US becomes Japan’s investment destination instead of China

Japanese companies are increasing investments in the US to tap into robust consumer spending, shifting focus from China, Nikkie reported on Sunday.

The US-Japan summit will discuss subsidies for key goods like semiconductors, potentially widening the investment gap between the US and China.

In 2023, Japanese direct investment in the US reached $63.5 billion, maintaining high levels from the year before.

The total stock of Japanese investment in the US stood at $696.5 billion in 2022, five times higher than in China.

Notable recent investments by Japanese companies in the US include Sekisui House’s acquisition of MDC Holdings and Daiwa House Industry’s expansion in the southern US Nissin Foods Holdings and Yakult Honsha are also increasing their presence in the US market.

With consumer spending accounting for 70 per cent of US GDP, Japanese companies are targeting the US for growth opportunities.

The Biden administration’s push for domestic manufacturing has further encouraged Japanese investment, particularly in sectors like electric vehicles and renewable energy.

Companies in industries such as electric vehicles and renewable energy must establish local supply chains to be eligible for US incentives, which are crucial for maintaining competitiveness.

Toyota Motor recently announced an additional $8 billion investment in US automotive battery production, on top of the $5 billion already allocated.

Despite challenges such as lower returns compared to China, Japanese companies see the US as a more stable and attractive investment destination.

However, political risks, like opposition to acquisitions, remain a concern for companies like Nippon Steel.