Recent Developments in American and European Direct Investment in Post-Bubble Japan: Contrasting Perspectives

Although Japan’s trade surplus with the U.S. and Europe tends to gain the headlines, the country also has a sharp imbalance in terms of capital flows, not least in Foreign Direct Investment (FDI). Indeed, in recent historical terms, the trend of foreign investment between the U.S. and Japan has been towards greater imbalance. Between 1980 and 1990 U.S. direct investment in Japan rose by 210% from a minimal level in 1980 to $19.3 billion in 1990. This pales in comparison with Japanese investment in the U.S. which grew steadily over the same decade from $4.2 billion in 1980 to $70 billion in 1990. In comparison, Japanese investment in Europe over the decade increased from $4.7 billion to $45 billion, exceeding the flow of European investment into Japan by a ratio of 25:1 (EBC, 1992).