Crisis dams up Japanese investment flow to Asia
Crisis dams up Japanese investment flow to Asia
TOKYO (AFP): Japan's investment in China, India and the United States is forecast to grow, but Asia's currency turmoil makes Japanese firms more wary of their cash flow to some countries in the region, analysts say.
"Despite obvious negative factors existing in the country such as regulation problems, Japanese firms cannot ignore China as a key destination of their investment," said Hiroki Sekine, an analyst at the Export Import Bank of Japan (JEXIM).
Japanese investment in the United States is also seen rising steadily because of the strong U.S. economy, while a growing number of Japanese firms are showing strong interest in launching businesses in India, the analyst said.
According to an annual survey released by the government-owned bank on Thursday, China remained for the third year in a row the most promising destination for direct Japanese investment for the mid-term.
The United States, the largest recipient of Japanese cash, climbed up to second place from fourth last year, with India rising from seventh to fifth.
A total of 445 Japanese manufacturing companies with three or more overseas affiliates responded to the survey, which was carried out by the bank between July and September.
The poll also showed China, India and the United States were the top three most promising investment destinations for the long run, taken as the next decade.
"Particularly, more and more Japanese companies are interested in India," the bank analyst said.
According to the finance ministry, Japanese direct investment in India for the year to last March nearly doubled from a year earlier to 24.7 billion yen ($191 million). Japan's investment in the country for the six months to September already reached 20.3 billion yen.
ASEAN
On the other hand, analysts said Japanese firms were more cautious about their investment in some of the Association of Southeast Asian Nations (ASEAN) nations, particularly Thailand, Malaysia and Vietnam, in the wake of the currency crisis that has swept the region since July.
"In the past, Japanese companies considered they wanted to invest in Asia en bloc, but they have dropped such a rough idea following the turmoil," said Harunori Yamada, a senior researcher of Mitsubishi Research Institute Inc.
"Japanese companies will be more serious about selecting the destination of their investment in the region," Yamada said.
"Gaps over the amount of Japanese investment among Asian countries will be widening, and this will be more obvious during the turn of the century," the researcher warned.
ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
The JEXIM poll showed Thailand slipped to fourth place from second last year as a promising destination for Japanese direct investment over the next three years.
The bank said the decline was due to the Thai government's decision to float the baht in July which triggered hefty devaluations of neighboring currencies and regional economic turmoil.
The survey showed Malaysia was downgraded from sixth to eighth with Vietnam falling from fifth to sixth. Indonesia was unchanged in third place.
"As for Malaysia, (the) Japanese are concerned about high labor costs," Sekine said. "As for Vietnam, Japanese firms realized that the country was too premature to accept investment smoothly."
The poll also showed Japan's overall foreign direct investment in fiscal 1997 was estimated to increase 1.4 percent from a year earlier.
"Although it may be hard to attain the sharp increase observed in the previous years, the high level of foreign direct investment flow is expected to continue at the current level," the bank said.
Despite Tokyo's cautious stance towards some Asian countries, Japanese money flows to the entire region have gained steadily.
Japanese direct investment in Asia -- ASEAN members, China, Hong Kong, Sri Lanka and Pakistan -- jumped 26.4 percent from a year earlier to 794.4 billion yen ($6.2 billion) for the six months to September, the finance ministry said.