In a recent Nihon Keizai survey, Japanese manufacturers indicated that their average breakeven exchange rate was 94.98 yen, down from 1994's average of 110.4 yen. The companies surveyed identified two primary tools used to remain competitive-moving production overseas and increasing imports. When Japanese companies consider where they will locate production facilities, China and Southeast Asia are favorite destinations. According to surveys of Japanese businesses, of those planning to invest overseas, about 48 percent will be investing in China, and nearly 47 percent will invest in Southeast Asia. Only 4 percent will be investing, in Europe, and 15 percent of those surveyed indicated they will invest in the United States.
Some companies plan to invest in more than one location.
For many companies, such as those in the automotive industry, China's lure is due to a low-cost labor force and a huge consumer market. One indication of the increase in overseas production facilities is Japanese investment flows. As the largest destination for Japanese foreign investment flows, the United States receives almost twice the amount invested in Asia. China-bound investment increased by 52 percent, ranking China second to only the United States in terms of Japanese bilateral investment flows in 1994. Other beneficiaries of increased Japanese FDI flows to Asia include Thailand, Malaysia, and the Philippines.