Since 1989, Japan Bank for International Cooperation (JBIC) has conducted an annual survey to identify the current trends as well as future outlook of overseas business operations by Japanese manufacturing companies with an extended record of overseas business. The survey covers more than 600 Japanese manufacturing companies with three or more overseas affiliates (including at least one production base).

In the most recent survey published in November 2013, China lost its position as the most promising destination of Japanese foreign direct investment (FDI) for the first time since the first survey in 1989, dropping to fourth place.

In 2012, 62.1 percent of the respondents said “China is promising.” But this ratio dropped dramatically to 37.5 percent in 2013. “Rising labor costs” was the most serious concern of Japanese companies (77.1 percent), followed by “Intense competition with other companies” (62.0 percent), “Unclear execution of legal system” (55.3 percent), and “Insufficient protection for intellectual property rights” (46.4 percent). Reflecting the boycott of Japanese products in China after the Japanese government nationalized the Senkaku islands in the fall of 2012, “security/social instability,” which had been stable at around 10 percent up until 2012, jumped to 31.8 percent in this latest survey.

Masayuki Tanimoto is a JBIC visiting fellow with the Japan Chair at CSIS. To read Tanimoto-san’s full piece visit the CSIS Japan Chair Platform website to read the .pdf here: