Diminishing Japanese foreign direct investment in Korea has showed no signs of abatement, continuing a precipitous decline from 2.69 billion USD in 2013, 2.49 billion in 2014, and 1.67 billion in 2015 to 1.25 billion in 2016 after peaking at 4.54 billion in 2012. Persistent issues with Abenomics have played a role in the slowing of Japanese investment toward Korea, including the weakening of the yen. Meanwhile, Korea’s increasingly prohibitive cost structure, the slowing growth of Korean multinationals (particularly assembly plants) and historical and territorial issues that continue to plague political discourse between the two neighbors have all served as a drag on Japanese direct investment toward Korea.In these circumstances, Japanese corporate investment strategies toward Korea are attracting much attention from the Korean government.The purpose of this article is to propose national and provincial (municipal) policy initiatives aimed at attracting Japanese FDI through an analysis of Japanese investment strategies. This analysis consists of an empirical study of publicly-available statistics and in addition to responses obtained from a questionnaire issued to companies with Japanese affiliations operating in Korea.The salient characteristics of Japanese investment strategy, as derived from a survey of the extant literature, are described as follows.First, Japanese manufacturing investment is concentrated in the material and components industry, at 84.2% of all manufacturing FDI. Second, Japanese companies’ inroads into Korea seem aimed at capturing domestic market share, and not directly producing goods for export. However, it is necessary to note the fact that Japanese investments are largely intended to orient contractors to the Korean market, as the major exporters in Korea are all global firms. So it is difficult to say with certainty that the principal motivation behind Japanese FDI is centered on the securing domestic market share and ultimately not aimed at the production base for export. Third, Japanese firms operating in Korea have achieved a local content ratio of 49.2%. This is lower than investment analogues in China, Thailand, and India, but higher than in Indonesia, Malaysia and Vietnam. Fourth, the surplus ratio of Japanese-affiliated enterprises with Korean investments is valued at 81%, as estimated in 2016, the highest level in all of Japanese affiliated enterprises in Asia and Oceania, well above the average of 62.8%
