Japanese investments in Israel in 2022 amountedto $1.558 billion A significant decreasefrom the peak investments in 2021, Japanese investment accounts for 12.8% of foreign investment and 10% of all investments in Israeli high-tech Japanese investments in Israel totaled $1.558 billion in 2022 compared to $2.945 billion in 2021. A sharp drop equivalent to a drop in all investments in Israeli high- tech. Last year’s investment is $500 million higher than Japan’s total investment in 2020.
Japan’s investments make up, despite the decline, 12.8% of all foreign investments and 10% of the total investment in Israeli high-tech. (compared to15.8% and 12% in 2021) According to a study conducted by the Advisory Company Harel-Hertz Investment House.
Thedecline in investments is due to the followingreasons:
1. The war in Ukraineand with it, the price of raw materials increasedsharply. 2. The continued impact of the coronavirus pandemic, which has caused manydifficulties in manufacturing processes, the supply of critical parts, the collapse of the supply chain and shipping has added to negative sentiment in the industry and inthe financial marketsin Japan. 3. The dramatic devaluation of the YEN against the major currencies in general and against the dollar in particular – a devaluation of about 40% during 2022 – reduced motivation for overseas investment and encouraged an increase in domestic investment in Japan. The number of Japanese investments decreased more moderately, which amounted to 67 investments compared to 93 investments in the previous year – a decline of 28%. This moderate decline in investment can be explained in transition to the early stages (SEED and A). Of the 67 investments, 42 were initial investments in new companies and 25 were follow-on investments.
Another characteristic of Japanese investment is the prominent component of strategic investments. About half of the investments were made by industrial companies seeking to develop shared technologies and achieve future advantages over their competitors with the help ofIsraeli entrepreneurship.
The investment classification is also characterized by the transition to new industries, there has been a significant increase in the Cleantech, Agritech and Foodtech industries. In the traditional industries, too, there are changes when there is a decline in cyber and that of Semiconductors, and stability in the field oflife sciences.
The activity of the Japanese-Israeli funds is particularly impressive, almost all of the funds raised new funds or set up follow-up funds (Sumitomo, Marubeni, Corundum), the most prominent of which is the Liquidity CAPITAL, which, itself raised about $2.0 billion, but since the activity of this fund is not necessarily in Israel (the US, Gulf States, Singapore) We could not fully include this in the local statistics.
Harel-Hertz expects investment recovery in the coming year, mainly in light of theinitial and significant interest in Israeli Securityand Defense technologies. Cooperation in this field will be a step up in bilateral relations, as investments will be directed to mature industries (and not just start-ups), and therefore to investments in largeamounts and long-term collaborations.
Another development that may accelerate investment and economic cooperation is the mutual willingness to enter into discussions about a free trade agreement (FTA)and upgrade the double taxation avoidance treaty.
The opening of Japan, after three years of closure -COVID. The inauguration next month of ELAL's direct flights to Tokyo is a renewed opportunity for growth of the Tourist industry, and of the opening of new Japanese offices in Israel as well as the establishment of Israeli presencein Japan.
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