Japan Inc. has been on an acquisition spree in the last 5 years. 2013 is set to be another record year. Direct investments abroad between January and August already totaled 9.7 trillion, up 54% from the same period in 2012. Sales generated by overseas subsidiary increasingly make up a greater portion of the total worldwide sales of Japan Inc. For Japanese manufacturers, the overseas subsidiary sales ratio rose to 24% in April-June quarter this year. When we add sales through exports, the overseas sales ratio rises to 39%. For industries such as transportation machinery and general machinery, the overseas sales ratio are already over 50%. We also find that the increase in the sales of overseas subsidiaries are not leading to a shrinkage in exports. Japanese manufacturers are accomplishing globalization without hollowing out its domestic production base.
In this report, we show that Japanese manufacturers have raised their overseas sales ratio from 25% in 1997 to 36% in 2012. Car makers and general machinery makers are the most global, with 55% of sales coming from overseas. Interestingly, the efforts to diversify away from Japan has not resulted in “hollowing out” of their domestic base. Exports remain important as the means to service overseas demand.