The depreciation of the yen has made Japanese companies and assets more attractive, accelerating the flow of Korean capital into Japan. South Korea's direct investment in Japan reached a record high in the first half of this year. As domestic companies expand investments in advanced industries such as semiconductors and next-generation energy, local banks are also increasing their lending assets in Japan.
According to the Korea Export-Import Bank's statistics on overseas direct investment, South Korea's direct investment in Japan totaled $2.667 billion in the first half of this year. This amount surpassed last year's total investment of $1.757 billion by $910 million within just six months. The first-half performance alone set a new record for annual investment since statistics began. With the addition of the second half's results, this year's investment is expected to exceed this figure further.
The increase in investment in Japan is linked to the yen's depreciation and changes in the management environment of Japanese companies. The weaker yen has lowered the relative acquisition costs of Japanese companies and assets. With pressures from activist investors and demands for enhanced corporate value on the Tokyo Stock Exchange, Japanese firms are restructuring their cross-shareholdings and non-core businesses, creating more opportunities for mergers and acquisitions (M&A).
Indeed, according to M&A research firm Recof Data, foreign acquisitions of Japanese companies reached 326 cases from January to September this year, a 20% increase compared to the same period last year. The total transaction amount also rose by 40% to 6.2 trillion yen. The yen's depreciation and the restructuring of Japanese companies are driving increased foreign capital interest in the Japanese market.
South Korean companies are also paying attention to Japan's technological capabilities and industrial ecosystem. Samsung Electronics opened an advanced semiconductor packaging research center, the 'Advanced Package Lab (APL),' in Yokohama last month. The company plans to invest 40 billion yen over five years starting in 2024 to collaborate on research and development with local materials, parts, and equipment firms. Posco Holdings, Doosan, Hyundai Motor, and GS Engineering & Construction are participating as strategic investors in the 'Korea-Japan Fusion Fund,' aiming to invest in the Japanese fusion company Kyoto Fusion Engineering.
The economic sectors of both countries are also accelerating cooperation. The Korea Chamber of Commerce and Industry and the Japan Chamber of Commerce and Industry agreed to expand collaboration in future industries such as artificial intelligence (AI), semiconductors, and clean energy during a meeting of their leadership in Sendai, Japan, in August.
In response, the financial sector is also expanding its operations in Japan. As of the end of June this year, the loan balances of three South Korean banks—Shinhan SBJ Bank, Hana Bank's Japan branch, and KB Kookmin Bank's Tokyo branch—totaled 1.9968 trillion yen, nearing 2 trillion yen. This represents a 15.0% increase compared to a year ago. The growth rates for each bank were 24.0% for Hana Bank, 15.6% for KB Kookmin Bank, and 13.8% for Shinhan SBJ Bank, all recording double-digit increases.
A financial sector official stated, "The attractiveness of prices due to the yen's depreciation, combined with the restructuring of Japanese companies and expanded investment opportunities in advanced industries, is leading to increased investment in Japan. We need to monitor how future movements in Japanese interest rates and exchange rates will impact investment flows."
* This article has been translated by AI.
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