Singapore, Japan investing more in each other

Singapore

JAPANESE firms in Singapore divested US$19 billion last year, but the cut-back appears to be a one-off move. The Japanese are now back pumping money to expand and build new factories here, investing a total of US$2.8 billion in the first half of this year.

Meanwhile, egged on by more foreign investment friendly policies just implemented by Tokyo, Singapore's direct investments in the world's third biggest economy continued to surge. Singapore-based companies poured US$3.3 billion into Japan in January-June 2017, more than they did for the whole of 2016, according to data released by the Japan External Trade Organisation (Jetro), the country's official trade and investment promotion agency.

The pull-back in Japan's investments in Singapore in 2016 stood out not only because of the huge sum involved; it is also the only significant Japanese divestment last year. But Singapore remains one of the biggest destinations in the region for Japanese direct investments.

Jetro data show that Japanese firms have US$41.8 billion sunk in factories and offices here as at end-2016 - more than in any other country in Asia, except China (US$108.8 billion) and Thailand (US$55.2 billion).

And Singapore-based companies have reciprocated with investments to launch high-tech startups, expand their presence in finance and insurance business, acquire properties and open new restaurants in Japan.

Lately, booming tourism in Japan is another key draw for Singapore firms which have put money into hotels and service apartments to tap into the Japanese tourist market.

Singapore companies continue to be dominant Asian investors in Japan

Commenting on Asia's rising investments in Japan, led by Singapore, Jetro says in a report: "Backed by the growth of the tourism market thanks to increasing (number of) tourists visiting Japan, mostly from Asia, real estate investment trusts and other investment funds acquired properties such as commercial buildings and hotels one after another. Inflow of Asian capital continued with focus on tourism."

Singapore companies continued to be the dominant Asian investors in Japan, accounting for the bulk of the region's US$3.7 billion in investments in the first six months of 2017.

As at end-2016, Singapore firms have US$18.9 billion ploughed into Japan, up from US$15.4 billion five years ago. They account for 44 per cent of the region's cumulative investments (US$42.8 billion) in the country.

That makes Singapore, already the biggest foreign investor in China and India, the top Asian investor in Japan - and behind only the US (US$59.9 billion), Netherlands (US$35.2 billion), France (US$28.6 billion) and UK (US$19.3 billion).

Foreign investments is a key plank in Japan's revitalisation strategy - and the Shinzo Abe government aims to double investments to 35 trillion yen ( S$430.4 billion) by 2020, from 17.8 trillion yen in 2012, to create more jobs and boost innovation. Japan has bagged an estimated 26.7 trillion yen in foreign investments as at June-2016, according to latest data.

Jetro chairman and CEO Hiroyuki Ishige noted that Japan's biggest appeal to foreign firms has been its huge sophisticated market, with consumers demanding high-quality goods and services. He said that the country is also seen as a trendsetter - foreign firms that succeed in the Japanese market will succeed anywhere.

Mr Ishige said that business costs in Tokyo are also falling in comparison with Singapore, Hong Kong and Shanghai, while Japan's reputation as a product and research & development centre is rising.

At the same time, the Japanese government is tweaking its policies to make Japan the world's most business-friendly country by reducing corporate tax and strengthening corporate governance, among other moves.

Mr Ishige further pointed out that his country has introduced the Japanese Green Card for highly skilled foreign professionals, "which will be the most quickly obtainable green card in the world".