Japanese-Nordic Trade and Japanese Manufacturing in the Nordic Countries

This paper will describe and explain the pattern of Japanese manufacturing investment in the Nordic countries (Denmark, Finland, Norway and Sweden). In particular, it seeks to investigate whether the limited market size of these countries in Northern Europe gives rise to a different type of Japanese FDI from that establishing itself in other parts of Western Europe. Special attention will be paid to the issue of direct, as opposed to indirect, economic relations between Japan and the Nordic countries, in trade as well as in investment. It is assumed that the Nordic countries, when seen from the Japanese perspective, are not a priority area in the process of developing direct trade and investment relations within a single internal European market. Accordingly, indirect trade via larger countries in Western Europe is expected to grow at the expense of direct bilateral trade. On the other hand, the Japanese view of Europe as a single economic unit may also give rise to investment in the Nordic countries within special production niches, serving the entire European Union. Another objective of this paper will therefore be to establish the difference between trade and investment serving solely domestic Nordic markets, and those investments aiming at production for export to other European countries as well as to Japan.