Japanese firms set spending record in buying up foreign assets
Japanese corporations will have spent more on foreign companies than they did at the height of the '80s. But few heads are turning, showing how much has changed in perceptions of Japan.
Japanese corporations will have spent more on foreign companies than they did at the height of the '80s. But few heads are turning, showing how much has changed in perceptions of Japan.
In the late 1980s, when聽Mitsubishi Estate bought Rockefeller聽Center and Sony snapped up Columbia Pictures,聽the Western media were full of stories of聽Japan鈥檚 imminent global economic domination. "Japan as No. 1" was a best-seller, and US autoworkers dramatically took sledgehammers to Japanese imports.
But by the end of 2012, Japanese corporations will have bought more foreign companies, spending more in dollar terms, than they did at the height of the '80s bubble economy. No one, however, seems to be taking notice.
The silence speaks to how a country聽as well-known for cute pop culture as for cutting-edge technology 鈥� and which powerful corporations聽once feared as a foreign predator 鈥� is now seen as down on its luck, struggling to recover from disaster. This perception 鈥� along with the fact that foreign takeovers are far more frequent, there are more global powerhouses, and Japanese cars are built around the globe 鈥� has allowed Japanese firms to go on an unprecedented spending spree overseas without any of the backlash seen decades ago.聽
鈥淛apan has gone from being the 'exotic' in the 1960s, to a 'threat' in the 1980s, to just being a part of a rich, cosmopolitan human existence,鈥� says Devin Stewart, senior fellow at the Carnegie Council and former director of the Japan Society in New York. 鈥淧eople learn about聽Japan聽and its culture nowadays because it is an important part of the world as we know it. It's a place people relate to.鈥澛�
In 1990, at the height of the asset bubble in聽Tokyo, "Japan Inc." made 463 acquisitions of foreign firms. This year, the total is set to top 500 for the first time, with a record total spend of more than 7 trillion yen ($83 billion). IT giant Softbank鈥檚 $20 billion takeover of Sprint Nextel Corp., announced in October, will be the biggest foreign takeover ever undertaken by a Japanese company.聽
The acquisitions this time around are spread across a wide range of industries, rather than the trophy buys of prime real estate that unnerved聽America聽during the days of聽Japan鈥檚 roaring bubble economy.
鈥淭here was a slightly indiscriminate hue to Japanese buying in the late '80s, and companies have learned to be more sophisticated, rather than appearing to be carrying around large wads of cash in their back pockets,鈥� says Yuuichiro Nakajima, head of Crimson Phoenix, a cross-border mergers and acquisitions advisory firm with offices in聽Tokyo聽and London.聽
Overlooking a key point
Japan鈥檚 financial institutions, their fingers burned badly by the bursting of the bubble that left them with massive, unrecoverable loans, survived the worldwide crash of 2008 relatively unscathed, having taken a more cautious approach 聽than their Western counterparts. Indeed, it was Japanese investment bank Nomura that bought large chunks of Lehman鈥檚 European and Asian businesses after the bankruptcy of the聽US聽institution in 2008 that triggered the global financial crisis.聽
Commentary on Japan often points disparagingly to its shrinking population and domestic market, the challenges of recovering from the March 2011 earthquake and tsunami, and its enormous national debt, which at well over 200 percent of GDP is outranked globally only by Zimbabwe. However, it鈥檚 often overlooked that the country鈥檚 overseas assets exceed its foreign liabilities by around $3 trillion.聽
鈥淚t seems strange, but聽Japan聽is also the world鈥檚 biggest creditor nation and has acquired very large overseas assets over the past 30 years. It gets a very good return on these, providing income of 14 to 15 trillion yen ($166.5 to $178.5 billion) a year,鈥� points out Masayuki Kichikawa,聽chief聽Japan聽economist at Bank of America Merrill Lynch (BAML) in聽Tokyo.聽鈥淚t is this which helps protect聽Japan聽from financial crisis, despite the huge government debt.鈥澛�
And Japan's activity is often overshadowed as the world fixes its eyes on Japan's giant eastern neighbor. 鈥淚n some ways聽China聽has taken the place of the聽Japan聽of yesteryear: It has huge firepower and is buying across multiple sectors,鈥� suggests Mr. Nakajima. 鈥淎nd, with聽China, many of these buyers are state-owned, bringing into question whether the motivation behind acquisitions is strictly profit.鈥澛�
Yet even聽China, which almost certainly will displace the聽US聽as the world鈥檚 economic powerhouse, doesn鈥檛 evoke the fear聽Japan聽once did.聽
鈥淏ut despite the differences between Japan, which was and is a democratic ally, and China, which is not an ally and is nominally communist, the fear about China today seems tame compared with the hysteria about Japan in the 1980s,鈥� says Mr. Stewart of the Carnegie Council. 鈥淏ack then, Japan聽was 'taking over the world.' Perhaps people are just more sophisticated about the world and know聽China聽faces enormous challenges, as all countries do.鈥�