Japan’s Foreign Direct Investment in East Asia: Its Influence on Recipient Countries and Japan’s Trade Structure

Following the sharp appreciation of the yen after the Plaza Agreement of September 1985, Japan’s foreign direct investment (FDI) in East Asian countries increased rapidly: from around $US1 billion during the first half of the 1980s, it started to increase sharply in 1986 and hit a peak of around $US8 billion in 1989. This rapid increase then stopped as the appreciation of the yen slowed during 1990-92, although the level has stayed around $US6-7 billion (Figure 1). However, it should also be noted that Japan’s total FDI has increased significantly since 1986, and that East Asia has not necessarily been the major investment destination for Japan (Figure 2).