The Impact Of Ofdi On Japanese Industry Hollowing Out And Its Causes

Japan is one of the world’s largest outward foreign direct investment (OFDI) countries. Since World War II the scale of its FDI has been expanded and the experience has matured. In1984, the foreign direct investment of Japan has already firstly exceeded10billion dollars and reached10.1billion dollars. In the later1980s, Japan has become the largest foreign investor in the world. However, with the development of Japan’s FDI, Japanese from all walks of life has been questioning the relationship between FDI and the phenomenon "Hollowing-out of Industry". So far there has been three times of discussion about Hollowing-out of Industry in the history. Some scholars even believe that Japan’s outward FDI has directly resulted to the national problem of "Hollowing-out of Industry". What exactly should we consider the relationship between them? What’s the real reason of hollowing out of industry issues? These questions are the focus of this essay which is of great importance to the future trend of Japan’s FDI and economy development.This article is to explore the issue of hollowing out of Japanese industry in the view of FDI. It consists of two main parts. One part is the influence of Japan’s outward FDI on hollowing out of industry; the other is the cause to the hollowing out of industry problem. The essay analyzes the first part in three ways which include the balance of trade, unemployment and the structure of industry. First of all, by comparing the process of industry structure upgrading and industry choices of FDI from Japan, it concludes that outward FDI do promote the upgrade of domestic industrial structure. What’s more, with the data related to foreign trade and FDI, we find that the effect of inducing export is greater than that of substituting export and reverse import. Obviously, Japan’s outward FDI is complementary to its foreign trade. With respect to employment, it turns out to be a fact that many people were out of jobs after analyzing the unemployment rate and employment figure in various industry. However, Japan’s FDI is only the indirect reason of unemployment, rather than the main reason. There are many factors that have contributed to the unemployment issue. The strike by the final disposal of bad credits and lack of consumption demand from home are two main factors. In addition, the imbalance of outward and inward foreign investment should also be blamed. These arguments indicate that outward FDI will not necessarily lead to the problem of "Hollowing-out of Industry". Otherwise any country of large OFDI scale will certainly get this problem.This article analyzes the reason of hollowing out of Japanese industry in two ways. From the view of international industrial transfer, the main reason is flowing out more while flowing in less. As a consequence, the space remained by outward foreign investment couldn’t be filled by this small scale inflows. To be more specific, the imbalanced situation was resulted from long-term recession after the collapse of the bubble economy, the policies released by government to protect domestic industry, the defect of corporate system and higher operation cost. Then from the view of domestic industry structural adjustment, it lies in the lagging behind of service industries and high-tech industry, which consequence couldn’t fill the room leaved by out ward foreign investment. In summary, the shortage of FDI inflows and slow development of high-tech industry have the fundamental force to the industry hollowing problem.