Japan's Great Investment Wave

Session Context and Scope:

• The panel focuses on mobilizing Japan's "sleeping capital," specifically 9 trillion yen in household deposits and 6 trillion yen in corporate retained earnings, which remain underutilized despite negative interest rates.
• The discussion is bifurcated into inbound investment (attracting foreign capital) and outbound investment (directing Japanese capital abroad).

Mobilization of Domestic Capital (FSA & Regulators):

• Hironori Sasaki (FSA) notes that individual savings accounts (tax-exempt) have seen significant uptake, and the Corporate Governance Code and Stewardship Code are being revised to pressure companies for growth.
• Sasaki identifies Toshiba as a case study where globalization and weak oversight of overseas subsidiaries led to financial fraud, prompting a shift toward proactive, macro-level market oversight.
• Regulators are prioritizing "substantive effectiveness" of governance over mere formality, such as the presence of independent directors.

Private Sector Mobilization and Corporate Governance:

• Yasuhiro Shibata (Nikko Asset Management) highlights that Japanese asset managers are increasingly global, with 100 non-Japanese passport holders among 500 Tokyo employees.
• Shibata identifies reinvestment risk due to negative interest rates on maturing government bonds as a primary driver for Japanese insurers and banks to seek international assets.
• Shibata notes the absence of family offices in Japan due to high inheritance taxes (55% on estates over $80 million), which limits private wealth diversification compared to the West.
• Steve Tsang (All-Import Airways) states he is "maximum bullish on Japan," citing the tourism boom (from 6.8 million visitors in 2012 to over 24 million in 2016) and the success of low-cost carriers like Peach Aviation (6 million passengers, 65% young females).

Geopolitics and Investment Security:

• Kenji Nakayama (LDP) emphasizes that political stability and the US-Japan alliance are the primary trust factors for foreign investment.
• Nakayama frames the North Korea situation as a "can of worms" but suggests that potential bilateral talks between the US and North Korea could create a new stage for regional peace.
• Nakayama asserts that Japan offers a transparent legal system (e.g., arresting former leaders) which serves as a unique value proposition for international investors compared to single-party states.

Inbound Investment Opportunities and Demographic Challenges:

• Tsang identifies 8 million empty houses in rural Japan as a prime target for foreign investment, particularly for tourism revitalization and VR-based property showcases.
• Shibata highlights a critical shortage of hotels in Tokyo and Kyoto, noting that 3% of the total cost of an Integrated Resort (IR) must be dedicated to casino components.
• Shibata points to the aging population as a dual opportunity for medical technology, robotics, and the "silver industry," citing GE's decision to establish an R&D facility in Japan for medical equipment.
• Government Policy includes the introduction of work visas for foreign home helpers, nurses, and caregivers to address labor shortages, though the term "immigration" is officially avoided.

Outbound Investment Trends:

• Shibata observes that Japanese corporations are shifting investment from China to Southeast Asia due to rising costs in China.
• Shibata notes a "maturity mismatch" where short-duration Japanese funds cannot easily support long-term infrastructure projects, suggesting a need for tax incentives to extend investment horizons.
• Sasaki clarifies that the government does not mandate specific outbound destinations but encourages global allocation to ensure domestic financial assets generate returns for future generations.

International Relations and Specific Markets:

• Tsang promotes Hong Kong as a tax-efficient conduit for investing in Japan, citing capital gains tax reciprocity and shared rule-of-law standards.
• Tsang forecasts that Chinese tourism to Japan will continue to grow at 25-30% year-on-year, despite political tensions, due to proximity and visa policies.
• Panel Response to Mozambique Inquiry: Japan plans to accelerate investment in Africa via the Tokyo International Conference for African Development (TICAD), leveraging resources and technology from companies like Panasonic and Sony, with further engagement expected at Expo 2025 in Osaka.

Forward-Looking Statements and Commitments:

• Masayoshi Son (referenced by the Chair) has committed to investing at least $50 billion into US infrastructure, technologies, and SMEs.
• FSA aims to continue revising corporate governance codes to prevent future misconduct similar to the Toshiba scandal.
• Japan plans to allow foreign nurses and caregivers to enter starting this year, following the 2023 allowance for foreign home helpers.