How the tide has turned in Japan. Once a powerhouse that sent manufacturing jobs and massive investment abroad, Japan can no longer grow without outside help. The NYT reports that Japanese mayors are now traveling to China to implore manufacturers to come build factories on their jobs-deprived shores.Trapped in slow growth since the early 1990s and devastated by natural and nuclear disasters in the last two years, Japan’s economy now faces an impasse. The country is finding that it can no longer do without the help foreign manufacturers. The region, however, is not standing still:
The new dynamic in Japan signifies part of a larger regional power shift. A small but rapidly increasing amount of foreign capital comes from its neighbor, China, which last year surpassed Japan as the world’s second-largest economy and seeks to diversify its export-oriented approach to business…“The Chinese are starting to look like saviors,” said Kotaro Masuda, an economist at the government-affiliated Institute for International Trade and Investment in Tokyo. “Any investment Japan gets is basically a plus, wherever it’s from, because it means more jobs, more tax income, more opportunities.”
Chinese investment in Japan has jumped twenty fold in the past four years, but at $314 million in 2010, it remains relatively small as a percentage of overall investment in the country.Although Japanese officials have been complaining about China’s undervalued yuan for years, on the whole Japan’s problems are home grown. In the past, Japan shunned foreign capital: its strong regulations, high operating costs and taxes, and the absence of any government welcome mat for foreign money meant that Japan has had one of the lowest levels of foreign investment relative to GDP in the world. Even Japanese companies prefer to invest their money abroad.That needs to change; let’s hope Japan at long last decides to take action and halt its dreary economic slide.