Foreign Direct Investment in Japan - Part Four: German and Finnish Foreign Direct Investment

Masatoshi Kuratomi (UK Chief Representative, Development Bank of Japan) and J. Sean Curtin (Fellow, GLOCOM and Asia Times)

A full list of articles in this series can be found here.

Sean Curtin: Which European country currently accounts for the largest amount of foreign direct investment (FDI) in Japan?

Masatoshi Kuratomi: Amongst European investors, Germany currently holds poll position with the Scandinavians also pushing towards the top of the table. German companies are leading investors in Japan for a host of technical reasons such as their strong position in technological innovations and advances as well as their expertise in the car manufacturing and the component sector. These factors give them an advantage before they enter the Japanese market. German FDI is overwhelmingly tied to the car manufacturing and component sector, an area with which it is already strongly associated.

Obviously, European FDI covers many other sectors besides car production, and there are abundant opportunities for retailers and producers of brand name goods. These kinds of companies already have an advantage in the Japanese market in terms of image.

Sean Curtin: Can you tell me more about Scandinavian FDI? I know the Swedish, Finnish and Danish Ambassadors to Japan are very active in promoting ties between Japan and Scandinavia.

Masatoshi Kuratomi: The main focus of recent Scandinavian FDI activity has been Finland, specifically the partnership between the Finnish health industry and Sendai city. The municipality has been keen to gain the expertise of the Finnish health industry which possesses innovative high-tech approaches to health care for the elderly as well as foreign management know-how. Scandinavian countries have great experience in utilizing innovative technologies for elderly medical care.

In the Finnish Well-Being Center (FWBC) project, the Finnish side were able to offer a full package of elderly care know-how. This project is located in Sendai and is an attempt to introduce to Japanese nursing homes a whole range of health and welfare equipment that utilizes IT commonly found in Finland. The objective is to create a new type of Japanese elderly health care business that creates an environment in which the elderly can live more independently within the community. The core of the project revolves around developing special homes for the elderly and R&D facilities. The project is based around alliances and cooperation between the Finnish health industry and the City of Sendai administration, regional academic institutes and companies.

Sean Curtin: How did the project arise?

Masatoshi Kuratomi: The Sendai initiative started with the Finnish side looking for a candidate city in Japan where it could introduce its technology. The project formally began when Finland asked the Development Bank of Japan for assistance. The DBJ has extensive ties with municipal governments, so we were able to locate a suitable city interested in the Finnish proposal and then introduce the two parties. Now the project is well under way and the Finnish company is developing the IT devices which will be used in elderly health care. We have supported this endeavor from its genesis stage all the way through to completion.

Sean Curtin: This sounds like a very lucrative market. Besides the Finnish initiative in the elderly health care market, do you anticipate other European countries entering this sector?

Masatoshi Kuratomi: At the moment, this market is in its infancy, so a clear picture has not yet emerged, but as far as I know at present Finland is setting the pace in this particular field. In Japan, there is a lot of discussion about how to deal with a rapidly graying society, and depending on how large a budget the Japanese government allocates towards tackling this challenge, there may be even greater opportunities for foreign companies than there already are now. I think there is great future scope for European FDI in this sector. The Finnish initiative is probably a trailblazer for future trends. DBJ has extensive ties with local municipalities, so helping start these kinds of tie-ups by providing introductions is something the DBJ excels at.

Profile: Masatoshi Kuratomi
Masatoshi Kuratomi is currently the Development Bank of Japan’s Chief Representative in London, representing DBJ in many fields including environmental issues such as carbon finance. Since joining DBJ in 1981, he has accumulated over 20 years’ experience in credit analysis on companies and projects of various Japanese industries concerning energy efficiency, urban re-development, IT and environmental protection. Previously as Deputy Director General of the Energy Department, he supervises loans for waste management, recycling and related businesses, some through project finance.

A full list of articles in this series can be found here.