An Empirical Study on Japan's Outward Foreign Direct Investment and Industrial Structure Upgrading

This paper analyzes Japan's outward foreign direct investment and its domestic industrial structure upgrading. The Granger causality test results indicate that Japan's outward FDI does help explain the changes of the proportion of Japan's second industry and the tertiary industry, but couldn't help explain the changes of the proportion of the first industry. The co-integration test results indicate that there are long-term equilibrium relationship between Japan's outward investment and its first, second and tertiary industry respectively. Vector Error Correction estimation indicates that the short-term correction will be conducted with a stable speed to draw back any diversion of the co-integration equilibrium, which shows that there is a long-term relationship between Japan's outward FDI and its industrial structure upgrading, and there is a correction mechanism functioning well in the process. From the analysis, we can see that Japan's experience is good for China's references. Chinese government should greatly encourage Chinese enterprises' outward investment and thus upgrade the domestic industry.