RIETI Seminar Session ２ “The Current State of Japan’s Inward FDI”

Shigeki Maeda Japan External Trade Organization(JETRO)

President

Copyright (C) 2016 JETRO. All rights reserved.

4,045 4,975

9,902

19,408

23,748

24,384

0.8%

1.0%

2.0%

3.9%

4.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020

Amount(Billions of JP Yen)

Percentage of GDP(%)

Source: BOJ "Balance of Payments", Cabinet Office "National Accounts of Japan"

The stock of inward FDI and its portion in the nominal GDP

The changes in the inward FDI stock of Japan

Inward FDI Promotion through

Abenomics

Bankruptcy of Lehman Brothers

The Great East Japan Earthquake

The Financial Big Bang

Revision of the Commercial

Law

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Inward FDI Promotion by the Koizumi

Administration

(Billion ¥)

2

Goal 35 trillion ¥

International Comparison of the state of Japan’s Inward FDI

International comparison of the inward FDI's ratio in nominal GDP

Source: UNCTAD "World Investment Report 2015" FDI database (except Japan) Japan: Ministry of Finance "Balance of Payments", Japan Cabinet Office "National Accounts of Japan". The breakdown of investment sources for UK, USA, France and Germany are taken from the statistics announced by the central bank of each country.

Copyright (C) 2016 JETRO. All rights reserved.

0

0.1

0.2

0.3

0.4

0.5

0.6

Japan China Korea Germany France USA UK

4.2% 6.5%

21.7%

30.2% 15.1%

19.1%

9.2%

26.2%

4.9%

10.8% 12.9%

19.3%

25.6%

30.9%

56.4% Investment from EU

Investment from UK and Canada

Investment from outside the EU

Investment from other than UK and Canada

3

Healthcare sector

“Sakigake package”

Priority examination for innovative pharmaceutical products, medical devices and regenerative medicines

Shortening assessment period for the cutting-edge medical services

(e.g. regenerative medicine and medical devices)

Reducing Drug Lag and Device Lag

“Patient-requested Cure System”

Combining insured and uninsured (non-approved) medical services on a request from a patient

Reform of the PMDA (Pharmaceutical and Medical Devices Agency)

Shortening the examination period of new drugs (from 22 months to 14.7 month) and reducing Drug Lag

Energy Sector

Full liberalization of the retail sales market in April 2016

Entry by foreign companies also became possible

Tourism Sector

Relaxing visa requirements for 13 countries, primarily for visitors from ASEAN countries.

✔ Expansion of the business opportunity by the Structural reforms

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Regulatory Reform of Abenomics - Making Japan a country with “the greatest ease of doing business”

From the Survey on Japan’s Investment Climate 2015 Results

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Investment Environment in Japan: (1) Do you feel that the Japanese business climate has become better?

Two of the options which you think have been the most effective

5.4%

It's becoming somewhat better

30.9%

61.7%

It's becoming significantly better + It's becoming somewhat better

It hasn't changed much

It's becoming worse

It's becoming significantly better 2.0％

n=149

50.0%

45.2%

33.3%

15.5%

regulatory reform

simplified administrative procedures

tax reduction

othern=84

Source： Survey on Japan’s Investment Climate 2015 （JETRO）

Caladrius Biosciences, Inc.（USA） Overview: the company is a contractor for developing cell-therapy products and regenerative medication. It set up a subsidiary in Hyogo prefecture for the commercial production and sales of its product CLBS12, which improves blood flows to the limbs and cures severe ischemic limb.

Vetter Pharma International (Germany) Overview：the company is a contractor for medicine production (it provides services of sterile filling of injections). It set up a subsidiary in Tokyo, in order to strengthen relationships with existing customers (Chugai Pharmaceuticals etc.) and to find new customers.

emka Technologies SAS（France） Overview: the company develops, produces and sells medical devices that measures cardiovascular system and respiratory system parameters. It set up a subsidiary in Hyogo prefecture to develop its business in Japan.

Taiwan Liposome Company, Ltd. (Taiwan) Overview: the company develops medicines for cancer, retinal diseases and infections. It set up a subsidiary in Tokyo in January 2015 in order to get approval for super-generic and newly-formulated medication, and to find new partners and strengthen relationships with existing ones.

Promotion of inward FDI through regulatory reform

Success cases supported by JETRO（regenerative and medical sector）

6

Johnson & Johnson (USA)

Overview: the company opened it’s “Tokyo Science Center” in the Comprehensive Special Zone for International Competitiveness in Kawasaki city in August 2014. It is a training facility for medical workers, equipped with surgery simulation devices. The company expects trainees from Asian countries.

3M (USA)

Overview: the company set up an R&D base that specializes in healthcare field, in Sagamihara city, Kanagawa. It aims to develop high-value products to meet the diverse healthcare needs of the Japanese market.

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Nokia Japan President, Mr. Jae Joon Won “The large mobile-phone companies of Japan are front-runners, leading the world by new technologies. Developing new products in Japan and selling to the world will be a big business chance for us.” “Japan is the most important strategic market for Nokia, and we will continue investing in Japan to advance our business in the world”.

Improvement in the Japanese business environment Voices of foreign-affiliates companies' executives

NIHON L’Oréal President, Mr. Jerome Bruhat “(Japanese customers are) fashion-sensitive, and highly interested in innovative products.” “As the Asian base of ‘Maybelline New York’, the Japan base is developing products together with our research facility. Hit products, such as the superfine eye liners and BB liquids with skin lotion are the outcome of the research in the Japanese market”.

GE President and CEO, Mr. Jeffrey Immelt “In Japan (where manufacturing is concentrated), there are plenty of apparatus and software technologies. It becomes a new leader of industry and will be successful”. “In Japan, there are technologies and very talented personnel, and it is a wonderful place to work in, as well as an important market for GE”.

(Anonymous) Asian generic medicine producer “In the next 5 years the generic medicine market in Japan will grow steadily. But in may hit a ceiling after that, so we are going to develop new medicines. Therefore, we need to build a full-scale R&D and manufacturing facility in Japan”.

7

(Anonymous) European electronics producer “For the CEO of our Japan subsidiary, more than 50% of the job is to appeal to the head quarters about how important the Japanese market is. We are always looking for such information”.

(Anonymous) European medicine producer “Our mission is to maintain our manufacturing base in Japan. In order to do that, we need to give additional functions to our current factory, but there are a couple of obstacles. We need to discuss this with local governments.”

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8

EBC(The European Business Council) is the trade policy arm of 16 European National Chamber of Commerce and Business Associations

Source: Golden Opportunity The EBC Report on the Japanese Business Environment 2015

Golden Opportunity The EBC Report on the Japanese Business Environment 2015

Structural reform of the economy has always been an integral part of Prime Minister Abe’s Growth Strategy ･･････We have already seen changes to lower corporation taxation and improve corporate governance, and the Government has stated its intention to boost inward investment ･･････ if this opportunity for internal restructuring is grasped, Japan can lift its economy to a new level.

Message from the Chairman

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Improvement of Japanese Business environment - A point of view of Japanese Business Environment from Foreign Companies

Website and events: Distributing information on Japanese

business environment

Overseas offices: Finding businesses interested in

investing in Japan

HQ and domestic

specialists: Developing proposals (providing

customized information)

Supporting business

startups through the IBSC (Invest Japan Business Support

Center)

Domestic offices: Providing a link to local

governments and attracting

businesses

9

Invest-in-Japan website (http://www.jetro.go.jp/en/invest/)

Seminars/symposia, brochures

Finding companies interested in investing in Japan by visiting businesses and exhibitions

Individual consultations with interested companies Providing information on markets and industries Providing information and introductions for

governmental approval and licenses

Invest-in-Japan website

(6 languages)

Temporary office

Seminars and symposia

Providing temporary office space (six IBSCs / Tokyo, Yokohama, Nagoya, Osaka, Kobe, Fukuoka)

Providing expert advice (taxes, accounting, human resources, social security, real estate, etc.)

Cooperation to the Tokyo One-Stop Business Establishment Center

Providing information on regions throughout Japan (location sites, local incentives, etc.)

Cooperation with local governors/mayors to promote their areas

Support new investments of companies already operating in Japan

Government incentives: Providing information on

government incentives

Providing information on subsidy Programs and other government incentives

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JETRO’s activities to attract foreign direct investment

Tokyo, 871

Other than

Tokyo 534

Kanagawa, 145

Osaka, 100

Aichi, 88

Hyougo, 54

Chiba, 35 Fukuoka, 26

Saitama, 17 Other 69

(FY2003-2015)

JETRO Supported

14,197

Successful cases by country

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projects

Successful cases Changes in the ratio of regions

Other than Tokyo 62%

Tokyo 38%

Successful cases by location in Japan

1,405

Foreign companies’ startups

North America40%

North America 28%

Europe 33% Europe 31%

Aisa 16%

Asia 39%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

North America

Europe

Asia

(FY)

US 29% (411)

China 11% (151)

Germany 9% (120)

Korea 7% (96)

UK 6% (85)

France 5% (75)

Australia 3% (46)

Singapore 3% (45)

Taiwan 3% (43)

Hong Kong 3% (41)

Other 21% (292)

Investment projects supported by JETRO