JAPANESE INVESTMENT IN THE UNITED STATES

The great hue and cry with respect to foreign investment in the United States emphasizes the acquisition by foreign buyers (the Japanese in particular) of American business enterprises and American real estate (Burritt, 1991, pp. 6066; Levine, 1989, pp. 117118; Gilder, 1990, p. 60). In actual fact, however, foreign investment (including that of the Japanese) in American financial instruments dwarfs that in the operational ownership of business enterprise and the ownership of real property (U.S. Department of Commerce, 1993, pp. 5154; Standard & Poor's, 1993, p. 101; Herr, 1989, pp. 2230). In this context, a differentiation is made between the acquisition of the operating control of a business enterprise and the purchase equity shares (common stock) in such enterprises. In 1990, foreign investment in the operational ownership of American business enterprise totaled $73.1 billion, and foreign investment in the ownership of American real estate totaled $34.6 billion, while that in the capital markets soared to $296 billiontwoandthreequarters times the combined foreign investment in the operational ownership of American business enterprises and foreign ownership of American real estate (U.S. Department of Commerce, 1993, p. 7778).

With respect to the source of foreign investment in American business enterprise, the United Kingdom, Japan, and Canada are the bigthree (Herr, 1989, pp. 2230). The United Kingdom accounted for

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e crash of real estate in some regions of the United States to the same extent as have American investors (Sender, 1990, pp. 141144). Gains and losses on foreign investments in American real estate were not uniform, however, among investors from different countries. Asian investors, as a group, tended to fare better than investors from other international regions, and the Japanese investors tended to fare best of all in 1990 (Caplen, 1990, pp. 2021). Data pertaining to foreign investors' gains and losses from American real estate are summarized in Exhibit 1, which may be found below on this page. Exhibit 1 Income From Foreign Investments in American Real Estate By Country or Region: 1990($ = bil) ??????????????????????????????????????????????????????????????? Africa 0.03??? Asia and Pacific Other Than Japan 0.09????? Britain 0.11?????? Canada ?????????????????????????????? 0.59 Europe Other Than Britain, Germany, and Netherlands 0.15????????? European Community 0.25?????????????? Germany 0.13?????? Japan

Category: Economics - J