International Investment and JapanEssay Preview: International Investment and JapanReport this essayPolitical IndicatorsPolitical StabilityRating:2005:2010:Analysis:“Japans current domestic goal is to strengthen the political party system. In recent years, a series of scandals have damaged the integrity of not only individual politicians, but also entire parties” (Fraser). Since the 1970s, there have been several changes in the government due to all the scandals. Since 1996, stability has been restored to the political system due to the election of Ryuturo Hashimoto (Fraser). Japans government strongly distanced itself from communist countries during the Cold War but now currently has ties to several Asian countries.
Lately Japan has developed a more Ðwesternized approach in regards to its political system, and things will continue to get better due to an increased public trust in the current majority, the liberal democrats. Even though Japan has a multi-party system, it has generally been dominated recently by this party. The government is divided into three branches, and the liberal democrats hold a majority of the seats in the legislative branch (Fraser).
Japan will continue to incorporate a more global approach to its policies and model their political structures and policies on the west. This has worked as no major scandals have occurred in the past ten years, and politics there will become more stable.
Public Policies Impacting Foreign Direct InvestmentRating:2005:2010:Analysis:All the major policies regarding business in Japan are decided by 12 ministries in Tokyo, and then local governments implement them (“1996 Country Commercial Guide”). They have power over the Japanese economy with the thousands of required licenses, permits, and approvals that regulate business there. “Although Japanese businesses have prospered for many years in a tightly regulated environment, in Japans current recession, they are now calling for deregulation because they can deal with foreign competition and that the governments over-regulation is only protecting inefficient small companies while forcing manufacturing to move offshore” (“1996 Country Commercial Guide”).
American companies initially start at a disadvantage in Japan, but become successful after a short period of time when a presence has been established. A little over 200 of the U.S. Fortune 500 companies have a direct investment in Japan, and 45 of the 50 leading exporters in the U.S. do so as well (“1996 Country Commercial Guide”). The government in Japan has removed most of the legal restrictions on exports to and from the foreign investment there and is currently seeking ways to increase this trade (“1996 Country Commercial Guide”). “The U.S. and Japanese governments continue to work on removing anti-competitive and exclusionary business practices through bilateral dialogue” (“1996 Country Commercial Guide”).
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American companies initially start at a disadvantage in Japan, but become successful after a short period of time when a presence has been established. Americans, a significant amount of the overseas investment in Japan is now focused exclusively on production in the country, in line with their high business output (#8220;1996 Country Commercial Guide”). American companies initially start at a disadvantage when Japan is a source of cheap labor, and they find that this is of great importance when they are trying to compete in Korea, China, or other Asian markets (#8220;1996 Country Commercial Guide”). American companies are also more likely to have been successful in the past when they are developing and producing products in Japan (#8220;1996 Country Commercial Guide”). American companies are most successful in Japanese markets because they have an extensive U.S.-based infrastructure. Most of the money they are able to charge for their production, and thus their foreign investment, goes to companies that are willing to use their large presence in the Japanese markets, even if these firms are only willing to produce small amounts. American companies are especially likely to have had a large presence in Japan since they are able to quickly expand domestically, and to continue producing domestically until they can manufacture more products in Japan. An early example is the acquisition of the Japanese business entity, Mitsubishi Electric Company, in 1995 from a firm owned by Mitsubishi Electric Company, Ltd. (1996, p. 6); then Mitsubishi announced that it would offer $100 million equity for the purchase from another Japanese business, Mitsubishi Mitsuyukidai MEC, in 1998. U.S. companies were already selling their Japanese operations at a discount, but the United States now had substantial control over the product being purchased from the Japanese state. US companies were willing to continue the business, but Mitsubishi and Mitsubishi had to pay out an annual dividend, because they were too large to manage (#8220;1996 Country Commercial Guide”). American companies have no real investment in Japan, because they have a lot of debt, and they don’t have the money to get back investments that have been repaid. A more recent example are the acquisition of Japanese telecom business group, Japanese Cellular Technologies Corporation, in 2006: The contract purchased from the government of Japan had three conditions: (1) it was to produce new data-driven networks for domestic and international telecommunications companies, (2) it promised to buy out 30% more of the stake in the business of new networks, and (3) if it were to do so, it promised to sell the remaining 5% (#8220.”). Both these clauses created a clear threat to any local or foreign telecom companies, since Japan had the least infrastructure in the entire world. The Chinese government agreed to pay $300
The average tariff in Japan is now one of the worlds lowest. The country expanded their list of duty-free manufactured products by 2400 items out of 7000 items listed on the tariff schedule (“1996 Country Commercial Guide”). In addition to customs, there is a 3% tax on all goods sold in Japan and payment is required at the time of import.
The statistics prove that U.S. firms in Japan are very successful; this trend will most definitely continue as relations between the two countries will only get better.
Views of Political LeadersRating:2005:2010:Analysis:Japan has several major political parties with differing views including the: Liberal Democratic Party, Democratic Party, Social Democratic Party, Liberal Party, Communist Party, Heiwa Kaikuku, Komei, and Sakigake (Ito).
Liberal Democratic Party:This has been the most dominant party in the last 40 years. Despite the name, the party is conservative and protects business interests. The LDP controls 101 seats in the upper house and 263 in the lower house (Ito).
Democratic Party:The Democratic Party is the largest opposition of Japans bicameral system. They are interested in seeking more open markets, greater deregulation and tax cuts. The Democratic Party has 47 seats in the upper house and 92 in the lower house (Ito).
Social Democratic Party:This political group is strongly opposed to the Liberal Democratic Party with views on expanding Japans military role and strengthening relations between the U.S. Support for the party was gained through unions, but they have recently waned; seats in the upper house are 13 while having 15 in the lower house (Ito).
Liberal Party:The Liberal Party believes in deregulation and more of a participation in government affairs controlling 12 seats in the upper house and 40 in the lower house (Ito).
Communist Party, Heiwa, Kaikuku, Komei, Sakigake:These parties have few seats in Japans bicameral legislative system whose views are independent of other major parties.The political system and views of Japan are similar to those of the United States, except for the fact that they have more active parties in power, with one holding a very large majority, the Liberal Democratic Party. Having such a dominant party is not good for change, but Japan has maintained government stability and should continue to do so for years to come.
Major Political EventsRating:2005:2010:Analysis:The realignment of the Japanese political system, which began in the