Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 371: FDI in the Restructuring of the Japanese Economy

Magnus Blomström (), Denise Konan () and Robert E. Lipsey ()
Additional contact information
Magnus Blomström: The European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Denise Konan: University of Hawaii at Manoa, Postal: 2424 Maile Way, SSB 542, Honolulu, HI 96822, U.S.A.
Robert E. Lipsey: National Bureau of Economic Research, Postal: 365 Fifth Ave., Suite 5318, New York, NY 10016, U.S.A.

Abstract: This paper examines how inward and outward foreign direct investment (FDI) have influenced the restructuring of the Japanese economy and can be expected to continue to do so in the future. We find that outward investment has helped Japanese firms to sustain foreign market shares and contributed to the restructuring of the Japanese economy away from older industries. By shifting from exporting to affiliate production, there has been a geographical reallocation of the activities of Japanese firms, particularly those of multinational manufacturing firms. However, Japanese outward FDI is still not very large relative to the Japanese economy, despite the rapid growth since the mid-1980s, and there is still scope for significant increase when compared with the levels of most other OECD countries. Inward FDI will presumably have an even stronger impact on the restructuring of the Japanese economy. Although the stock of inward foreign direct investment is still very small, there are important changes under way. Deregulation has opened up much of the industrial and service sectors to foreign multinationals.

Keywords: Foreign Direct Investment; Multinational Corporations; Restructuring; Japan

JEL-codes: F23

26 pages, April 4, 2000

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