Japan: Elevated FDI outflows to continue – Nomura

In view of analysts at Nomura, Japanese corporates keep expanding their operations outside Japan as Nomura’s latest M&A tracking shows net pending M&A outflows from Japan are currently at their largest among major countries.

Key Quotes

“Japanese BoP data also show net FDI outflows from Japan have been consistently high. Net FDI outflows from Japan increased to JPY1378bn ($12.2bn) in August, the largest monthly net outflows in six months. Annualized Japanese FDI has been around JPY15-20trn ($135-180bn) over the past five years.”

“Strong and steady FDI outflows from Japan mean FX market supply and demand from Japanese corporates has shifted to less JPY buying. As oil prices have recovered, Japan’s trade balance is currently largely in balance. Thanks to the income account surplus, Japan’s current account remains firmly in surplus, but the total of the current account surplus and net FDI flows, a proxy for Japanese corporates’ FX demand, is close to balance again.”