Japan sets new FDI target of ¥120 trillion as economy faces demographic challenges

WEB DESK: Japan plans to raise its incoming foreign direct investment target to ¥120 trillion ($840 billion) by 2030, aiming to attract more overseas capital to help revitalise struggling regional economies and address labour shortages.

The government will revise up the current ¥100 trillion goal by 20 percent according to a programme released by a panel overseeing the matter on Monday. The plan also outlines a longer-term objective of ¥150 trillion in foreign investment in the early 2030s.

The updated targets will be reflected in the government’s forthcoming fiscal and economic policy guidelines, schedules for release later this month.

The revision comes as Japan increasingly looks to foreign investment to sustain economic growth amid demographic headwinds and declining regional industries. Facing these mounting challenges, the country has slipped down the global ranks of gross domestic product. Japan was surpassed by Germany in 2023 and is projected to be overtaken by India soon as the world’s fourth-largest economy.

As of 2024, Japan’s total FDI stood at ¥53.3 trillion, more than doubled the level a decade ago. This increase has been fuelled in part by major investments such as Taiwan Semiconductor Manufacturing Co.’s facility in Kumamoto and Micron Technology Inc.’s expansion in Hiroshima in recent years.

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Still, foreign direct investment accounted for only 5.89 percent of the nation’s GDP in 2023, ranking among the lowest in the world. Japan has tended to lag on incoming FDI due to impediments ranging from perceptions of weak corporate governance to rigid labour laws.

The plan released Monday said the government would consider revisiting related tax systems and law in order to make the nation more accessible for foreign investors and businesses. Tokyo would also promote utilization of unused land and help develop infrastructure at potential investment sites.

The government plans to support foreign companies’ capital investment in key industries, including artificial intelligence, semiconductors and data centres, the programme showed. It will also ramp up efforts to connect domestic companies with international investors and startups interested in entering Japanese market or forming partnerships.