ABSTRACT
The Japanese trade structure has been changing consider- ably with the increased imports of manufactured products and increased exports of capital goods. Trade with locally incorporated enterprises through direct investments is considered to be the important factor of this change in the trade structure. The distortions caused by foreign investments on domestic production, however, are significant. Investments in plant and machinery made by Japan in foreign ventures were a large part of the total domestic activity. Japanese exports will decline because of substitutions of Japanese exports by the products of the foreign operations of Japanese multinationals. Investments by the Japanese electrical industry, both in the Asian newly industrializing economies and in Association of South East Asian Nations, account for a little less than 30 percent of the total manufacturing investments of Japanese origin. Multinational corporations within Consumer Electronics industry, mainly from Japan, have made direct investments to avoid tariffs and other barriers to exports.
