Japanese Investment in Africa

Japan's newest aid and investment in Africa suggests it is redoubling its focus on South and East African nations that border the Indian Ocean. In these countries, it not only runs trade surpluses and sees signs of new resources coming to market but also sees its private companies getting more heavily involved in manufacturing and construction. Prime Minister Shinzo Abe started 2014 with a visit to Ivory Coast, Mozambique and Ethiopia, where he promised aid and investment for security, energy and infrastructure. This trip followed his administration's pledge of $32 billion in new aid, investment and loans for 2013-2017 -- well above the $9 billion in aid and the decrease in direct investment stock between 2008 and 2012. Of these newly pledged funds, 44 percent ($14 billion) will go toward development aid, 20 percent toward financing infrastructure for trade corridors, 6 percent toward natural resource extraction and 6 percent toward low-carbon energy projects.

Japan's pledge comes as the country's inherent resource insecurities and newest economic growth challenges have become more urgent after the 2011 disasters and nuclear shutdown. The government has launched a comprehensive effort to rejuvenate its economy and rebuild its international standing, including its outward investment strategy. Meanwhile, Africa's developing economies face higher uncertainty over foreign investment, especially for export-dependent commodity producers. The world is coming down from several years of relatively synchronized stimulus efforts following the global financial crisis, and commodity demand from China is slowing. From the point of view of African states looking to attract foreign funds, Japan's renewed aid and investment provides timely support.

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