Japan plays a significant role in the global capital market. The country is the world’s largest creditor with a net investment position of 419 trillion yen (2022), has huge gold and foreign exchange reserves ($1.228 trillion in 2022, 2nd place in the world after China), and is among the world leaders in direct investment (FDI) exports.
In 2019, Japan even occupied the position of the world’s largest FDI exporter ($227 billion). Japan’s accumulated direct investment abroad amounted to
$2,132.6 trillion in 2023, having increased by more than 2.5 times since 2010. However, the volume of investment imports is extremely small, both in comparison with their exports and in relation to the size of the country’s economy.
This situation is due to the peculiarities of the investment climate in Japan. Despite the fact that the country occupies quite high positions in international rankings (Doing Business, etc.) that assess the conditions for doing business, and in the absence of formal restrictions for foreign investors, it still has an image of being closed and difficult for foreign business. This is mainly due to the persistence of informal barriers for entrepreneurs: the closed nature of the business structure and labor market, the high cost of production resources, and the relatively high corporate income tax rate.
For several decades, the Japanese government has been pursuing a policy of attracting investment to the country, which has brought certain results. The goal of doubling the volume of accumulated FDI (to 35 trillion yen) by the end of 2020 was achieved (39.7 trillion yen). The 2021 Strategy for the Promotion of Foreign Direct Investment in Japan set a target of doubling FDI stock to ¥80 trillion (equivalent to 12% of projected GDP) by 2030, with the possibility of increasing it to ¥100 trillion. In 2023, the Council’s Action Plan for Promoting Direct Investment reaffirmed that stimulating direct investment inflows to Japan remains a priority and “is the key to revitalizing the domestic economy.”