Japan is “Invested” in America
An excited crowd and thousands of online viewers watched as the presidents of two of Japan’s largest manufacturers took the stage in Alabama earlier this month. There they joined Governor Kay Ivey to make their highly anticipated announcement: Huntsville will be the home of “Project New World,” Mazda and Toyota’s $1.6 billion joint project, which will create over 4,000 new jobs.
Even though 6,700 miles of land and sea separate Tokyo and Huntsville, this southern city will become the latest anchor point tying the economies of Japan and the US ever closer. Thanks to a relationship based on shared values, Japan was the top international creator of US jobs in 2017, cementing Japan’s place as America’s Number 1 partner in the Indo-Pacific region.
Japanese Cars, American Jobs
“I think if you told me about the Alabama project in the 80’s, I just plain wouldn’t have believed you!” said Japanese Ambassador Kenichiro Sasae. He has watched for decades as the Japan-US trade relationship in the automotive sector has moved from outright hostility to cooperation, and participated in the critical negotiations that put ties back on track.
“Beyond the Alliance, there’s always been an opportunity for trade between Japan and the US based on both countries’ market-based economies and commitment to the rule of law. I was always hopeful about our ability to find a way forward, but it is still amazing to see so many Japan-brand cars on the road that I know were built by Americans.”
To produce those cars, In 2016 alone, Japanese auto manufacturers purchased nearly $70 billion of US-made auto parts. In total, through their integration with the US-based automotive supply chain, Japanese auto manufacturers already support 1.5 Million American jobs, and new investments like the Huntsville, Alabama facility promise to further grow that number. For example, in 2017 Toyota committed to investing $10 billion in new manufacturing capacity over the next 5 years in places like Kentucky, Texas and Indiana. And that $10 billion would be about the same as their investments in the 5 years before that!
CSIS’s Scott Miller describes the potent mixture of technical know-how by Japanese companies with the talented and skilled American workforce and writes that “the 35-year history of U.S. investment by Japan’s automakers is, first and foremost, a story of the mutual gains from exchange.” Thanks to a deep commitment to growing these investments, the mutual benefits in global competitiveness for both countries will continue well into the future.
New Heights for Japan-US Trade Ties
While impressive, the automotive sector only represents about a quarter of Japan’s investments in the US: Between 2003 and 2015, Japanese firms announced more than 1,400 separate projects across the US, and last year cumulative Foreign Direct Investment (FDI) reached a new high of $424 Billion.
“Sometimes it’s actually difficult to keep track of all the new announcements” jokes Economic Minister Junichiro Kuroda. “2017 was a remarkable year, and it was great to see the details from the over 100 promising partnerships and projects that were put forward in so many different areas. And I expect that momentum to continue in 2018!”
Investments by Japanese firms include new facilities, like the 4.1 million-square-foot manufacturing facility Daikin Industries just built outside of Houston, Texas. It is the second-largest air conditioning factory in the US and will employ an estimated 3,000 workers.
Other investments will go towards expanding US-based operations, as Denso is doing with the $1 billion expansion of their advanced manufacturing facility in Maryville, Tennessee, which will create an estimated 1,000 further production and support jobs.
Importantly, growing trade ties flow in both directions: Japan is also a “Top 10” export destination for most US states. And tourists from Japan contribute an additional $17 billion/year to the US economy, while Japanese students studying at schools in the US contribute $600 million annually.
International Investment: A Cornerstone of Abenomics
The Government of Japan has made increasing trade with countries around the world one of the keys to its plans to bolster Japan’s economic growth. Japan is advocating for the construction of rules-based international trade relationships, bringing its world class high speed rail infrastructure to new locations, and bolstering its own tourism offerings. In addition, investment forums are being held around the world and in the US, to spur new business opportunities.
“ We are resolved to continue building trade and investment ties, as economics is just as critical of an issue to us as defense and other challenges,” says Ambassador Sasae. “I am confident that Japan will continue to make great contributions to communities across the United States, and the United States will continue to be a key part of Japan’s growth strategy.”
