Unipolar concentration in Tokyo
The spread of Japanese corporate investment around the world was an important factor in the emergence of Tokyo as one of the financial capitals of the world, as an increasingly sophisticated financial services industry emerged to service the far-flung web of overseas corporate investment. The second pillar of Tokyo’s financial strength arose from steadily increasing Japanese trade surpluses which were recycled primarily into American government treasury bonds, thus indirectly financing the increasing American trade deficits, and directly financing the growing federal fiscal deficits resulting from the Reagan tax cuts and military build up. Japan’s shift in role during the 1980s from a country whose economy and financial system was largely internally focused, albeit with an important export surplus, to one that was increasingly linked into the global capital and financial markets is illustrated by its changing investment profile. In the late 1970s, “Japanese investors accounted for only 6 per cent of direct investment outflows from the major industrial nations, 2 per cent of equities outflows, 15 per cent of bond outflows, and 12 per cent of short-term bank outflows. By the late 1980s, these figures had swollen to 20 per cent of international foreign direct investment, 25 per cent of equities, 55 per cent of bonds, and 50 per cent of short-term bank loans” (Pempel 1998: 147). The majority of Japanese international financial and management activity was carried out from Tokyo, directly resulting in the emergence of Tokyo as one of the command and control centres of the world economy, one of the top three “global cities” along with New York and London (Sassen 1991).