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Overseas Investments on the Rise in Japan - 2003-08-22

Japan's Finance Ministry says the country's overseas investment is on the increase. At home, however, unseasonably cool weather has hurt sales of summer products. Those are among the stories in this week's look at Japanese business news.

Japan boosted its overseas direct investment by 11 percent in the last fiscal year compared with the previous year. The Finance Ministry says overseas investment came to $37 billion, led by a rise in overseas shareholdings and openings of local offices. Economists say more Japanese companies are setting up factories in China to take advantage of cheaper labor there.

On the other hand, foreign direct investment in Japan rose four percent, to $18 billion. Merrill Lynch Japan chief economist Jesper Koll says he expects the trend to continue, as the global economy picks up strength.

"Foreign direct investment is going to start to increase into the Japanese economy," he said. "What has been holding back foreign enthusiasm is the hardship that a lot of American and European companies and Asian companies face in their home markets because of the difficult conditions globally."

While investment is heating up, Japan's unusually cool summer is chilling some businesses domestically.

The Japan Franchise Association says sales in convenience stores fell 7.3 percent in July from a year before, because rainy, cool weather softened demand for cold beverages and ice cream. That is a record drop since the association began keeping records five years ago.

The Japanese unit of the U.S. coffee chain Starbucks reports its earnings are cooling. Starbucks Coffee Japan reported that its net profit for the first quarter of the fiscal year plunged 76 percent compared with a year ago, to $380,000. The company attributes the decline to fierce competition that has hurt sales and forced Starbucks to close unprofitable outlets.

Toyota, Japan's largest automaker, is trying to do its part to reduce traffic jams. It is urging employees at its plant and headquarters in Toyota City in central Japan to stop driving to work. Instead, the company is asking its 28,000 staffers to take public transportation.

Toyota acknowledges that the appeal may seem like a contradiction. But a spokesman says the congestion - in no small part due to Toyota employees driving to work - is causing gridlock that can take more than an hour to clear. The automaker this year began offering a free bus service from nearby train stations to its facilities.