Singapore emerges as top Asian investor in Japan

Singapore is the only Asian country which has over a trillion yen - or S$12.74 billion at Monday's exchange rate - invested in Japan, according to the first official Japanese report on foreign direct investments in the country.

That makes Singapore, already the biggest investor in China and India, the top Asian investor in the world's third-largest economy, says Invest Japan Report 2015 published last week by Jetro, Japan's trade and investment promotion agency.

Yet, the exact amount sunk there - 1.72 trillion yen (S$21.82 billion) - doesn't make Singapore the overall champion foreign investor in Japan. That title goes to America. The world's biggest economy has 6.69 trillion yen invested in the country.

Singapore is placed fifth among Japan's biggest foreign investors, behind the US, the Netherlands, France and the UK in that order. The only other Asian economy in the top 10 list is Hong Kong, at ninth position.

Foreign investments is a key plank in Japan's revitalisation strategy - and the Shinzo Abe government aims to double investments to 35 trillion yen by 2020 from 17.8 trillion yen in 2012 to create more jobs and boost innovation. Having bagged 23.34 trillion yen by end-2015 - and with the pace of investments picking up - Japan is on track to meet its goal.

Corporate tax reform, stronger corporate governance and other improvements have made Japan more investment-friendly. Jetro has supported over 12,000 projects and helped 1,245 foreign companies to set up shop in the country, including 38 companies from Singapore.

A recent Jetro survey found that foreign investors are drawn to Japan's big market and well-developed infrastructure. While they are still bothered by its red tape, the difficulty in hiring workers and unfamiliarity with the local language, business costs are no longer as big an issue as before.

"Now, office and house rents in Tokyo are low compared with Hong Kong and Singapore," says Jetro chairman and CEO Hiroyuki Ishige. "Similarly, managers' salaries in Tokyo are lower than those in Singapore."

Of the 150 foreign investors polled in the survey, one third say that the Japanese business climate is better now and over three quarters indicate that they will expand in Japan in the next five years.

Though Europe accounts for the biggest - 46.8 per cent - share of the foreign investments in the country, the report says that Asia, with a 15.5 per cent share, the third biggest after North America (29.4 per cent), has stepped up its investments in recent years.

"Direct investment from Asia increased seven-fold from 517 billion yen at end-2000, exceeding the increase of western countries, with an increase by 31/2 times," the report says.

Singapore and Hong Kong (879 billion yen) stood out, followed by Taiwan (342.2 billion yen) and South Korea (255.7 billion yen), according to the report.

China, the world's second biggest economy, accounts for only 1.5 per cent of the total investments in Japan, but the amount has increased 29 per cent year on year since end-2000.

Three-fifths (576.8 billion yen) of the investments flowing into Japan in 2014 alone came from Asia. The US was still pumping in the single biggest chunk (466 billion yen), but Asian economies rank high - No 2 Hong Kong (211 billion yen), No 3 Singapore (152 billion yen), No 4 Taiwan (108 billion yen) and No 7 China (62 billion yen).

The major investments from Asia in 2014 include the strategic partnership between Singapore's paint leader Wuthelam group and Nippon Paint and Taiwan's CTBC Financial Holding Co's acquisition of Tokyo Star Bank.

In the first nine months of 2015, Singapore invested 150 billion yen in Japan, equivalent to its investments in the whole of 2014. Hong Kong's investments added to 109 billion yen; South Korea, 74 billion yen; and Taiwan, 44 billion yen. The US invested 264 billion yen.

The report says that the biggest chunk (7,738 billion yen) of foreign investment in Japan are in the finance and insurance industries, followed by transportation equipment manufacturing (2,781.3 billion yen) and electric machinery manufacturing (2,309 billion yen).

Singapore's investments there are largely in finance and insurance.

As at end-2014, Singapore has S$620 billion invested overseas, up 15.6 per cent from 2013, according to the Department of Statistics.

The biggest share of the investments, S$110 billion, is in China, followed by the Cayman Islands (S$59 billion), Hong Kong (S$50.2 billion), Indonesia (S$46.4 billion) and Australia (S$42.9 billion).

This article was first published on June 14, 2016.
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