Singapore, US buyers help drive surge in FDI into Japan

TOKYO — Foreign direct investment into Japan surged last year as a cheaper yen made real estate and other assets more attractive to buyers including Singapore sovereign wealth fund GIC and United States financial services giant Blackstone Group.

Net inbound investment rose 181 per cent to ¥1 trillion (S$11.4 billion), the highest since 2009, the Ministry of Finance (MOF) said yesterday. Asia accounted for 54 per cent of the inflow, the US accounted for 47 per cent, while there was a net outflow of investment from Europe.

The yen’s tumble on Premier Shinzo Abe’s reflation policies is breathing life into inward investment even while it boosts import and energy costs. Mr Abe aims to double the stock of FDI in the nation by 2020 and plans to lower a tax on corporate income to make Japan more attractive for business.

“The weakening yen makes Japanese properties cheaper for overseas buyers. Real estate investment will probably become more active as we approach the 2020 Olympics,” said Ms Kaori Iwasaki, an economist at the Japan Research Institute. Since Mr Abe took power in December 2012, the Japanese currency has plunged 29 per cent against the US dollar.

Investment from Asia is increasing, especially from Singapore, Ms Iwasaki said. GIC last October bought a building next to Tokyo Station in a bet that the city’s real estate values will continue to rise. GIC paid US$1.7 billion (S$2.3 billion) for the property, said a person familiar with the purchase who asked not be named.

Blackstone said in November it agreed to buy GE Japan Corp’s residential property business for more than ¥190 billion to expand its apartment holdings in Japan.

A lower corporate levy may lure more direct investment from abroad, said economist Keiji Kanda of Daiwa Institute of Research. Mr Abe’s Cabinet will cut the company income tax rate by 3.29 percentage points over the next two fiscal years, aiming for a final levy below 30 per cent, on par with Germany. A one percentage point cut in Japan’s effective corporate tax rate will increase inward FDI by 3.5 percentage points, said Mr Kanda.

Meanwhile, Japan’s surplus from direct investment and foreign securities increased 9.7 per cent to ¥18.07 trillion, the biggest since 1985, inflated by the weak yen. BLOOMBERG