Japan firms spend record amounts in Southeast Asia

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Graphic charting Japan’s investments in Southeast Asia. Japanese firms have spent a record amount scooping up assets in the region this year, new data show.

TOKYO—Japanese firms have spent record amounts scooping up assets in Southeast Asia this year, part of a trend that has seen Tokyo moving to boost its presence in the fast-growing region and away from China.

As Japan’s Prime Minister Shinzo Abe leaves Thursday for a three-day trip to some of the region’s biggest economies to tap an expanding middle class, figures show Japanese firms have already this year spend more on mergers and acquisitions than ever before.

Rising wages in China and a Tokyo-Beijing territorial dispute that has infected bilateral trade has also taken the sheen off the world’s number-two economy as an investment destination, analysts say.

Japanese firms have spent a staggering $8.2 billion on M&A in Southeast Asia so far in 2013, already a record with five months to go and well above the $614 million at the same point in 2012, data provider Dealogic said.

The figure easily outstrips the previous full-year best of $7.6 billion in 2006, it added.

Two deals helped inflate this year’s figure: Mitsubishi UFJ’s $5.6 billion bid earlier this month for Thailand’s Bank of Ayudhya and Sumitomo Mitsui Banking Corp.’s agreement to buy a 40 percent stake in Indonesia’s PT Bank Tabungan Pensiunan Nasional for about $1.5 billion.

But Japan also took top spot in terms of the overall volume of such regional agreements, followed closely by Thai and Singaporean firms, said Dealogic, which counts deals in its data from the moment they are announced.

Searching for other investment areas

The Thai bank tie-up comes after Japan’s largest lender said it had agreed to buy a 20 percent stake in state-owned VietinBank for about $743 million, the largest-ever foreign investment in Vietnam’s banking sector.

Toyota has said a new $230 million plant in Indonesia will start producing vehicle engines by 2016, among a string of investments in the region by the world’s biggest automaker.

“Japanese companies have been searching for places to invest in addition to China,” said Toru Nishihama, economist at Dai-Ichi Life Research Institute. “This trend is likely to continue for the next five to ten years.”

The ramped-up shopping spree has come even as the yen has weakened against the dollar since late last year—owing to a big-spending plan by Abe to kickstart the economy—making overseas deals relatively more expensive for Japanese firms.

The 58-year-old premier’s three-day tour to Malaysia, Singapore and the Philippines is the latest of several trips he has made with business leaders since coming to power in December that aim to drum up new deals.

In May, Abe announced a development aid and loan package for Myanmar worth hundreds of millions of dollars as it boosts trade ties with the once-isolated nation, which has ushered in a raft of political reforms.

Japan also agreed to cancel about $1.8 billion of Myanmar’s debts during a visit by Abe. He was accompanied by a 40-strong delegation of bosses from some of Japan’s top companies.

“The Japanese government is very proactive about it,” Nishihama said. “It has become enticing for Japanese businesses to invest in Southeast Asia, with government-affiliated financial institutions.”

Tensions with S. Korea, China

Tokyo’s shift in focus comes amid tight diplomatic tensions with neighbors and key trade partners South Korea and China, where a jump in wages has pushed up foreign firms’ costs and made it a less appealing place to set up shop.

Relations have been frayed as Abe mused about watering down Japan’s apology over wartime aggression while territorial disputes also tested nerves.

Last year, a long-running row with China flared over an island chain in the East China Sea, setting off a consumer boycott of Japanese brands in China, a major export market.

Hundreds of Japanese firms also have plants in China, including major automakers such as Toyota and Nissan, and the dispute hurt firms’ view of the country.

Nissan chief Carlos Ghosn last year warned that the Japanese automaker—the most dependent on China among Japan’s big three—would think twice about investing more in the country, where it already has several plants.

“Certainly beyond what we have decided, before going for further decisions in China, we will be very careful in assessing how much of an impact (the political situation) has on consumers’ minds,” Nissan’s top executive told the Financial Times newspaper in October.—Hiroshi Hiyama

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  • dikoy321

    s from Germany:

    KEEP UP complaints when LGU (mayors, governors, local officials etc.) officials DELAY PROACTIVE processes that ENHANCE the Nation’s well-being!

    Just like in Basketball, P-Noy cannot do everything ALONE !

    Heard about a German NGO who wanted to DONATE Solar Power, a complete Set, to a Philippine NGO, and could NOT do so?

    When VP Binay was asked during his Germany visit, he could NOT understand WHY the Donation was in LIMBO, FROZEN, although it was FREE !???

    Blame could rest upon LGU local officials : no CUT, no Honey in their pockets, No Donation, NO Transaction !

    How IDIOTIC, but TRUE !

    All of US must BEGIN to CHANGE for the BETTER, if we WANT to PROGRESS and CATCH-UP with our Asian neighbors !

    Forward Philippines !!!

  • sigena

    baka sa pilipinas dinadala yung mga junk ng toyota

  • Ulipur

    Very sad….no mention of any Japaanese investments in the Philippines. Japanese favorite is Thailand.

    • Meow Ming

      Abe will be in PH this friday. Maybe he will bring with him some investors imn PH.

      • delpillar

        Yes, a lot of businessmen will be with PM Abe’s party as reported by Nikkei-Shimbun (NIKKEI NEWS BUREAU).

        Japan’s government Airforce-one airplane is also a Boeing 747-400. It has a lot of capacity for Japanese officials and businessmen.

    • ThudOthwacker

      Fuji will be setting up their lens manufacturing here.

    • delpillar

      Canon, Fuji, Epson, Yokohama Tires will either expand or put new factory locations here in the Philippines.

      For printer, for example, there are rotating shaft, motors, metal plates etcetera inside it. So the supplier of Canon and Epson printer maker in Japan (SMALL-SCALE metal foundry and machining and molding company based in Japan) will also build small subsidiary in the Philippines or even will make a foundry and machining and molding company itself.

      The Printers and Camera, like multi-function printer with scanners and LAN/Wi-Fi connectivity are run by System-On-Chips software/Programs. So these companies will hire programmers from Low-level (Machine-Language), Printer Driver Programmer for different OSes, Middle-ware/Installer and even developer software like C++/Java. So they will hire several Filipino IT and Software programmers and engineers too.

      Sometimes, programmers of System-On-Chips for Japanese hardware makers like Epson Canon in Japan came from other 3rd party companies like small software company or small System Integrator Companies in Japan. So these Japanese system integrator companies in Japan will create company branch in the Philippines.

    • MShaf

      Thailand and Indonesia offer good infrastructures, allow 100% foreign equity for most manufacturing, cheaper labour costs and has really cut a lot of investment red tapes decades ago.

      PH with 95m population could easily duplicate that. PNoy has his plan. Hopefully this will be Japan-version of pivot to ASEAN (security and economic wise) as Japan used to be in the 70s to 90s. ASEAN as a whole will surely benefit.

      • sigena

        pag si pnoy nag plano, hanggang plano lang yan sa dyaryo

      • Tommy

        The Philippines allows 100% foreign equity for ‘most manufacturing’ as well. AFAIK, the only manufacturing work tha is restricted is the production of weapons that need to be PNP or DND regulated.

    • NoWorryBHappy

      And we wonder why the Philippines is lagging behind.
      Many of us are pessimists who EMPHASIZE what WAS NOT rather than what we can be. Jealousy can be a virtue when propelled in the right direction.
      Dapat ang reaksiyon ay: Mas gagalingan pa natin ang pagpatalsik sa mga mangungurakot para mapalinis ang ngalan ng Pinas.
      :
      Remember: “It has become enticing for Japanese businesses to invest in Southeast Asia, with GOVERNMENT-AFFILIATED financial institutions.”
      You cannot just clean a name that’s been attached to corruption for more than four decades.

    • Tommy

      The article is mostly about M&A though, with a bit about investment.

      It specifically mentions two bank bids, but at the end of the day a bank changing owners doesn’t really create any jobs (extra investment aside). If a Japanese conglomerate bought BPI, would it REALLY change much?

      OTOH, factory building (which IS happening in the PH) tends to create several stable jobs and improve the country’s manufacturing base.

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