tie-ups with the “Cool Japan” campaign
Reception to bring “Doraemon” into North America (Los Angeles and New York)
Promoting the development of the market through cooperation between different industries, by harnessing JLOP contents
Business matching seminars for different industries (jointly organized by J-LOP secretariat and the Associationof Japanese Animations)Introduction of six overseas expansion case studies that involved cooperation between different industries

Projects to establish an international content network
International business symposiums toward the overseas dissemination ofJapanese content
Holding symposiums that provide information about human resource development, legal
information, and policies and measures.
Cool Japan Awards (Los Angeles)Awards ceremony (presentation of awards to those who have made active use ofJapanese content / panel discussions / networking events
Business panels in the American Film Market (Los Angeles)
Los Angeles Cool Japan Committee (Los Angeles)
Users of Japanese contents hold periodic discussions about the challenges faced by
Japanese content in Hollywood, and measures to ensure the business success ofJapanese content in Hollywood.
Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Expectations toward strengthening export competitiveness in the growing medical
equipment market○The size of the global medical equipment market stood at US$328.3838 billion in 2013. The market is expected to reach a scale of US$454.5665 billion
by 2018 with contributing factors such as the growth in demand in emerging Asian economies. In particular, China’s market, which is facing the challengesof an ageing society, has been forecasted to expand by about 5.5 times from US$7.3412 billion in 2009 to US$40.3535 billion in 2018.
○ Under the Healthcare and Medical Strategy (passed by the Cabinet in July 2014) drawn up by the Japanese government, the target value for medical
equipment exports has been raised from ¥500 billion in 2011 to ¥1 trillion in 2020. JETRO is a member of the government’s Task Force on theInternational Expansion of the Medical Industry, and is involved in promoting the international expansion of the medical industry through public-private
cooperation.
○There are even several companies engaged in the production and sale of medical equipment in the list of the "Global Niche Top (GNT) Companies
Selection 100" (Note) drawn up by the Ministry of Economy, Trade and Industry. (Note: Manufacturing companies that have secured a large market shareglobally in niche sectors)
Figure III-9
The market size of the medical equipment in major Asian emerging
countries(Market size in 2009 = 100)

Figure III-10
Companies in the medical equipment sector selected as the "Global Niche Top
Companies Selection 100"Company

600.0
2013 (Prospect)
500.0

2018 (Forecast)
400.0

300.0
200.0
100.0
0.0

Source: Worldwide Medical Market Forecasts to 201828

Location

Overview
Develops and manufactures pelletization andcoating devices for the pharmaceuticals andFreundTokyofood industries. Has 70% of the domestic
Corporation
market share and more than 20% of the
global market share.
Possesses the technology to produce thin andHopnic Researchlighweight high refractive index polarizedFukuiCo., Ltd.
lenses for correcting vision. Has more than
90% of the global market share.
Has expanded its prosthetic teeth products,
Yamahachi Dental
Aichi
which has both rigidness and color fastness,
Mfg. Co.
to more than 80 countries around the world.
Note: Only Yamahachi Dental Mfg. Co. has been selected as one of the"Next GNT" which has not achieved the "GNT 100" standards but expects
for dramatic growth in the future.
Source: Documents releaed by METI
Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Uncovering the challenges and countermeasures in developing the Chineseand ASEAN markets○Some challenges that are shared by Japanese corporations in their efforts to break into the Chinese market are high prices, counterfeit products, humanresource development, selection of dealers, and licensing and identification (according to the JETRO Asia Caravan project). The relatively higher prices of
in-house products as compared to Chinese products is perceived as a bottleneck in opening up sales channels.
○The following are some examples of countermeasures employed in efforts to develop the ASEAN market (according to the JETRO ASEAN Caravan
project): Ensuring the easy appeal of the product’s characteristics, reducing customs tariffs through the utilization of FTAs, product selection anddevelopment that corresponds with local tastes and circumstances, utilization of external human resources and trading companies for inadequate resources,
paying careful attention to checking the sales networks of buyers, not agreeing easily to exclusive contracts, taking thorough measures against counterfeit
products, taking feedback about issues seriously when products do not sell, careful preparation in advance and collection of information at the local site,
moving to the next step through follow-up in business negotiations after returning to Japan, etc.
Figure III-11: Challenges and countermeasures in developing the Chinese market
Challenges

Examples of countermeasures

Challenge 1
High prices are abottleneck in expanding
sales channels

・Developing and strengthening salespeople：Thorough training ofsalespeople, such as nurturing human resources who are able to explain
products in dealer
・Setting up product POP: Setting up POP advertisements in the sales
spaces to provide product explanations in order to promote
understanding about production amongst consumers
・Active utilization of the Internet: Utilization of the Internet to transmit
product information to many consumers, in particular wealthy consumer
groupsFigure III-12: Advantages of Japanese commodities and lifestyle goods
from the perspective of Chinese buyers

High quality
Positive appearance such as
design, fashionable, etc.
Superior functionability

Safety and reliability
Challenge 2
・Establishing the brandIntellectual property
Injecting effort into sales in areas such as local high-class department
risks such as counterfeit stores with strong information dissemination capabilities
Environmentally friendly
products, etc.
・Introduction of new products into the market
Products that are not available
Challenge 3・Ability of the company's top management to take actionin China
Human resource
Ability of the company's president to lead its overseas operations anddevelopment for
respond swiftlyRich lineup
overseas businesses
・Deploying dedicated personnel in charge(internal systems)
Appointing members of the management, such as executive officers, toReasonable prices
take charge of overseas oeprations, and deploying dedicated full-time
employees
Japanese brand・Developing human resource that is able to speak Chinese and English
Challenge 4・Improving business negotiation methods
Selection of dealers
Improving contract methods, such as making it a principle to pay in
Other(credit management), advancecollection of receivables ・Utilization of test sales
0

Challenge 5・Sharing information and promoting understanding in the company
Procedures forCounting the necessary expenses to China's unique business practiceobtaining licenses, etc., ・Improving methods based on local conditions
business practices
Switching some import clearance to Hong Kong

Shanghai
Beijing
Guangzhou
Chongqing(number of cases)
50

100

150

200

250

300

Source: Survey conducted on participating buyers in JETRO’s Asia Caravan project (FY2013)

29

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Small and medium-sized enterprises are motivated to expand into
Latin America and Southwest Asia
○Of the 695 SMEs (Note) that are selected for JETRO’s individual assistance service for launching businesses in emerging countries (No. ofcompanies that applied: 1,449. No. of companies selected: 1,195), 95 (13.7%) SMEs hope to expand into other than East Asia and ASEAN. Of these,
approximately 80% SMEs hope to expand into Latin America and Southwest Asia.
○Approximately 70% of the SMEs that hope to expand into Latin America and Southwest Asia are manufacturing companies. Of those which hope
to expand into Latin America, more than 50% are automotive companies, and mostly hope to expand into Mexico. On the other hand, of those which
hope to expand into Southwest Asia are various manufacturing sectors.
(Note: As of July 2014, the number of companies for which figures could be tabulated was 695 companies)

Breakdown of companies selected for JETRO’s individual assistanceservice for launching businesses in emerging countries
Figure III-13: Regions that companies wish to expand
into other than Southeast Asia and East Asia

47.4

0%

10%

20%

Latin America

3.2 3.2

33.7

30%

40%

Southwest Asia

50%

60%

Middle East

8.4

70%

Russia/CIS

4.2

80%

90%

AfricaEurope100%

Figure III-14: Breakdown of manufacturing sectors that wish to expand
into Latin America and Southwest Asia

Latin America

Southwest Asia

Each 2.9

4.5

55.9

5.9

5.9

5.9

18.2

14.7

13.6

9.1

9.1

9.1

9.1

22.7
4.5

0%

20%

40%

60%

80%

0%

100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Automobiles

Chemicals

Precision equipment

Machinery

Fiber

Chemicals

Non-ferrous/metals

Machinery

Construction

Electric equipment

Non-ferrous/metals

Transport equipment

Fiber

Iron and steel

Other manufacturing

Pharmaceuticals

Automobiles

Other manufacturing

30

100%

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Strengthening support for expanding into the African market○The low-income population of Africa (annual income per capita US$3,500 or less) is expected to drop from 53.4% in 2005 to 17.4%
in 2030. The middle-income population (annual income per capita US$20,001 or more) is expected to increase from 4% in 2005 to
28.1% in 2030.
○Japan’s FDI in Africa is extremely low in comparison to other key countries. The development of the African market is a challenge
for Japan.
Figure III-15: Population composition by annual income (Africa)

Figure III-16: FDI stock in Africa by country (2012)(US$ million)

100%

70,00061,38160,00080%

58,9108 – 9 times greaterthan Japan

57,97850,00060%

40,00040%

30,00020,000Over 3 times greaterthan Japan

10,0006,892

21,730

20%

2,470

0%

2005
2010
2014
2015
2020
US$0-3,500
US$3,501-10,000
US$10,001-20,000

2025
2030
US$20,001 and above

Notes: (1) The denominators are the seven countries in the African region that are registered in
the source material. (2) Purchasing Power Parity (PPP) basis.
Source: Euromonitor International

0
UnitedStatesUnitedKingdom

France

China

Japan

South
Korea

Note: The definition of Africa is based on the source materials.
Sources: Japan: "Balance of Payments Statistics" (Bank of Japan, M inistry of Finance),
China: "Statistical Bulletin of China's Outward Foreign Direct Investment", All othercountries: "International Direct Investment Statistics 2014"(OECD).

JETRO will take up the challenge of expanding into the African market
through public-private cooperation

Pilot Project for Business in Africa(Starting FY2014)31

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

Market development in third countries by Japanese corporations○In tandem with the expansion in overseas production, Japanese corporations have made prominent moves toward exporting to third countries
from their overseas production bases (“Made by Japanese”).
〇In South Africa, the number of Japanese-manufactured passenger cars imported from Japan’s overseas bases such as India is twice as big ofthat of from Japan.
Figure III-17: Examples of third country export by Japanese corporations
Industry

Machine tools

Automobile parts

Food productsCompany

Yamazaki Mazak Corporation

Bridgestone

Nissin Foods Holdings

Industrial machinery Nissei Plastic Industrial

Food products

Morinaga & Company

Plant Location

China

VietnamUnited States

ThailandIndonesia

Export destinations

Turkey, Europe

Products manufactured at the Liaoning plant in China
are exported to Europe, beginning with Turkey.
Going forward, there are plans to sell progressively in
Russia, South America, and Southeast Asia.

Europe and United States

Establishment of a new plant in Vietnam to produce
tires for passenger vehicles for export to Europe andJapan (production to commence in mid-2014).

Colombia

Sale of instant noodles to Colombia commenced inAugust 2013. Utilizing the US-Colombia FTA, it isexporting instant noodles tax-free from the UnitedStates to Colombia.

Southeast and West Asia

Established a production subsidiary in Thailand in
April 2013 for the assembly of injection molding
machines and other production activities. In tandemwith strengthening sales to the Southeast and West
Asia regions, it also aims to utilize FTAs to develop
its global sales strategy.

Near and Middle East

Food products

AjinomotoIndonesia, Malaysia

Near and Middle East, Islamic region

Food products

Nisshin Seifun Group

TurkeyEurope, Asia, Africa

Food products

Hagoromo Foods Corporation

Indonesia

Middle East

Medical equipment

Toshiba Medical Systems Corporation

Malaysia

Europe, Middle East, etc.

Automobiles

Mitsubishi Fuso Truck and Bus Corporation India

Africa, Middle East, Latin America

Textile products

Kaneka Corporation

AfricaMalaysia

Figure III-18: Import volume for passenger cars imported by Japanesemanufacturers from third countries in South Africa

Overview

Established a joint venture with a local company inIndonesia in October 2013. Local production plants
serve as the strategic production bases for theSoutheast Asia as well as Near and Middle East
markets.
Developing the Near and Middle East and Islam
markets by utilizing production bases, products, andhuman resources in line with Halal standards inIndonesia and Malaysia.
Established a joint venture in Turkey. It is harnessing
the geographical location of Turkey to sell locally
produced pasta to Europe, Asia, and Africa.
Hagoromo Foods exports tuna cans to the Middle
East and Japan through local plants in Indonesia thatare funded through joint ventures with Itochu
Corporation and other companies.
Established a production plant for medical diagnostic
imaging systems in Malaysia (scheduled to commence
operations in December 2014). Products are
distributed to the global market including Europe andthe Middle East from Malaysia, which is a logistics
hub.
Commenced production of left-drive trucks in India,
developed for the Africa, Middle East, and Latin
America markets. These are scheduled to be exported
to Nigeria, Ethiopia, Egypt, and other countries.
There are also plans to introduce the products into
other African markets, as well as into the Latin
America and Middle East markets.
Established a production plant for acrylic fibers in
Malaysia. Schedule to commence operations in
October 2015, it will supply all products to Africa.

(No. of Unit)

300,000
No. of passenger cars imported by major countries

250,000
200,000

United Kingdom

22,309Japan

29,601

South Korea

52,619150,000
Germany

66,121

100,000

50,000

Breakdown of local sales of passenger cars
manufactured by Japanese companies(local production/imported)

Imports from Japan(29,601 units)India

99,612

Imports from third countries(58,000 units)

Local production (26,000 units)

0

Note:
1) The number of passenger cars imported to South Africa by major countries shows the top five exporting
countries of HS8703, to South Africa.
2) The number of passenger cars manufactured and imported by Japanese manufacturers is based on data froma local company which does research on passenger cars and small-sized commercial vehicles. An approximate
calculation was made for a portion of the data in which the two types of vehicles could not be distinguished.
Source: “The South African Merchandise Trade statistics”

Source: Information released by the respective companies, websites, news materials

32

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 1: Development of overseas markets by Japanese corporations

Japan External Trade Organization (JETRO)

India has an advantage in entering the Middle East and African markets○The proportion of exports to the Middle East and Africa against the total value of India’s exports is about six times that of Japan’s. The proportion of its
investment in the same regions against its total investments is about 24 times that of Japan’s.
○ Export activities in the western part of India are particularly robust. Under exports from India to the Middle East and Africa, the eight main ports in thewestern part have approximately 60% proportion against the total value of India’s exports to the same region.
○There are 22 million Indians called PIO (Person of Indian Origin) and NRI (Non-Resident Indians) in the world. Of these more than eight million PIO
and NRI live in the Middle East and Africa. Thus the concept of establishing bases in India is one of the effective measures to develop the Middle East andAfrican markets.
Figure III-21: Exports value by India’s major ports (2013)

Figure III-19
Proportion of exports to the Middle East and Africa (2013)
Middle East

(US$ million, %)To world

AfricaTo Middle East and Africa

Japan
India
（％）

World
0

5

10

15

20

25

30

Note: Classification of region follows IM F definitions.
Source: "Direction of Trade Statistics" (IM F), M ay 2014.

Figure III-20
Proportion of outward FDI stock in Middle East and Africa (2012)
Middle East

Africa

Japan
India
0

5

10

15

20

25

30

（％）

Notes: (1) Classification of Japan's regions follows "Balance of Payments Statistics"(Bank of Japan, M inistry of Finance), while classification for India follows IM F
definitions. (2) Investments with no specified countries were not included in the
denominator.
Sources: Japan: "Balance of Payments Statistics" (Bank of Japan, M inistry of
Finance), India: "Coordinated Direct Investment Survey" (IM F).

Overall (including "Other")
Nhava Sheva Sea

Value
315,147
49,442

Percentage
100.0
15.7

Value
93,055
14,047

Percentage
100.0
15.1

Global ratio
29.5
28.4

Sez Jamnagar (Reliance)

30,876

9.8

11,113

11.9

36.0

Mumbai Air, Dpcc, Gems & Jeweller
Chennai Sea

24,094
16,549

7.6
5.3

4,629
2,681

5.0
2.9

19.2
16.2

Sikka

14,257

4.5

7,819

8.4

54.8

Mundra12,129

3.8

5,182

5.6

42.7

Delhi Air

11,385

3.6

1,355

1.5

11.9

Mumbai Air

8,341

2.6

1,713

1.8

20.5

Newmangalore Sea

7,549

2.4

1,476

1.6

19.6

Kolkata Sea

6,885

2.2

1,609

1.7

23.4

Vadinar

6,875

2.2

3,407

3.7

49.6

Bangalore Airport

6,409

2.0

2,018

2.2

31.5

Mumbai Sea

6,179

2.0

2,234

2.4

36.2

Epz/Sez Surat

6,084

1.9

4,027

4.3

66.2

Delhi (Icd)

5,979

1.9

2,347

2.5

39.3

Other

102,105

32.4

27,39529.4

26.8

Eight ports in the western part of India
158,27750.2
54,171
58.2
34.2
Notes: (1) The shaded cells refer to the eight ports in the western part of India. (2) Mumbai Air, Dpcc, Gems &Jeweller carries out customs clearance mainly for Gems and Jewellery items in Mumbai. Mumbai Air, Dpcc,
Gems & Jeweller is regarded as a part of Mumbai Air. Therefore the numbers of the main ports of Western partof india is considered as 8. (3) Percentages are rounded off to the nearest 0.1%, so the total may not add up to100%.
Source: Trade Statistics of India

33

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 2: Investment environment in emerging economies

Japan External Trade Organization (JETRO)

Challenges for the investment environment in emerging economies○Risk items that ranked high for the question related to challenges for the investment environment in emerging economies included “inadequate
infrastructure,” “undeveloped legal system and problems with implementation,” “political risks,” and “exchange rate risks.” For China and Thailand, many
responses pointed to “high labor costs.”○According to JETRO’s survey, there are differences between the head offices in Japan and the overseas offices in their perspective of challenges for theinvestment environment. Compared to the head offices in Japan, local offices have a higher awareness about the complexity of tax systems and procedures.
Figure III-22: Challenges for the investment environment in emerging economies(M ultiple responses, %)Political risks or problems insocial conditions and law andorder

Natural disaster risks orenvironmental pollution
problems

59.8

27.2

13.1

9.1

7.1

4.5

29.3

4.4

46.4

28.8

11.8

11.7

7.1

4.9

17.8

2.5

5.7

3.4

886

21.8

41.5

24.5

6.4

19.9

11.1

22.6

12.8

Philippines

500

11.6

31.4

12.2

5.2

5.2

4.4

23.2

23.6

Vietnam

878

15.7

48.7

31.9

8.0

12.6

7.9

8.2

4.3

Myanmar

468

12.0

70.5

42.5

8.1

2.6

5.8

32.7

4.7

India

648

21.5

55.7

28.7

8.3

7.7

13.9

17.9

9.3

Mexico

276

17.0

14.9

7.2

4.0

5.8

6.5

32.2

1.4

Brazil

324

31.2

14.2

16.0

4.6

16.4

19.4

27.5

1.2

Russia

313

17.6

11.8

30.7

5.8

8.3

12.8

27.5

2.6

Turkey

220

15.9

7.3

6.8

3.6

6.4

3.6

20.5

2.3

Republic of South Africa

210

15.7

18.6

11.9

4.3

5.7

2.9

34.8

2.4

1,217

Malaysia

566

Indonesia

Tax risk and problems

18.9

ThailandHigh or rising labor costs

50.8

20.5

Problems in protection of
intellectual property rights

51.3

2,018

Undeveloped legal system andproblems in application of laws

44.5

China

Inadequate infrastructure

Hig exchange rate risks

9.9nFigure III-23:
Comparison of response rates from head offices and local offices forthe complexity of tax systems and procedures
0.0

10.0

20.0

BrazilRussia
India

50.0

60.0

70.0

80.0

90.0

100.0

88.3（206）
79.0 （62）12.8（313）
76.2 （332）

13.9 （648）

7.9 （878）

Mexico6.5 （276）

65.0 （428）57.1（105）54.4 （272）11.1 （886）Philippines

4.4 （500）

Thailand4.4 （1,217）

Malaysia

40.0

19.4 （324）VietnamIndonesia

30.0

8.8 （262）
2.5 （566）

48.3 （145）23.8 （808）Local offices

Head offices

Note:The numbers in brackets ( ) refer to the number of firms that responded for the respective country.
Source: "Survey of Japanese-Affiliated Companies in Asia and Oceania, Latin America, Europe and Russia(FY2013 survey)" (JETRO)"FY 2013 Survey on the International Operations of Japanese Firms " (JETRO)

Note: (1) T he variable "n" indicates the total number of firms that are doing business or considering starting new business ,who
reported a risk or problem in the respective country;(2) Each figure is the response ratio for the corresponding risk item, arrived at by dividing the number of responses by"No.";(3) Highlighted frames represent risk items that recorded a response ratio of 20% or more.
Source: "FY 2013 Survey on the International Operations of Japanese Firms" (JET RO)

34

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 2: Investment environment in emerging economies

Japan External Trade Organization (JETRO)

Restrictions on foreign investment for the logistics industries in ASEAN countries○FDI stock in the ASEAN region for the wholesale, retail, and transportation industries as of the end of 2013 was US$15.92 billion, and grewby about seven times by the end of 2005. Japan’s logistics industries are becoming increasingly active in their efforts to enter the growing
consumer market of ASEAN.
○Although the AFAS negotiation is in progress, strict restrictions on foreign investment still remain.
Figure III-25 Commitments in wholesale and retail industries to other
ASEAN investors in the ASEAN Framework Agreement on Services (AFAS)

Figure III-24: Japan’s outward FDI stock toward Asia (wholesale, retail, andtransportation, by country and region)

Wholesale(US$ million, %)End of 2005

ThailandEnd of 2013

Total for wholesale, retail, and Total for wholesale, retail, andtransportationtransportation
Value
Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN
Singapore
ThailandIndonesia
Malaysia
Philippines
Vietnam

8,878
3,052
2,409
898
322
2,129
1,354
388
80
135
190
-

Percentage

Value

100.0
34.4
27.1
10.1
3.6
24.0
15.3
4.4
0.9
1.5
2.1
-

36,606
10,310
6,414
1,544
1,876
15,92011,460
2,712
555
562
416
207

Indonesia

Percentage
100.0
28.2
17.5
4.2
5.1
43.5
31.3
7.4
1.5
1.5
1.1
0.6

Philippines

Vietnam

Cambodia

Laos

Note: Figures were first released in Japanese yen and converted to US dollars
using Bank of Japan average inter-bank rates.
Source: "Balance of Payments" (Bank of Japan, Ministry of Finance)

Malaysia
Myanmar

RetailAllows foreign equity up to 49% forAllows foreign equity up to 70% only for
sports goods and 70% for medical
products manufactured in Thailand undergoods.
its own brand.
Allows foreign equity up to 51% for food No commitment.
and beverages, textile and foootwear
that fulfill the space criteria.
Allows foreign equity up to 51% for fur Allows foreign equity of up to 51% for
articles.
snowmobiles and related products, and
70% conditionally for petroleum productretail oulets.
Allows 100% foreign equity with theAllows 100% foreign equity with the
exception of certain sectors.
exception of certain sectors, but
Economic Needs Test required for thesecond establishment onwards.
Allows 100% foreign equity for radio
Allows 100% foreign equity for motor
and television equipment, musicalfuel, and a wide range of sectors that
instruments, etc., motor vehicles, andfulfill the space criteria.
motorzycles and related parts.
Allows foreign equity up to 49% forNo commitment.
textiles, clothing and footwear.
Economic Needs Test required,however.
Allows foreign equity up to 51% under a minimum foreign capital investment.
Joint venture with Myanmar citizen or enterprise with a minimum of 35% foreign
equity is permitted.

Note: Singapore has no restrictions on foreign investments. Brunei has made nocommitments in any of the sectors.
Source: Schedule of commitments by each country in AFAS8.

35

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 2: Investment environment in emerging economies

Japan External Trade Organization (JETRO)

China (Shanghai) Pilot Free Trade Zone: Testing ground for the easing of regulations○The China (Shanghai) Pilot Free Trade Zone was established in September 2013. Easing of regulations is in progress particularly in the financial sector.
This progressive approach in Shanghai is expected to ripple across the country. In China, 28 more areas have submitted plans to set up free trade zones.
○The number of companies set up as of the end of June 2014 was 10,445, including 1,245 foreign companies. As of June 11, 58 Japanese companies
have been established.
Figure III-26: Overall plan for the China (Shanghai) Pilot Free Trade Zone

Figure III-28: Japanese corporations entering the Free Trade Zone

(1) Pilot Renminbi capital account convertibility, interest rate liberalization, and cross-border use of
Rebminbi, under proper risk control. (2) Finance sector will be fully opened to privte investors andforeign invested financial institutions. Foreign-invested and Chinese-foreign equity joint venture
Financebanks will be allowed. (3) Administration on foreign debt will be further reformed to facilitatecross-border financing. (4) Cross-border Renminbi reinsurance business also encouraged tocultivate reinsurance market.
(1) Opening up 18 service sectors. (2) Trial national treatment on investment permission and a
Investment"Negative List" mechanism will be implemented within the zone. (3) The approval requirement on
foreign investment contracts and Articles of Association will be replaced by a filing procedure.
(1) Supervision techniques and approaches will be improved to pilot the model of import quarantine
and relaxed import/export inspection. (2) Multinational companies are encouraged to set up AsiaTrade
Pacific regional headquarters and/or operation centers with comprehensive functions of trading,logistics, settlement, etc.
Administrative examination and approval requirements under certain regulations will be temporarily
Legislation
adjusted and such adjustment will be tentatively implemented in the next three years started from
October 2013.
Government (1) The focus of administrative management procedures will shift from prior approval to mid-event
administration control and subsequent supervision. (2) Enhance cooperation among authorities.
Source: "Overaview of China (Shanghai) Pilot Free Trade Zone" (JETRO)

Figure III-27: 18 service sectors receiving
liberalized policies
Areas
Financial
Transportation
Commerce and
TradeProfessional
Cultural
PublicSectors
Banking, health and medical insurance, finacial leasing.
Ocean cargo transportation, international ship
management.
Value-added telecommunications, entertainment
gaming consoles sales and services.
Legal, credit investigation, travel agencies, humanresources, investment management, engineering
design, construction.
Performance agencies, entertainment facilities.
Education and vocational skills training, medical.

Source: Overall Plan for the China (Shanghai) Pilot Free Trade Zone.

36

Sectors

Corporation
Overview
The Bank of
The 100% subsidiary, Bank of Tokyo-Mitsubishi UFJ (China) Ltd., isTokyo-Mitsubishi the first Japanese bank to establish a branch, which started operations
UFJ
in January.
The 100% subsidiary, Sumitomo Mitsui Banking Corporation (China)
Sumitomo MitsuiLtd., has set up a branch in February, acquiring information andBanking
knowhow pertaining to new systemic reforms, for further service
Corporation
improvement.
The 100% subsidiary, Mizuho Bank (China), Ltd., established a branch
Mizuho Bank, Ltd.
in March.
The subsidiary, SBI (China) Co., Ltd. established a preparatorycompany, "Shanghai New Successful Way Investment Consulting Co.,Ltd." in March, for the development of an online finance business in a
SBI Holdings, Inc.
joint venture with two Chinese companies. It is conducting businesssurveys and related license applications toward the establishment of an
Financeonline finance company.
It has set up its first consulting company, Tokyo Tanshi Business
Consultancy (Shanghai), which is the first consulting company withTotan Holdings
100% capital funded by a Japanese financial institution. This company
Co., Ltd.
was authorized for business in March. It will provide consulting services
in China, using the knowhow and networks developed in the group. It isstarting business in July 2014.
Through a joint venture with three Chinese companies, it concluded a
joint venture agreement in May to establish Shanghai Nomura Lujiazui
Investment Management Co., Ltd. (tentative) that provides financial
Nomura Holdings, information in China. This joint venture will provide information aboutInc.
financial markets and products to financial institutions located within thezone, and serve as a key partner for Chinese foreign products. It aims
to expand its presence in the Chinese onshore market. It is 60% fundedby Nomura Holdings, Inc.
In May, a leading culture and leisure industry player, Shanghai Oriental
Pearl Group Co., Ltd., announced that its 100% subsidiary, Shanghai
Electrical
Oriental Pearl Culture Development and Sony Group's 100% subsidiary,Sony Corporationequipment
Sony China, will be establishing a joint venture. The company will be
engaged in production, sale and related services for hardware andsoftware of Sony's Playstation.

Source: Press releases from the individual companies, and announcement by
Shanghai Oriental Pearl Group Co., Ltd.
Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 2: Investment environment in emerging economies

Japan External Trade Organization (JETRO)

Focus on Asian frontier countries○Japanese corporations have been moving to reorganize their overseas bases for reasons such as the rise in labor costs. More than half of the destinations for the relocationof bases and functions from China are in ASEAN countries. Furthermore, in recent years, there has been a trend of Japanese companies in Thailand advancing intoneighboring countries, called “Thailand-Plus-One”. More than half of the target “Thailand-Plus-One” countries are those located along the Mekong River (Vietnam,
Cambodia, Laos, and Myanmar).
○Southwest Asia countries (Bangladesh, Sri Lanka, and Pakistan) also possess strong potential as production bases. Sri Lanka has been rated comparatively in theBusiness Environment Survey conducted by the World Bank, for the ease of starting businesses in the country, and the ease of trading across borders.
Figure III-29: Destinations of shift of bases and functions from
China
Other
13.7%

Corporation
Vietnam
24.4%

China
16.1 %
Thailand
9.3%

Japan
18.0 %

Malaysia
2.0 %Industry

Myanmar
2.4%

Philippines
3.4 %Cambodia
3.4 %Figure III-30:Countries in which Japanese companies haveestablished or are expected to establish overseas bases for “ThaiPlus-One”

Electircal equipment

Laos

Launched operation of a production factory for digital single reflex-lenscameras in October 2013. Responsible for a part of the manufacturing
proceses of final products in Thailand.

Denso

Automobile parts

Cambodia

In order to strengthen the production and supply systems in ASEAN region in
July 2013, it established a production plant for sensor parts used in dynamos for
two-wheeled vehicles in Cambodia.

Minebea

Precision equipment

CambodiaStarted production at its inhouse plant in a special economic zone in December
2011. The plant carries out assembly of compact motors using parts supplied
by plants in Thailand and Malaysia.

Source: Press releases from the individual companies.

Figure III-32: Business environment ranking by country and item
Item

Dealing with construction permits
Getting electricity
Indonesia
30.3 ％

Cambodia
9.6％

Registering property
Getting credit
Protecting investors
Paying taxes

Myanmar17.6 ％

Vietnam
21.8 ％

Trading across borders
Enforcing contracts
Resolving insolvency

Notes: (1) Includes multiple answers.
(2)Figures for each country indicate the ratio to the total of 261 responses. .
Source: “For the 2nd half of 2013 Survey of Business Sentiment by Japanese Corporation in
Thailand” (Japanese Chamber of Commerce in Bangkok, Thailand).

Overview

Nikon

Starting business

Other
8.4％

Laos
7.3％

Country

Indonesia
7.3 %Notes: (1) "Other" includes the answers without any specific countries.
(2) Figures for each country indicate the ratio to the total of 205 responses.
Source: "FY 2013 Survey on the International Operations of Japanese Firms" (JETRO)

Philippines
5.0 ％Figure III-31: Examples of Japanese corporations moving into countries along the Mekong River

Banglad
Sri
Cambo
Myanm
Pakistan
Laos
Vietnam China
Thailandesh
Lanka dia
ar
74
105
54
184
85
189
109
158
91
93
109
108
161
96
150
29
185
14
189
175
91
134 140
126
156
119
12
177
125
145
118
76
154
51
48
29
86
73
73
42 159
170
42
73
73
22
34
52
80 187
182
157
98
12
100
166
171
65 119
107
149
120
70
130
91
51
114 161
113
65
74
24
185
158
135
162 104
188
46
19
22
119
71
59
163 189
155
149
78
58
130
110
85
137 159
182
99
96
18

Overall
Source: ”Doing Business 2014”（The World Bank)

37

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Experts provide recommendations for policy issues, aimed at increasing investment in Japan○At an expert Group Meeting on Foreign Direct Investment in Japan organized by the government, attendees pointed out that Japan faces thechallenges of high costs and low profitability. They also recommended six items toward improving Japan’s investment environment, including
improving conformity with global systems.
○From an international perspective, Japan’s inward FDI stock has remained at low levels. As of the end of 2013, the GDP ratio of Japan’s
inward FDI stock was 3.8%, below the world average. It has leveled off after reaching a peak in 2008.
○The economic effects of investment in Japan cover a wide range, including the creation of employment opportunities, improvements in
productivity, and improvements in current account balance, thereby contributing significantly to the Japanese economy.
Figure III-33: Policy recommendations raised at the Expert Group Meeting on
Foreign Direct Investment in Japan(1)Harmonization with the global systems(a)Tax system(b)Securing human resources,
employment systems, etc.
(c)Corporate governance(d)Corporate merger system(e)International harmonization ofregulations and administrative procedures(2)Promotion of economic partnerships,social security treaties, etc.

Figure III-34: Changes in GDP ratio of inward FDI stock in
key countries

Reduction of the corporate tax rate, carryover and carryback of retained loss
Fostering globally competitive human resources, ensuring the flexibility of
employment agreements and termination rules, and so forth
Improvement of the independent external director system, and so forth
Greater deferred tax charges for forward triangular mergers
Provision by administrative agencies of one-stop services, making English
versions of laws and other instruments available, and so forth

(%)

World
Germany
United States
China

70.0
60.0

FranceUnited Kingdom
Japan
South Korea

50.0

40.0
30.0

Promotion of labeling in English and alphabets along with Japanese,increasing the number of medical staff who can speak English, and so forth(a)Health care and pharmaceuticals(b)Agriculture(4)Challenges related to individual(c)Food items
business sectors(d)Energy(e)Tourism and hotels(f)Retail sales(5)Support and preferential measures for Expansion of the project to promote the location of global corporations inforeign direct investment in Japan
Japan, JETRO’s stepped-up efforts to provide one-stop services, and so forth
Publicity by the prime minister and other ministers of state, cooperation(6)Promotion of the appeal of Japanbetween the national and local governments in publicity, and so forth
Source: Report on the Expert Group Meeting on Foreign Direct Investment in Japan(3)Improvement of living conditions

38

20.0
10.0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(Year)

Source: World Investment Report 2014 (UNCTAD)

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Foreign companies regard Japan’s expensive business costs as obstacle○International organizations that study the investment environments of various countries have highly appraised Japan’s infrastructure, including thequality of labor and legal systems, and cited these as factors contributing to Japan’s appeal as an investment destination. The scale of Japan’s economy
is also highly attractive, and its living environment is safe and secure, while communication in foreign languages is an issue.
○The top factors that obstruct investment in Japan include the high tax rates and business costs, the uniqueness of the Japanese market, and theregulatory and licensing systems. Of these, foreign companies perceive the high business operating costs as the greatest problem when setting up
business in Japan.
Figure III-36:
International comparisons of Japan’s grossregional product(nominal) (FY2011)

Figure III-35: Top 5 incentives and obstacles of the investment environment in Japan
Attractiveness
UNCTAD

IMD

World Bank
1

Resolving insolvency

Skilled workforce

Availability of low-cost labour and skills

2

Protecting investors

Reliable infrastructure

Enabling infrastructure

3

Ease of trading across borders

High educational level

Presence of natural resources

Kanto
Kinki
Chubu

4

Ease of getting electricity

Strong R&D culture

Market attractivenessHokkaido/Tohoku

Effective labor relations
Ease of getting credit
5
Overall
24th/60 countries/regions
27th/189 countries/regions
rankings ofJapan
Ranking of 10 indexes on the ease of Ranking based on percentage of responses
by companies. Multiple answers up to 5
doing businessNotes
choices.
Obstacles
JETRO

World Economid Forum (WEF)

10th/177 countries/regions
Ranking of 4 indexes on attractiveness. "Labor
force" and "Infrastructure" were both ranked
first.
Ministry of Economy, Trade and Industry

1

Tax rates

Business cost

Business cost

2

Restrictive labor regulations

Uniqueness of the Japanese market

Exclusivity and uniqueness of the Japanese market

3

Inefficient government bureaucracy Communication in a foreigh language

4

Policy instability

Insufficient capacity to innovate
5Overall
9th/148 countries/regions
rankings ofJapan
Ranking based on percentage of
responses by companies. Multiple
Notes
answers up to 5 choices.

High level of customers' demand

Administrative procedures/authorization system Regulations/authorization system

Securing human resources

Difficulies in securing human resources
n.a.

n.a.

Ranking based on the number of companies Ranking based on percentage of responses bycompanies. Multiple answers up to 5 choices.
that responded. Multiple answers up to 4
choices.

Source: “Doing Business 2014” (World Bank), ”World Competitiveness Yearbook 2013” (IMD), ”World Investment Report 2012” (UNCTAD),“The Global Competitiveness Report 2013-2014” (WEF), “Survey of Trends in Business Activities of Foreign Affiliates (2012)” (METI),“Results of JETRO’s survey of foreign firms regarding obstacles and necessary improvements in doing business in Japan” (JETRO).

39

KyushuChugoku
Shikoku（Unit：billion dollar）
2530.0 Brazil
2474.6
981.0 South Korea
1114.5930.4 indonesia
845.6
717.8 Turkey
774.7
602.5 Switzerland
658.9
355.3 Thailand
345.7
175.3 New Zealand
162.7

Note: Regional GPA outputs were converted to dollar-basedvalues by JETRO.
Source: "WEO, April 2014” (IMF), “Report on Prefectural
Accounts” (Cabinet Office).

Figure III-37: Top 10 countries in the Global
Peace Index (GPI)
Rank
Country
1 Iceland
2 Denmark3 Australia
4 New Zealand
5 Switzerland
6 Finland
7 Canada
8 Japan
9 Belgium
10 Norway

Score
1.189
1.193
1.200
1.236
1.258
1.297
1.306
1.316
1.354
1.371

Note: The lower the score, the higher the level of peace
Source: "Global Peace Index 2014", (The Institute for
Economics and Peace)
Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Signs of improvement in Japan’s business costs○Japan’s corporate tax rate (Tokyo) is the second highest at 35.64%, coming after the United States (California) among the key countries.
However, the revised Japan Revitalization Strategy drawn up by the Japanese government lays out clearly the aim to reduce effective corporate
tax rates over the next few years to the 20% level.
○Foreign companies point to high personnel, property and energy costs in Japan. However, there are real estate expenditures that are higher inother Asian cities than in Tokyo. The gap between Tokyo and other Asian cities is also shrinking for personnel costs.
○In order to increase investment in Japan, there is also a need to improve profitability of Japanese companies. Progress has been made toward
reviewing existing corporate governance structures, such as through the introduction of independent external directors.
Figure III-38: Comparison of business cost among major Asian cities（Unite：dollar、％、month）
Shanghai Hong Kong

Manufacturing：Worker
Manufacturing：Mid-levelengineers
Manufacturing：Department chief
Non-manufacturing：Clerical staff
Wages
Non-manufacturing：Department
chief,
Social security burden ratio（Employer's）（％）
Bonus payments（months）
Office rent(monthly)（per sq.m)
Store/showroom rent in the city
center(monthly)（per sq.m）RealIndustrial estate (land)
estatepurchaserate (per sq.m)
Housing rent for resident
agent(monthly)

Seoul

SingaporeTokyo
Figure III-39: Percentage of companies listed in the First Section of
the Tokyo Stock Exchange with independent external directors

495

1,728

1,851

1,432

2,523

867

2,148

2,392

2,947

3,475

1,485
908

3,492
2,168

3,218
2,301

4,584
2,396

4,653
2,591

2,230

4,152

3,711

4,489

4,901

42.0

5.0

25.4

16.0

19.2

50

1.8
52

1.9
109

3.4
57

2.4
66

4.0
35

40

206

368

32

309

46

222

477

320

999

1,433

(%)
70

61.4
60
46.9
38.8
31.5
30
20
10

2,703

2,966

2,167

4,654

2,761

0
2010

Publicutilityrate

34.6

Electricity rate for general use（per
kWh）

0.13

0.18

0.09

0.21

0.24

Water rate for general use（per cu.m)）

0.76

0.86

0.78

1.74

2.04

Note:
1) In the case that figures vary, the intermediate values are selected.
2) The monthly base salaries are used as the value for wages in manufacturing and non-manufacturing industries.
3) Refer to source materials for detailed information on real estate.
40
Source: “The 24th Survey of Investment Related Costs in Asia and Oceania (May 2014)” (JETRO).

2011

2012

2013

2014

Source: the Tokyo Stock Exchange

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Growth in presence of foreign companies in Japan○In sectors with large inward FDI stock, including the pharmaceuticals, electric and transport equipment, there has been a steady rise in the domestic
market share of foreign companies.
○In the domestic market, there are many foreign companies with a large share of sales, particularly for consumer goods. In the categories of beverages,
contact lenses, and personal accessories, the sales share of foreign companies has overtaken that of Japanese companies to take the top place.
○Other countries collect and distribute open quantitative data on the contribution of foreign countries to their economies. Sufficient statistics related toinward FDI again become crucial.
Figure III-41: Foreign-affiliated companies occupying large
shares in the Japanese consumer market（Unit：％）

Figure III-40: Top 10 companies in Japan’s pharmaceuticals and life
insurance firms (1995→2012)
1995
RankingCompany
1
Takeda Pharmaceutical
2
Sankyo3
Otsuka Pharmaceutical
4
Yamanouchi Pharmaceutical
5
Eisai
6
Taisho Pharmaceutical
7
Shionogi
8Daiichi Pharmaceutical
9
Fujisawa Pharmaceutical
10
Mitsubishi Tanabe Pharma
Ranking
1
2
3
4
5
6
7
8
9

Company
Nippon Life
Dai-ichi Life
Sumitomo Life
Meiji Life
Asahi Seimei
Mitsui Life
Yasuda Life
Taiyo Life
Daido Life

Sales
602
410
370
295
254
221
226
217
219
175
Income
6,146
4,092
3,555
2,688
1,859
1,687
1,588
1,326
1,153

10
Chiyoda Life
Source: Tekikoku Databank, Toyo Keizai, Inc.

995

2012
RankingCompany
1
Takeda Pharmaceutical2
Asetellas Pharma
3
Otsuka Pharmaceutical
4
Daiichi Sankyo
5
Pfizer6
Mitsubishi Tanabe Pharma
7
Chugai Pharmaceutical
8
MSD
9
Eisai
10
Novartis Pharma(Billion yen)
Sales
790
624
598
550
524
397
382
356
348
323

Ranking
1
2
3
4
5
6
7
8

Income
6,481
5,342
3,659
3,144
2,921
1,995
1,497
1,903

Company
Japan Post Insurance
Nippon Life
Meiji Yasuda Life
Sumitomo Life
Dai-ichi Life
Aflac
MetLife
Gibraltar Life Insurance

9

Prudential Gibraltar Financial Life
Insurance

1,052

10

Taiyo Life

1,018

Categories/Companies（Café/Bar）
Starbucks Corp（U.S）（Soft drink）
Coca-Cola Co,（U.S）（Tobacco）
Philip Morris International Inc（U.S）
British American Tobacco Plc（U.K）（Coffee）
Nestlé SA（Switzerland）
Mondelez International, Inc（U.S）（Fast food）
McDonald's Corp（U.S）（Glasses：•contact glass）
Johnson & Johnson Inc（U.S）
Bausch & Lomb Inc（U.S）（Personal ornaments）
Richemont SA, Cie Financière（Switzerland）

LVMH（France）
PPR（France）

Company
Sharesrankingin theCategory

2.6

2nd

23.2

1st

24.5
11.4

2nd
3rd

32.6
16.0

1st
2nd

12.3

2nd

17.1
3.5

1st
3rd

6.5
5.9
3.8

1st
2nd
3rd

Note: 1) The definitions of each category are those proposed by the Euromonitor.2) The
shares for soft drinks and cigarettes are calculated based on the trade/retail volume,
while in other categories, they are calculated based on service/retail value. 3) Rankingsand shares in glasses and personal ornaments are as of 2012.
Source: “Euromonitor International”

41

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Nationwide efforts are essential in order to increase inward FDI in Japan○The key countries place importance on inward FDI that contributes to the creation of employment and revitalization of the economy. The
presidents and prime ministers personally appeals for their countries, or listen to the views of foreign investors to improve the business climate.
Amidst the intensification of global competition to attract companies, it is essential to put in place nationwide efforts to attract investors.
○In Asia, South Korea is taking the lead to implement one-stop services for administrative procedures. It has also established an ombudsman
system that consolidates the requests from foreign companies. Singapore has also introduced similar systems.
Figure III-42: Action taken by key countries to increase inward FDIPresident Obama established a federal investment promotion
project referred to as “Select USA” (June, 2011).
U.S.
The President held “Select USA Summit” in Washington. 1,200
investors from over 58 countries participated (October, 2013).
“Strategic Investment Attraction Council” was held by President
France Hollande, attended by 34 foreign companies located in France(February, 2014).
Prime Minister Cameron invited executives of 18 Japanesecompanies located in the UK and conducted hearings regarding
U.K.
matters necesarry to expand investment in the UK (February,2014).
A program in which a minister is appointed to each major
investment project implemented by foreign companies is being
conducted.
President Park Geun-hye invited executives of foreign companies
South located in South Korea to hear about such matters as obstacles
Korea when doing business in South Korea (April, 2013 and January,2014).
Premier Li Keqiang invited foreign residents in China andChina delivered a policy of attracting excellent human resources toChina (January, 2014).

Figure III-43: Conceptual diagram of South Korea’s ombudsman system
for inward FDIPresident ofSouth Korea
Appointment

Requests

Requests
Foreigncorporation

Relatedorganizations

Ombudsman

Written reply(within 30 days)

Requests

Requests
Home doctor(Assists theombudsman's
work)

Role as a mediator in resolving issues

Source: Compiled by JETRO from various news articles

42

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Growing importance of the role of local governments○In attracting foreign investment, in addition to sales initiatives from the leaders of the country, it is also important to provide practical support such as
through the provision of information. In Europe and America, organizations at the provincial level also provide support to investing companies. In the UnitedStates, the governors of states take personal steps to explore opportunities for attracting foreign companies.
○The significance of inward FDI in the regions include (1) the development of new products and technologies through collaboration with small andmedium-sized companies in the region, and (2) the revitalization of local economies through the concentration of global human resources. Foreign companies
have a strong interest in collaborating with small and medium-sized Japanese companies that have strong business capabilities.

Figure III-44: Regional Investment Promotion Agencies (IPAs)
which own representative offices in JapanU.S.
AlabamaArkansas
FloridaIPAs
U.S.
Department of Commerce North Carolina
State government
OhioEnterprize Fｌorida
OregonGeorgia

Georgia Department of
Economic Development

Indiana

Iowa economic
development
State government

KentuckyState government

Iowa

IPAs
State government
Jobs Ohio
State government
Exports pennsylvania's
products,techonologies &services(No. of companies)

TennesseeState government

225

Texas

State government
Virginia Economic
Development Partnetship
Export Washington
State governmentState government

200

Pennsylvania

Virginia

Figure III-45: Location of head offices of foreign companies in
Japan
Rank

300
2680

275

248

250

175
150

Mississippi
State government
Washington
MissouriState government
West Virginia
Nebraska
State government
South Carolina
IPAs
U.K.
England
London & Partners
ScotlandScottish Development International
Welsh government
Wales
Northern Ireland Invest Northern Ireland
IPAs
Germany
Investment in Bavaria
Bayern
HWF Hamburg Business Development Corporation
Hamburg
Hessen Trade & Invest GmbH
Hessen
North RhineNRW. Invest GmbH
Westphalia
Saxony Economic Development Corporation
SaxonySource: the American State Offices Association (ASOA), JETRO website

136

125
100
75

1
2
3
4
5
6
7
8
9
10

No. of%companiesTokyo
2249 70.5
Kanagawa
280 8.8
Osaka
150 4.7
Saitama
64
2
Aichi
63
2
Hyogo
57 1.8Chiba
45 1.4
Shizuoka
30 0.9Fukuoka
25 0.8
Ibaraki
20 0.6
47

50
28
25

28

15

7

0
Hokkaido

Tohoku

Kanto

Chubu

Kinki

Chugoku

Shikoku

KyushuSource: “Survey on Trends of Foreign Companies” (TEIKOKU DATABANK, LTD.)

43

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Attracted more than 1,000 investments in 10 years○Since FY2003, JETRO has provided support to foreign companies for inward FDI in more than 10,000 investments. Of these, 1,136 cases actuallyentered the Japanese market by the end of March 2013. There has been a marked increase in investments from Asian companies. The key areas that
JETRO is focused on attracting investment to are environment, health, tourism, retail, and research and development.
○JETRO has launched new initiatives to attract foreign companies. In addition to directly approaching the corporate managers of global companies
to invest in Japan, it has set up a consultation hotline to provide one-stop services on investing in Japan. It has also strengthened collaboration withlocal governments that actively promote attraction of foreign investors.

Figure III-46: Achievements by JETRO in attracting foreign investors
to Japan (accumulated number of cases)

Figure III-47: Breakdown of JETRO’s achievements in attracting
foreign investors to Japan (2003 – 2013)

No. of investments
1200

Asia

SectorNorth America

1000

Service
Software contents

Europe800

Other

Electrical and electronicparts
Machinery and parts

600

400

No. ofinvestments
208
200(No. of investments, %)No. of%Function%
investments
18.3 Sales
875 77.0
17.6 Communication, PR,
138 12.1
collection of information

80

7.0 R&D

34

3.0

76

6.7 Procurement

30

2.6

Automobile parts73

6.4 Finance

16

1.4

IT equipment

65

5.7 Manufacturing

13

1.1

Note: Percentage does not add up to 100% as only the main sectors/functions have been listed.
200

0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(Fiscal year)

44

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 3: Growing inbound trade, including investment in Japan

Japan External Trade Organization (JETRO)

Number of foreign visitors to Japan tops 10 million○The number of foreign visitors that visited Japan in 2013 grew by 24.0% year-on-year to 10.36 million, reaching a historical high. The increase wasdriven by the rise in visitor numbers from South Korea, Taiwan, Hong Kong, and the ASEAN region. The number of visitors from the ASEAN region
increased by 48.3%, topping a million for the first time.
○Over the past 10 years, the number of foreign visitors to Japan doubled. The government aims to reach 20 million visitors by 2020. The key tosuccess lies in the Asian market.
○“Industrial tourism” initiatives are being put in place to utilize local industrial facilities and factory plants as tourism resources. Nationwide efforts
are necessary to increase the number of repeat visitors to Japan by conveying the attractiveness of the rich culture and history of industrial areas.

Figure III-48: Number of foreign visitors to Japan(10,000 people)

1,200

Other
China
ASEAN

United States
TaiwanHong Kong
South Korea

1,000

800

600

400

200

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132013 2014
1-6 1-6
P

Figure III-49: Number of Asian visitors to Japan(2003→2013)(No. of people, %)World

5,211,725 10,363,904

Composition
ratio(2013)
98.9
100.0

Asia total

3,511,513

8,115,789

131.1

78.3

South Korea

1,459,333

2,456,165

68.3

23.7

China

448,782

1,314,437

192.9

12.7

Taiwan785,379

2,210,821

181.5

21.3

Hong Kong

260,214745,881

186.6

7.2

ASEAN total

441,602

1,149,060

160.2

11.1

Thailand80,022453,642

466.9

4.4

Singapore

76,896

189,280

146.2

1.8

Malaysia

65,369176,521

170.0

1.7

Indonesia

64,637

136,797

111.6

1.3

Philippines

137,584

108,351

-21.2

1.0

Vietnam

17,09484,469

394.1

0.8

2003

2013

% change

Note: Total for Asia includes other countries and regions not listed above.
Source: Japan National Tourist Organization (JNTO)(Year)

Notes: (1) Figures for 2014 are provisional figures for January to April, and estimates for May to June. (2) Figures
for ASEAN are the total for Thailand, Singapore, Malaysia, Indonesia, Philippines, and Vietnam (six countries).
Source: Japan National Tourist Organization (JNTO)
45

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 4: Challenges toward further globalization for Japanese corporations

Japan External Trade Organization (JETRO)

From intellectual property measures to a comprehensive intellectual property
strategy that includes protecting trade secrets○With regard to the number of patent applications across the world in 2013, the United States took top place (global share of 27.9%), Japan took
second place (global share of 21.4%), China took third place, Germany took fourth place, and South Korea took fifth place. Japan overtook the UnitedStates in the number of patent applications per 1,000 people of the population. Japanese corporations should move from the acquisition of patents andintellectual property measures for counterfeit products and piracy, toward formulating a comprehensive intellectual property strategy that includes theprotection of trade secrets.
○The percentage of small and medium-sized enterprises that have not formulated policies for trade secrets and patent applications was 38.3%. It has
also been conjectured that small and medium-sized enterprises do not fully comprehend the need for the protection of trade secrets. The appropriate
protection and management of trade secrets is an important issue for small and medium-sized companies that hold technology as their greatest lifeline.
Figure III-51: Strategies related to patents and trade secrets for small andmedium-sized enterprises

Figure III-50: Number of patents per 1,000 people in the population

0.55
0.41
0.34
0.25

0.25

0.22

0.18
0.12

There is an awareness of the administrative
importance of patents and trade secrets, but no
particular policy has been formulated

38.3

Actively seeks out patent applications for items
that the company appears to be able to acquire
rights for

37.0

0.08

Minimizes patent applications, and protects
trade secrets as far as possible

9.8

Patents and trade secrets are not very important
to work

8.3

0.02

Note: Figures shown for top 10 countries in the number ofinternational patent applications for 2013.
Source: World Intellectual Property Organization (WIPO)

Sets forth standards for patent applications andprotection of trade secrets, and abides by these
6.6
standards
Unit: Percentage of responses ( %)Source: "Report on Basic Survey on Intellectual Property Activities of SME"under the
FY2013 Analysis Project for Support Measures to SME on Intellectual Proerty (Japan Patent46

Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 4: Challenges toward further globalization for Japanese corporations

Japan External Trade Organization (JETRO)

Revitalizing Japanese corporations through “brain circulation”○ The “Declaration to be the World’s Most Advanced IT Nation,” dated June 24, clearly lays out initiatives to “to strengthen JETRO projects,
in order to advance global business for small and medium-sized ventures in Japan with harnessing Silicon Valley, and to strengthen support forthe creation of business innovation originating in Japan as well as support for global business expansion by promoting ‘brain circulation.’”○After the groundbreaking emergence of President Shinohara of Tempstaff and CEO Son of Softbank, there have been continuous signs of“brain circulation.” There are expectations toward the revitalization of Japanese corporations through “brain circulation.”
Figure III-52: Current situation in “brain circulation”

Countires/regions with brain circulatlion establishedJapan○Highly skilled personnel in Taiwan, Israel, China and India ○Brain circullation did not occur in Japan, where the rapid
Historicalexperienced difficulties in finding good research/employment reconstruction and economic growth provided excellent
backdrop of
opportunities for some time after the WWII.
circumstances for research and employment after the WWII.
brain○They migrated to Silicon Valley and other regions in the○The fear of brain drain out was more dominant than thecirculation
US, in search for opportunities to study aboroad and forbenefit of brain circulation.
employment, by the thousand.
○Since 1980, highly-skilled personnel who were employed or ○Highly skilled personnel is fostered through internaltransfer in Japanese companies principally implementing
Background of educated in the US have begun to return to their native
countries, with their economies rapidly growing.
lifetime employment.
establishing○The experience in the US enabled them to transfer○Means of brain circulation across companies was not
braininternational
technology
andthecreation
of
added
value
to
utiilized in fostering highly skilled personnel. Humancirculation
their native countries.
resources were not developed by means of brain circulation,a○Casestransferwhereof personnel
across founded
companies.
○Social and economic (eco) systems encouraging
the Japanesecompanies in Siliconentrepreneurs, such as Sillicon Valley, have been established Valley, or in Japan by utilizing Silicon Valley's network, isin Hsinchu in Taiwan, Tel Aviv in Israel, Shanghai in China few in number.
Present
and Bangalore in India.
○Unique manufacturing venture companies, using Siliconsituation of○Highly skilled personnel returning to their native countries Valley's ecosystems, are finally beginning to appear.
brain
have contributed to the founding and development of new○The entrepreneurship environment ranks 120th in thecirculationindustries, by utilizing Silicon Valley's network.
world. (World Bank Doing Business).
○In regards to the number of foreign companies going public
on the NASDAQ exchange, Israel marks second after
China.
47
Source: Compiled by JETRO.
Copyright (C) 2014 JETRO. All rights reserved.

Chapter 3 Section 4: Challenges toward further globalization for Japanese corporations

Japan External Trade Organization (JETRO)

Toward diversity management through the employment of foreign students○There is a need for Japanese companies to review the utilization of human resources in traditional homogeneous groups such as “Japanese, male,full-time, lifelong employment,” and to put in place diversity management initiatives to create innovation that can make maximum use of thecapabilities of human resources with diverse attributes and values.
○The hurdles faced by foreign students who wish to work in Japanese corporations remain high. It is desirable for Japanese corporations to keep inview the future career plans of foreign students as potential candidates for managerial positions in overseas offices, and to put in place flexible
recruitment and selection methods corresponding to their diverse backgrounds, capabilities, and aspirations.
○There are also many cases whereby doors to conducting business overseas have opened up for small and medium-sized enterprises through theemployment of foreign employees.
Figure III-53: Number of foreign students working in Japanese
corporations after graduation
45,000Not employed

40,000Figure III-54: Examples of foreign employees working in small and medium-sized enterprises (Diversity
Management Selection 100)Company name

Prefecture Type of business

KanekoManufacturing Co.,Ltd.

Cutting work ofparts in healthcare/aviation/space fields

SaitamaForeign
employees/Total
employees
2/80

Employed

35,00030,00025,00025,58924,951

20,00023,95027,53530,06030,68029,988

Niigata

Kikusui Sake Co.,
Ltd

Kochi

Sake brewing
company

1/60

DUNKSOFT Co.,
Ltd.

Tokyo

Website construction, Softwaredevelopment

15,0002/22

Okinawa Watabe
Wedding
Corporation

Okinawa

Wedding Service

7/233

10,000

5,705

7,911

9,411

05

06

9,684

8,736

1/143

30,57323,1985,000

Snowblower/Gras
smowermanufacturer andsellerFujii Corporation
Co., Ltd.

6,073

6,663

7,910

8,722

09

10

11

12

0
04

07

08

Notes: (1) The "foreign students" represented here are those who are enrolled in universities, two-yearcolleges, technical colleges, and professional vocational schools.
(2) Year refers to fiscal year. 12 is the period from April 2012 to March 2013.
(3) "Not employed" is the number obtained by deducting "Employed" from "Number of foreign student
graduates." Includes those with unknown course taken after graduation.
Source: Japan Student Services Organization (JASSO)

Actual exmple
In order to negotiate overseas direct transactions, whichhave been realized through JETRO’s overseas
exhibitions, they have employed foreigners who are
currently being trained as sales engineers.
They offer foreign students a half-year internship. They
have hired a person from Bangladesh who graduatedfrom a Japanese local college and majored in electricaland electronic sciences in graduate school. He is
engaging in product development and writing manuals
for overseas customers using his sufficient knowledgeof technical terms. Proper attention to foreign religion,
customs and culture are given by the company and his
employees.
They employed an American woman to develop a newkind of sake for export to attract overseas consumers.
They successfully produce unique sparkling sake andexpanded their business.
They accept internship of foreign students, including aTurkish student who is now employed as the teamleader of software development due to strong ability in
the IT field.
Every year, they employ at least one foreign student.
They have accepted exchange students from East Asia
who are studying at a local college in Okinawa, to meetdemand from East Asia for luxurious wedding
ceremonies in Okinawa. They engage in coordinatingwith East Asian countries and working as ceremony
staff.

Note: These examples were selected from amongst companies with less than 300 employees and that are engaged in
sectors that target foreign customers.
Source: "Diversity Management Selection 100 - Collection of Best Practices 2013 and 2014" (METI)

48

Copyright (C) 2014 JETRO. All rights reserved.