ABSTRACT
Long-term capital outflows declined because outflows of portfolio investments declined as the increased liabilities far exceeded increased assets. The portfolio investments in the United States made by Japan were fluctuating in relation to the changes in the interest rate differentials with a lag of either one or two years. There were substantial net inflows of portfolio investment from the European Union despite higher German real interest rates. The major part of Japanese investments in Europe was in the nonmanufacturing sector accounting for 73 percent in cumulative foreign investments made by Japan, whereas the manufacturing sector’s share was only 23.9 percent. In the manufacturing sector, the major fields for Japanese investments were chemicals, electronics, and electrical appliances and machinery, and general machinery. However, a world resource glut and development obstacles in many African countries will inhibit significant future investments.
