Reinventing Corporate Japan

The deals and sales offered during this year’s holiday season captured us all, but companies have been shopping as well. In fact, Japan’s multinational corporations seem to have gone on global shopping spree. This past year, Japanese companies spent a record $80 billion on approximately 620 foreign companies. These international investments could be seen as not only a sign of economic strength, but also as an indication of domestic weakness.

Many factors have contributed to Japanese companies acquiring foreign firms and brands. After a tsunami, an earthquake, and several radiation scares, profits from production and exports have taken a beating. Furthermore, an aging population and sluggish economy have decreased consumption. But because of economic crisis in other countries, the yen has actually appreciated in value.

The economic meltdown in the Recession of 2008 have made companies everywhere very affordable in the global market. Japanese corporations, after more than a decade of economic stagnation in Japan and conservative spending, have healthy cash reserves that are more valuable than ever before. This, combined with the low valuation of attractive targets and high value of yen, has provided an ideal back ground for the current policy of acquisition.

The rise of China and the displacement of Japan as the second largest economy in the world have the Japanese thinking on ways to maintain their financial status in a world where emerging markets like the BRIC countries are pushing Japan further down. This has left the Japanese pondering as to how they can stay relevant and competitive across many industry segments in a global market.

Cultural integration is the key to success in a global economy for Japanese companies, especially when domestic demand is expected to be much slower than the possibility of growing exports in emerging markets. The current shopping spree for these corporations could well provide the impetus for growth and trigger a more integrated marketplace in the future. These are truly encouraging signals from the sleeping giants of Japan since growth is the key to sustained success, keeping companies honest and the investors interested.