In 2013, for the first time in 21 years, the most foreign direct investment in the US originated from Japan. For a three-year period, through 2015, the average investment amount reached USD 37.8 billion, second only to Luxembourg. Since there is a lot of investment from large corporations who make use of the advantageous tax structure in Luxembourg, in a sense, Japan has continued to hold the top position in the amount of investment from its own domestic companies. As of the end of the 2014 fiscal year, the total amount of direct investment from Japan was USD 372.8 billion, putting Japan in second place behind the United Kingdom, which has a “special relationship” with the US

In comparison, exports from Japan to the US have stagnated. Dollar-denominated export value, export volume, as well as the value of US imports from Japan have all decreased for three consecutive years, since 2013. Furthermore, the value of imports has only increased by 6% during the 20-year period since 1995, and is shifting to something that is closer to a long-term decline. During this period, imports to the US from throughout the world tripled in value, while Japan’s share dropped sharply from 17% to 6%. In the late 1980s, Japan was the largest import partner of the US Today, Japan is in fourth place, well behind China, Mexico and Canada.

Looking at the economic relationship between the US and Japan from the Japanese perspective, the point that stands out is the floundering exports to the US One of the big reasons is the disappearance of IT related products, like computers and phones, and electronic products, like televisions, which used to be some of Japan’s main export goods. This is due to a significant decline in the competitiveness of these products, which is also a serious problem in Japan. Compared to this, it may seem surprising that there is recently so much foreign direct investment. Since the US is only showing moderate economic growth, it is difficult to regard it as an especially attractive investment opportunity, and the effects for Japan are not clear at this time.

Nevertheless, I believe that direct investment in the US is a viable path, particularly for businesses based in mature economies like Japan. Looking at the rankings by country for foreign direct investment to the US in 2015, the countries listed after Japan include highly-industrialized nations like Canada, the Netherlands, Germany and France. There are only a few emerging economies on the list, and the largest investor among them is China, who invested only 6% compared to the amount from Japan. Some of the likely reasons for this are that in the emerging economies there are fewer companies large enough to be able to acquire US businesses, and that there are many points of commonality between the US and other industrialized nations with respect to the conditions necessary to continue business operations, and fewer with the businesses in emerging economies at a different stage of development. Although it is said that the opportunity to acquire a company in the US is open to anyone, for companies from emerging economies the barriers to entry are high. There is probably an advantage for businesses from developed countries like Japan, with experience in their home country that can be leveraged.

Furthermore, among developed nations, there is a large potential for growth in the US The population continues to grow, with a potential growth rate of about 2%, and the breakeven inflation rate at about 2%. The financial situation is stable, and the political structure makes it difficult to increase the tax burden on business, with one of the two major political parties in favor of small government. Populations are declining in most developed nations, and many are facing deflation, worsening financial situations and the risks of increased taxes, so the macro-economic environment in the US is superior. The US is likely to maintain the position as a leader in business creation and development. This in itself could explain the increase in advances into the relatively good prospects of the US, compared to the rest of the world, by Japanese companies that are in a better position than the businesses from emerging economies.

Of course, there is severe competition facing anyone who forays into the US, and in many cases, the expected performance cannot be achieved. Compared to Japan, there are close ties between the economy and politics, compliance regulation is strict, and there is a much higher risk of litigation, so there are some unique difficulties in the business environment. Understanding the politics is important. As the scale of the business increases, it is necessary to takes measures, such as establishing a base in Washington, D.C. It is also crucial to always continue to make the effort to be a good corporate citizen and earn the acceptance of the US customers, the local staff and the society, starting from the moment that the advance into the US is started. In this respect, it can be said that the barriers to entry into the US are very high, even for businesses from industrialized nations like Japan.

These high barriers to entry, however, are also a kind of defensive wall in the sense that they reduce the competition for companies that understand the actual situation and prepare appropriately. In this respect, the Marubeni Group seems to be in an excellent position to expand operations in the US, with previous experience of advancement into the US, and the necessary soft infrastructure for stable operation in the US already in place, including the office in Washington, D.C. This is why I believe, with the US as one of the main arenas of activity, there is good potential for achieving a “Strong Marubeni Abroad” for the “Global Challenge 2018” that has been started by the Marubeni Group this fiscal year.