A fresh wave of Japan FDI?

Jomar Lacson·4 October 2026, 2:34 am·1 MIN READ

Text size

Although the market focused on the potential debt reduction and share buyback, the more compelling question, at least for me, is whether Mitsubishi’s renewed commitment signals a fresh wave of Japanese foreign direct investment in the Philippines.

Mitsubishi and AC go way back to the 1970s. This investment possibly takes Mitsubishi back to its original stake in 1974 when, according to a study by Batalla (1999), AC offered the zaibatsu a 20-percent stake.

Since then, Mitsubishi has been paring down its stake in AC. Batalla (1999) provides the earliest estimate I could find on its ownership in AC at 10.4 percent. But the first partnership in 1974 may have been part of the initial waves of Foreign Direct Investments (FDI) from Japan.

The yen appreciation back in the 1970s combined with the import-substitution strategy of the Philippines encouraged Japanese firms to locate manufacturing in the Philippines. That is why Mitsubishi invested in Chrysler Philippines, which eventually became Mitsubishi Motors. From Dodge and Plymouths, Mitsubishi Motors started producing and selling the beloved Lancer, Galant and Colt models.

It was not just Mitsubishi. Toyota partnered with the now defunct Delta Motors Philippines of Ricardo Silverio Sr. who was behind the Toyota Tamaraw which has a new popular version today.

Japanese FDI was not limited to the automotive industry. In oleochemicals, we have Pilipinas Kao which was established in 1977 as a joint-venture between Kao Corporation and Aboitiz & Co.

Japanese FDI in the Philippines reflects global macroeconomic shifts and a cautionary tale of local macroeconomic and geopolitical risks. The influx of Japanese FDI in the 1970s was a positive response to the appreciation of the yen and the import-substitution strategy at the time.

However, the complex combination of high inflation, weakness of relevant commodity prices like copra affecting our key agricultural-centric exports, vulnerability of our USD reserves and balance-of-payments position, and the governance and political risks that intensified leading into the 1980s contributed to the Philippines largely missing out (relative to its Asean peers) on the Japan FDI wave driven by the Plaza Accord of 1985 as concluded by Batalla (2011).

From this global macroeconomic agreement, the further appreciation of the yen accelerated Japan FDI into the region.

The growth of Thailand’s automotive industry is a prime example. While our neighbors benefited, we were able to secure some significant investments towards the latter part of the 1980s and into the 1990s.

Good examples were the partnerships between Toyota and Metrobank/GT Capital, Sumitomo with First Philippine Holdings, Yamamura Glass with San Miguel Corp. and Tsuneishi Shipping with Aboitiz.

Even today, we see major Japanese houses such as Mitsui and Marubeni investing in the Philippines through our own local conglomerates in power, energy, and water, but partnerships are not limited to these sectors. Nearly all the major publicly listed conglomerates in the Philippines have Japanese partners in varying degrees.

Despite these strong and long-term partnerships, the approved FDI statistics from the Philippine Statistics Authority suggest that while Japan is a top investor averaging 11.7 percent of total FDI approved, the growth trajectory is negative. The compounded growth rate from 2011-2025 is negative 5.8 percent by my estimate. The fastest growing foreign investor post-Covid is Singapore.

With Mitsubishi’s investment in AC, I am hoping this signals a new wave of Japan FDI. The reasons may be different from the 1970s, however, given the possibility that the yen is depreciating as the effects of the Plaza Accord unwind to a degree.

With the shift in geopolitical structures, Japan may have begun to change its approach and further its alliances with friendlier neighbors. Strength in regional relationships is not just political, it is economic as well. Renewing and strengthening these relationships is what we need for macroeconomic growth.

If there is this fresh wave of Japan FDI, local partners should understand the long-term perspective of the Japanese. As AC and its partnership with Mitsubishi is the case, Batalla (1999) highlighted the concept of stewardship as described by Joseph McMicking in the 1960s as the basis for the training of family members and non-members alike as managers of the company.

Stewardship is a key element in the formation of a company’s sustainability policies.

To conclude, if a new wave of Japanese FDI is emerging, the Philippines should not lose the opportunity to translate it into sustained growth. The macroeconomic lessons of the past and the value of sustainable corporate practices show that attracting major Japanese investors requires prudent management and good governance at every level — from government and the private sector to individual Filipinos.