ABSTRACT
This chapter examines the impacts of Japanese foreign investments on the Japanese economy. The analysis of trade structure shows that the export inducement effect of foreign subsidiaries are more prominent than the export substitution effect or the import effect, and on the whole, Japanese subsidiaries are contributing positively on the balance of trade. Southeast Asian countries have started their export-oriented consumer goods industries during the early 1960s with the help of Japan and Western European multinational companies. Japanese multinationals have achieved price competitiveness without extensive reliance on low-cost offshore assembly operations in electronics sectors. In the United States, Japanese companies are establishing semiconductor assembly and testing facilities in order to reduce the trade friction between Japan and the United States. Many of the Japanese semiconductor firms have pursued a market-oriented assembly strategy to mitigate trade frictions and protectionist pressures within the major foreign markets for Japanese semiconductors.
