Japanese manufacturers and investors are increasingly moving their operations and investments to Southeast Asia in the wake of Japan and China’s tense economic relations. The move has also been prompted by motivations to diversify investments and a strong yen and a weak domestic economy.
“Japan’s net foreign direct investment (FDI) into the 10-country Association of Southeast Asian Nations (ASEAN) more than doubled last year to a record ¥1.55 trillion ($19.5 billion), data from Japan’s Finance Ministry shows. Japan’s net FDI into China is still rising, jumping 60 percent in 2011 to a record ¥1 trillion.”
The ASEAN composes 600 million people and this too is a justification for continued Japanese investment. As the middle class grows thanks in part to Japanese investment there should be an increased demand for Japanese cars and electronics. Depending on how quickly the ASEAN region grows we should look to see Japan to continue to focus investments in the Southeast. A strong relationship with this region may also be a strategic way to limit China’s strength in Asia.