*EPF305 07/19/00
Text: State Department July 18 on Japan's Investment Climate
(Joint U.S.-Japan report presents views of business leaders) (670)

The U.S. Department of State and the Japanese Ministry of International Trade and Industry (MITI) released on July 18 a summary report they jointly submitted to the President and Prime Minister regarding the environment for foreign direct investment (FDI) in Japan. The document presented the views of U.S. and Japanese business leaders, who applauded the successful legislative and regulatory changes recently undertaken in Japan but called for further measures to improve Japan's climate for foreign investment.

In a statement released the same day, State Department Deputy Spokesman Philip Reeker said that despite some increases, "Japan experiences levels of foreign investment among the lowest of developed economies."

Following is the text of the statement:

(begin text)

U.S. DEPARTMENT OF STATE
Office of the Spokesman

July 18, 2000

STATEMENT BY PHILIP T. REEKER, DEPUTY SPOKESMAN

Improving Japan's Investment Climate -- The Views of U.S. and Japanese Business

A Summary Report to the President and Prime Minister from the U.S. Department of State and Japan's Ministry of International Trade and Industry

The U.S. Department of State and the Japanese Ministry of International Trade and Industry (MITI) today released a summary report they jointly submitted to the President and Prime Minister regarding the environment for foreign direct investment (FDI) in Japan. The document presented the views of U.S. and Japanese business leaders, who applauded the successful legislative and regulatory changes recently undertaken in Japan but called for further measures to improve Japan's climate for foreign investment. The U.S. business community, in particular, sees an increased U.S. presence in Japan as a necessary platform for boosting the sales of U.S. goods and services to the Japanese market.

More than thirty U.S. and Japanese business leaders and government representatives made the suggestions in Tokyo at a March conference jointly sponsored by the State Department and MITI entitled "Investment-in-Japan Symposium 2000." The business leaders from both countries were virtually unanimous in their calls for Japan to implement greater regulatory transparency, better corporate governance and accountability to shareholders, the liberalization of professional services, and a comprehensive review of tax policies, including the need for a newly-negotiated U.S.-Japan Tax Treaty. More than five hundred people attended the conference, co-sponsored by the American Chamber of Commerce in Japan and the Japan External Trade Organization.

Foreign direct investment in Japan has grown very rapidly in the last three years, mostly owing to the "Big Bang" reforms in financial regulations, improvements in the climate for mergers and acquisition (M&A) and changing Japanese attitudes toward the presence of foreign firms. FDI in Japanese fiscal year 1998 was double that of Japan Fiscal Year 1997, and Japan Fiscal Year 1999 saw another 79% growth. Despite this increase, Japan experiences levels of foreign investment among the lowest of developed economies.

The governments of both the United States and Japan recognize that more efficiently-functioning capital, land and labor markets for domestic and foreign firms will be critical to fostering sustained economic recovery in Japan -- a necessary precondition for spurring growth of Japanese imports of foreign goods. In his opening remarks for the conference, U.S. Ambassador to Japan Thomas S. Foley noted, "In the global economy, there is neither foreign investment, nor domestic investment -- there is only investment. The challenges facing a Japanese firm trying to restructure are the same ones confronting foreign firms trying to invest."

Business leaders speaking at the conference made more than twenty specific proposals for change, which are enumerated in the jointly drafted summary for the President and Prime Minister and spelled out in more detail in an annex reporting the symposium's findings. They also praised significant improvements over the last year in Japan's laws and regulations regarding bankruptcy, accounting, corporate restructuring and labor mobility, which are now facilitating an unprecedented restructuring of the Japanese economy.

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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