Japan’s U.S. Investments Hit Record High Amid China Slowdown

Japanese government data revealed that Japan’s foreign direct investment (FDI) in the United States reached a record 11.73 trillion yen ($77.3 billion) in 2024.

The Ministry of Finance reported this as part of Japan’s global outward FDI, which grew 17% year-on-year to 31.63 trillion yen. This marks the highest level since records began in 1996.

This surge highlights a strategic shift by Japanese companies amid rising geopolitical tensions and economic uncertainty in China. The U.S. accounted for nearly 40% of Japan’s total outward FDI, with investments more than doubling over the past decade.

Japanese firms increasingly favor local production in the U.S., spurred by trade policies and tariffs introduced during Donald Trump’s presidency. Despite a weaker yen averaging 151.48 to the dollar in 2024, which increased investment costs, equity capital investments jumped nearly 60%.

This surge in investments drove much of the growth. In contrast, Japan’s net FDI in China stagnated at 493.1 billion yen, a figure down nearly 60% from ten years ago.

Analysts attribute this decline to China’s slowing economy, property market struggles, and heightened geopolitical risks. Takeshi Makita of the Japan Research Institute noted that investment hesitancy toward China has grown since Trump’s administration, when U.S.-China tensions escalated.

Japan’s Economic Pivot

Meanwhile, Japanese investments in ASEAN countries rose by 36% to 4.44 trillion yen, reflecting a pivot toward Southeast Asia. Japan’s current-account surplus hit a record 29.26 trillion yen in 2024. This was driven by an 11% rise in primary income to 40.21 trillion yen.

Trade deficits narrowed for goods and services, while a travel surplus reached an all-time high of 5.9 trillion yen due to increased spending by foreign tourists in Japan. However, a widening digital services deficit of 6.6 trillion yen offset these gains.

Despite robust outward investments, inward FDI to Japan fell by 13% to 2.56 trillion yen, far below its peak of 6.7 trillion yen in 2020. This imbalance underscores challenges Japan faces in attracting foreign capital while its companies look abroad for growth opportunities.

Japan’s record U.S. investments reveal how businesses adapt to global uncertainties. They are prioritizing stable markets and diversifying away from riskier regions like China.

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