FDI is the missing piece of Japan’s puzzle
Deep Dives
Explore related topics with these Wikipedia articles, rewritten for enjoyable reading:
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TSMC
12 min read
TSMC is central to the article's thesis about greenfield FDI in Japan. Understanding TSMC's history, pure-play foundry model, and global dominance provides essential context for why their Kumamoto investment represents such a significant economic development strategy.
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Foreign direct investment
14 min read
The article's core argument hinges on the distinction between greenfield FDI and other investment types like M&A. A deep understanding of FDI mechanics, historical patterns, and economic effects would help readers evaluate Noah Smith's policy recommendations.
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Transformer (deep learning)
15 min read
The article mentions Llion Jones as co-author of the 'groundbreaking 2017 research paper' behind LLMs - this is the Transformer paper. Understanding this architecture explains why Sakana AI's alternative approach of using smaller models is technically significant.
My book, Weeb Economy came out in March, but only in Japanese. Half of the book was a series of translated posts from my blog, so those are already in English. The other half was a new part that I wrote in English and had translated into Japanese by my excellent translator, Kataoka Hirohito. So while I’ll eventually republish the whole book in English, what I can do right now is to publish my English-language first draft as a series of posts on this blog.
The first installment was entitled “I Want the Japanese Future Back!”. In that post, I explained why Japan now finds itself in the position of a developing country, playing catch-up with other countries. This means Japan needs to experiment with bold new strategies and development models, as it did in ages past.
In this second installment, I suggest one such experiment: a huge increase in a kind of investment called greenfield FDI. I discuss:
How Japan is already benefitting from greenfield FDI in a few places
Why greenfield FDI (a foreign company building a factory or research center in Japan) is so much more important and useful than other kinds of FDI like mergers and acquisitions
Why Japan needs to export a lot more to other countries, and how greenfield FDI can help do that
How Japan can start to welcome more greenfield FDI
Why Japan is an attractive destination for international investment
The Kumamoto miracle points the way
The semiconductor industry is probably the most important industry in the world. Computer chips are absolutely essential to every high-value product in a modern economy — autos, rockets, appliances, machinery, everything. They’re also of crucial military importance, in an age where precision weaponry rules the battlefield. And they’re of core importance to emerging technologies like AI — whose vast computational resources require enormous data centers — and biotech.
As a result, it’s no wonder that the world’s major economies have been fighting over the semiconductor industry for generations. In the early days, the U.S. and Japan were the clear leaders. Much of the industry involves the design of semiconductors and the production of specialized tools and materials, and in these upstream parts of the industry the U.S. and Japan are still strong. But in the most important downstream part of the process — the actual fabrication
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