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Japan named the top source of foreign investments in the U.S.

Johanna Diago

Japan named the top source of foreign investments in the U.S.

For the fifth consecutive year, Japan was named the top source of foreign investment in the United States, according to the latest data from the U.S. Bureau of Economic Analysis.

Last year, Japanese investments in the United States amounted to $783 billion, followed by Canada with $750 billion, Germany, and the United Kingdom. Japan has topped the list since 2019, when it overtook Canada.

Nikkei Asia reported that most foreign direct investment came from straightforward acquisitions to establish foreign-owned affiliates, as well as from reinvesting and lending activities.

The U.S. Bureau of Economic Analysis reported that Japan was the top source of foreign direct investment in 2023, making it the leading source of FDI for five straight years. (Photo source: Adobe Stock Images)

In terms of sectors, foreign investment in the U.S. manufacturing industry was the most popular, accounting for 41% of total foreign investment, while finance and insurance took the second-largest share at 11%.

Within manufacturing, Japan’s greatest share of investment went to chemicals, transportation equipment, and computers and electronics.

What’s driving Japanese companies to invest in the U.S.?

All economies had to transform and adapt post-pandemic. In Japan’s case, it has to restructure policies to overcome global challenges and curb inflation rates. The Asean+3 Macroeconomic Research Office (AMRO) reported that by the 4th quarter of 2023, Japan had rebounded because of robust consumer activity and strong investment.

Although still relatively high, inflation in Japan has remained stable. AMRO Lead Economist Jae Young Lee explained, “Although growth is expected to moderate in 2024, investment will remain strong, reflecting ongoing efforts toward digitalization, labor-saving technologies, and investments in strategic sectors.”

Taking advantage of near-zero interest rates, investors have taken out loans in Japanese yen to acquire higher-yield assets in the United States.

Amid the popularity of such carry trades, the inter-agency Committee on Foreign Investments in the United States (CFIUS) has been more stringent in its review of FDI in the country, focusing on sectors critical to national security like real estate near military bases, semiconductors and biotechnology.

According to recent data, China has filed the highest number of notices to CFIUS since 2021, while Singapore, Canada, and Japan have had fewer notices over the years.

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Johanna Diago

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