The Success of Japanese Foreign Market Investments in Hungary

This study examines the recent history and current state of a special area of Japanese-Hungarian economic relations, foreign direct investments (FDI) in Hungary. We reviewed the flow of Japanese capital into Hungary. Foreign direct capital investments can improve productivity on the one hand via technology transfer, and one the other hand, they may have further positive effects through corporate relationships, such as market access or improved financing conditions. Through these means, they strengthen economic growth. When analyzing the data on the historical development of Japanese investment, we showed that the automotive industry plays a dominant role. Based on our results, the influx of Japanese FDI into the Hungarian economy is mutually advantageous to both parties. The most important result for Hungary was economic growth and for Japan, the easier access to the EU markets. Japanese-Hungarian relations are not limited to economic cooperation, they are present in everyday life and continue to grow closer.

Impact of Foreign Exchange Administration Rule on the Nexus between Country-Specific FDI and Malaysian Currency

In the aftermath of the US Presidential election on 8 November 2016, the Malaysian currency Ringgit (MYR) had witnessed unprecedented volatility in its value relative to the USD. As a policy response, Bank Negara Malaysia (BNM) implemented a Supplemental Foreign Exchange Administration (SFEA) Rule in December 2016. Exporters are required to convert 75 per cent of foreign currency proceeds from the exports of goods into MYR with a licensed onshore bank. This study evaluates the impact of the new SFEA Rule on the relationship between country-specific FDI and MYR. Based on the data of five major inward FDI countries from 2015 to 2018, our results show: Firstly, Japanese FDI strengthens MYR in post-SFEA Rule; Secondly, FDI from Singapore is found to exert downward pressure on MYR; Thirdly, FDI from China, the Netherlands and the US are insignificant in influencing the MYR; Finally, inward FDI from different countries responds differently to the Rule. Notably, the results obtained are robust to different measures of the exchange rate. On policy suggestion, the Foreign Exchange Rule should also target non-export oriented inward FDIs to achieve the policy target. The result also highlights the importance of export-oriented FDIs for the long-run benefit of the Malaysian economy.

Foreign Direct Investment in Japan: Growth, Trends, and Policy Efforts

For decades, Japanese outward foreign direct investment has exceeded the flow of foreign capital into the country. Policies and regulations restricted inward investment, while the foreign earnings of Japanese companies were recycled into investment abroad. Today, official policy has reversed to try to encourage greater inflows, but Japan does not attract much FDI. Following an overview of the trends of Japanese FDI, this chapter surveys the considerable official efforts to protect the interests of Japanese multinational firms abroad, particularly in the form of investment chapters in trade agreements and free-standing international investment agreements. It then analyzes recent attempts at reducing barriers to inward investment in Japan under Abenomics. Much suggests that these efforts do not spur on significant inflows. The conundrum of the Japanese government may be that the policy regime cannot by itself counter the diminishing economic attractiveness of Japan for foreign firms.

The Local Labor Market Effects of Korean Automotive Investments in the United States

This study investigates the local labor market effects of automotive foreign direct investment (FDI) in Alabama in the wake of the North American Free Trade Agreement (NAFTA). Of particular interest is the effect of FDI originating from a nontraditional source country in comparison to investments by European and Japanese firms. Using 2005–2011 American Community Survey (ACS) data, we compare changes in employment rates and median weekly wages in three area types: areas with Korean FDI, areas with German and Japanese FDI and areas without FDI. Results show that Korean FDI leads to increased employment rates but decreased median weekly wages. We attribute these findings to price competitive strategies of Korean firms.

Revisiting Complementarity between Japanese FDI and the Import of Intermediate Goods: Agglomeration Effects and Parent-firm Heterogeneity

This study revisits the nexus between foreign direct investment (FDI) and international trade in the dynamic perspective, focusing on intermediate goods imports of affiliates of Japanese firms operating in China. To examine the effect of the formation of the agglomeration and the recent FDI made by small firms, both of which have been overlooked in the literature, we construct a unique parent-affiliate matched panel data set of trade in intermediate goods, and estimate a discrete-time hazard model over the 2000–06 period. We found that affiliates owned by firms in agglomerated regions in Japan have a shorter duration of trade in intermediate goods compared with affiliates owned by smaller Japanese firms.

The Determinations of East Asia’s Automobile Trade Using a Gravity Model

The aim of this study is to investigate empirically the factors that determine the level of automobile trade in East Asian countries by taking into account government policies as well as the role of MNEs. To do so, in this study we include dummies of import substitution industrialisation (ISI) and export orientation industrialisation (EOI) policies as well as Japanese FDI as additional explanatory variables in our augmented gravity models. We found that GDPs, distance, per capita income, FTA, government policies, language and FDI are the determinants for the development of automobile industry in each country in East Asia. In the case of auto P&C, apart from economic size, the role of government through trade policy (i.e., FTA) and industrial policies as well as the role of MNCs are the major contributors to the development both exports and imports of East Asian countries. In the case of final automobiles, the role of FTA and language seems to be unimportant. Nonetheless, the role of government policies and MNCs seem to be important.