Jakarta. Japanese business representatives are nudging the regional economic bloc ASEAN to improve its investment climate.

The ASEAN Secretariat hosted the Federation of the Japanese Chambers of Commerce and Industry in ASEAN (FJCCIA) for an economy-related dialogue at its Jakarta headquarters on Wednesday. 

Speaking to reporters after the meeting, FJCCIA chairman Sawamura Takero claimed that Japan’s investment in ASEAN had gone down by at least 10 percent in 2022 compared to the 2019 figures while attributing the drop to the weakening Japanese yen. Although the numbers had begun to recover, the decline should be a wake-up call to make ASEAN more attractive for Japanese businesses, according to Sawamura.

“The weakening Japanese yen has caused a headwind for our foreign direct investment [FDI], which is shrinking overall in manufacturing, transportation, finance, wholesale and retail, among others,” Sawamura said.

The FJCCIA had proposed some recommendations that ASEAN could consider to woo foreign investors.

This includes promoting the use of the world’s largest trade pact: the Regional Comprehensive Economic Partnership (RCEP) agreement. While Japanese businesses eye ASEAN’s young population, these potential investors are also hoping the bloc can work on their human capital development.

Sawamura added: “Japan’s birth rate is decreasing, and we have an [aging] old society. That’s why [Japanese] businesses [are thinking of] using the capital [they have] to [invest] outside the country.”  

For context, 29.1 percent of Japan’s total population is 65 or older. ASEAN claimed that youth made up a third of its combined population.

According to Sawamura, the manufacturing sector remains popular among Japanese investors when it comes to doing business in ASEAN. They have shown interest in investing in ASEAN’s semiconductor and renewable energy sectors to name a few. Japanese businesses are eyeing the region’s digital economy sector as the grouping is in the process of striking what it claims to be the world’s first major region-wide digital economy agreement.

ASEAN’s Secretary General Kao Kim Hourn told the press that the Japanese FDI flowing into ASEAN topped $14.5 billion in 2023, adding that it is “normal” to see FDI figures fluctuating. Kao added: “ASEAN is still the preferred destination for investment. But we must make sure that ASEAN remains attractive to foreign investors.”

In Indonesia alone, Japan has become one of the country’s largest FDI sources. Indonesia attracted $1 billion in Japanese FDI throughout the first quarter of 2024, the Investment Ministry data showed. Japan was Indonesia’s fifth-largest foreign investor after the US ($1.1 billion) during the said three-month period.