Japanese foreign direct investment to Australia : an assessment of current performance, causes, and prospects

This paper examines Japanese foreign direct investment (FDI) in Australia in its historical continuity and change and postulates on the underlying factors. For research methods, it resorts to archival sources and qualitative induction and deduction logic. Findings suggests that there are four driving forces, namely, severe scarcity of manufacturing inputs, high cost of labour, accumulation of surplus funds for investment abroad, and firm-specific and internally created management resources in Japan have propelled its FDI to Australia. In addition to these imperatives in Japan, Australia’s three sets of national advantages, namely, the advantage or resource endowments, created and nurtured advantage of an affluent domestic market, and the advantage from its historical role in promoting globalization, have attracted Japanese FDI. Especially, these national favourable conditions have enticed the market and resource-seeking Japanese multinational corporations (MNCs) to select Australia for direct investment and other business operations. Japan’s trade frictions with the USA and other developed countries, instability in its resource procurement sources, and imperfections in its domestic labour and capital markets further drove its MNCs to invest in Australia. Australia, on the other hand, embraced Japanese FDI and MNCs since these were stable in nature and promising for a continued business and economic engagement. Australia also finds Japan as a partner for promoting and harvesting additional benefits from business and economic globalisation in the Asia-Pacific region, where Japan plays a significant role. Both countries’ strengths, weaknesses, and national interest work centripetally and centrifugally to benefit from their mutual engagement and advantage.