Japan Needs to Diversify Overseas Investment

Tokyo, May 19 (Jiji Press)--Japan's current account statistics for fiscal 2008 show that the country needs to change the structure of its overseas investment to make it a reliable driving force for national prosperity.

Since fiscal 2005, Japan's annual income account surplus has
surpassed its trade surplus, meaning that returns on overseas investments
make up the greater part of the current account surplus.
The current account surplus in the year that ended in March tumbled
50.2 pct from the previous year to 12,229.1 billion yen, the first drop in
seven years, according to Finance Ministry data released last week.
An income account surplus amounting to 14,559.3 billion yen kept
Japan from slipping into a current account deficit, while the merchandise
trade surplus nose-dived 90.0 pct to a record low of 1,170.4 billion yen
amid the global economic downturn.
Despite the large income account surplus, Japan's overseas
investment showed a lack of geographical diversification, with two-thirds of
surplus coming from investments in the United States and Europe.
In fiscal 2008, the income account surplus fell 13.1 pct, the first
decline in six years, due to the global financial crisis.
A breakdown reveals that income from foreign direct investment,
such as dividend income from subsidiaries, was almost unchanged, but that
falling interest rates across the globe squeezed returns on foreign
securities investment.
Many experts agree that Japan needs to step up its foreign direct
investment, which tends to generate higher returns, and to allocate more
funds to Asia in order to rectify the geographical imbalance.
Finance Ministry figures show that securities such as U.S. Treasury
securities account for about 40 pct of Japan's overseas net assets totaling
an estimated 244 trillion yen at the end of 2008.
Tatsuhiko Yoshizaki, deputy chief of the Sojitsu Research
Institute, says Japan has scope to boost returns on overseas investment if
it invests more on natural resource businesses such as oil field development
and raises the share of direct investment. Along with the challenges on
the investment front, Japan also faces the urgent task of revitalizing
exports to increase its trade surplus. Export earnings, such as those from
automobiles and electronics, have financed the country's foreign investment
and purchases of energy including crude oil from abroad.
To reinvigorate its exports, Japan's lineup of items for sale
overseas needs to include more products with new kinds of added value, such
as environment friendliness, a former Finance Ministry official says.