Japan reaped record income last year from investments overseas, highlighting one upside to the shift in production offshore that has undercut its economy.
The surplus from direct investment and foreign securities increased 9.7 percent to ¥18.07 trillion (US$152 billion), the biggest in data back to 1985, inflated by a weaker yen and fed by revenue from the world’s largest foreign net asset position, according to the finance ministry.
The buildup of operations by Japanese companies in lower-cost nations and closer to major markets has eroded the country’s industrial base, making the economy less responsive to the more-competitive yen.
Income generated by the shift is more than making up for a merchandise trade deficit, helping Japan finance the world’s heaviest debt burden.
“Japan is becoming a mature creditor nation with growing income from assets abroad,” Mizuho Research Institute’s Tokyo-based economist Takehiro Noguchi said. “The income surplus will continue to be important for Japan as the trade balance is expected to remain in red for a long time.”
Income from direct investment abroad jumped 21 percent to ¥6.5 trillion last year while revenue from foreign securities such as bonds rose 4.3 percent to ¥11 trillion.
At the end of 2013, Japan had ¥325 trillion in foreign net assets, the largest in the world, and added a further ¥18.8 trillion over the following nine months, according to the finance ministry. Japan’s direct investment abroad totaled ¥129.4 trillion at the end of September.
Suntory Holdings Ltd, a closely held whiskey and beer maker, bought Illinois-based Beam Inc for US$16 billion, Japan’s biggest outbound acquisition last year, according to Bloomberg data. Mizkan Group Corp, a condiment maker, purchased a North America pasta sauce business from Uniliver NV for about US$2.15 billion last year.
Nissan Motor Co announced in June that it would build a 1 billion euro (US$1.1 billion) factory in Mexico with Daimler AG to produce luxury vehicles.
Manufacturers produced 21 percent of their total output outside of Japan in the year through March 2013, a ratio that is forecast to rise to almost 26 percent in fiscal 2018, according to a survey of companies by the Cabinet Office.
Japan has poured much of its direct investment into the US, with 30 percent of the outstanding balance located in the world’s largest economy at the end of 2013, according to data from the Japan External Trade Organization.
The pickup in US economic growth contributed to Japan’s income from abroad, Tokyo-based Mizuho Securities Co economist Toru Suehiro said.
“The weak yen was the biggest factor behind the surge in income surplus last year,” SMBC Nikko Securities Inc economist Hiroshi Watanabe said. “The yen will continue to weaken against dollar, helping boost Japan’s income surplus.”
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