Feb 9th - Foreign Investment In Japan Shows 1st Net Outflow In 4 Yrs

Overseas investors pulled out more direct investments from Japan than they put in for the first time in four years in 2010.

Direct investment in Japan by overseas companies and others grew 41% on the year to 4.9 trillion yen, according to preliminary data released Tuesday by the Ministry of Finance. But the amount leaving Japan surged 110% to 5.05 trillion yen, resulting in a net outflow of 144.7 billion yen.

French tiremaker Michelin ended production in Japan as profitability worsened.

Notable investments in Japanese companies last year included Chinese textile maker Shandong Ruyi Science & Technology Group's move to bring Japanese apparel firm Renown Inc. under its umbrella. And Volkswagen AG took a capital stake in Suzuki Motor Corp.

At the same time, foreign firms feeling the effects of the 2008 global financial crisis shuttered or streamlined operations here. French tiremaker Michelin ended production in Japan as profitability worsened after the crisis, while U.S. media company Liberty Global Inc. exited the Japanese market by selling its stake in Jupiter Telecommunications Co.

European and U.S. drugmakers and retailers were also quick to consolidate or close Japanese bases. And a portion of Citigroup Inc.'s sale of Nikko Cordial Securities Inc. is believed to have been included in the 2010 data, boosting the outflow figure.

"Direct investment in Japan is shrinking because of stalled structural reforms in domestic industry," warns Hiromichi Shirakawa, chief economist at Credit Suisse Securities (Japan) Ltd.

Meanwhile, investors whose hopes of Japanese growth are fading on a rapidly graying population and other factors have headed to such greener pastures as emerging countries. Foreign direct investment in China topped 100 billion dollars for the first time in 2010, growing 70% from five years earlier.