“Riding the Japanese Wave”, a Commentary by Malcolm Cook

Commentary 2016/39, 2 August 2016

Three decisions announced this week by three major Japanese services firms in three different Southeast Asia markets signal a new wave of Japanese corporate investment in the region that is far from cresting:

    • Japan’s AEON became the first foreign supermarket chain to directly enter Myanmar after democratization in 2011 opening its first of fourteen joint venture stores on Monday;
    • On the same day, Aozora Bank of Japan announced a partnership with the largest bank by assets in the Philippines, BDO Unibank, to provide mergers and acquisitions advice and services. In January, BDO Unibank and Japan’s Nomura launched a joint venture securities firm in the Philippines.
    • Japanese law firm Mori Hamada & Matsumoto’s Thailand office has agreed to take over the Thai legal firm Chandler & Thong-ek, marking the largest overseas merger by a Japanese law firm;
Japan has long been the largest source of manufacturing foreign direct investment in Southeast Asia, helping to drive economic modernization, industrialization, and globalization in the region. This half century of Japanese manufacturing investment in Southeast Asia has benefitted the investing firms’ market position in the region, assisted their global ambitions, and supported the rise of the Japanese economy to the most diversified and developed one in Asia.

This new wave of services foreign direct investment from Japan to Southeast Asia is being driven by Japan’s economic maturation and stagnation with these firms seeking new markets. Fortunately, for Southeast Asia firms, many Japanese services firms are much larger and globally connected and more technologically and organisationally advanced and have healthy cash reserves. This second wave of Japanese investment comes at a time when many Southeast Asian economies are looking to their cossetted services sectors as new sources of growth and economic rebalancing.

These three deals in three different Southeast Asian markets by three major Japanese firms from three different service sectors show that Southeast Asia is benefitting from Japan’s economic maturation just as the region did from Japan’s post-war economic rise.

Dr Malcolm Cook is Senior Fellow at ISEAS – Yusof Ishak Institute.

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