Analysis: Little sign Abe can shake up Japan's inbound FDI

Mon May 20, 2013 3:40am EDT
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By Stanley White

TOKYO (Reuters) - Japan risks missing, yet again, an opportunity to use foreign investment to help fuel sustained economic growth that has eluded it for the last two decades.

Prime Minister Shinzo Abe pledged to make Japan "the world's easiest country for companies to do business in" as part of his economic revival plan, which so far has been largely met with approval. The stock market has rallied 45 percent this year and Abe's approval ratings are around 70 percent.

Abe gave further hints on Friday about government plans to be unveiled in a longer-term economic growth strategy, referring to tripling infrastructure exports and doubling farm exports.

But a month before that strategy is due to be unveiled, his efforts to ramp up inbound foreign direct investment (FDI) are showing little indication a trickle of foreign investment will turn into a tide.

"Over the last five years, 90 percent of my work has been outbound deals," said Ken Lebrun, chair of the FDI committee at the American Chamber of Commerce in Japan and a partner at the law firm Shearman & Sterling specializing in mergers and acquisitions.

"The reason is the same as why Japanese companies haven't been acquiring companies in Japan: growth prospects are poor. Hopefully, Abe's reforms will improve these perceptions."

At first glance, Japan is tough to sell to a foreign investor. Its population is ageing and quickly shrinking. Its own corporations are pessimistic about home markets and have been hoarding cash or investing overseas.

Yet its appeal lies in the sheer size of the $5 trillion-plus economy, the world's third-largest, a survey by international consultancy Accenture showed in March last year.   Continued...

Japan's Prime Minister Shinzo Abe attends a meeting hosted by Japan Akademeia in Tokyo May 17, 2013. REUTERS/Issei Kato