Japanese Businesses Storming to Korea

Japanese companies, which have recently escaped a decade-long recession, are making inroads into the Korean market.

Japan’s direct investment into Korea in the first half of 2004 amounted to $1.144 billion, three times larger than $367 million over the same period last year.

In the first quarter of this year, 45 Japanese businesses newly moved to Korea. From the first advance in 1962 to 1997, only 1,722 firms went to Korea, but the number shot up after the financial crisis. Now, more than 3,412 Japanese companies are doing business in Korea.

Lexus, a main model of Toyota Motor Corporation, entered Korea’s import car market as a latecomer in January 2001, but in just 33 months, it beat BMW to become the market leader.

Honda, which joined the market in May 2004 with its flagship model, the Honda Accord, jumped to fourth in just a month. Nissan Korea, which was established early this year, is planning aggressive marketing with seven new models that will be introduced next year.

If the Korea-Japan Free Trade Agreement (FTA) is forged next year as planned, Japanese car manufacturers will get 9.2% cost competitiveness with the abolishment of the import duties.

Korea’s distribution industry is facing the same destiny, which has been hit hard by sluggish domestic demand. It is bracing itself for the advancement of Japan’s Daiso Industries.

Daiso Industries started as “100 Yen Shop Daiso” outlets, which became a smash hit. The first Daiso shop opened in September last year in Myeong-dong, Seoul, and the second and third shops will be opened in TechnoMart in Gwangjin-gu, Seoul and the Galleria department store in Daejeon.

Asahi Brewries became the largest shareholder of Haitai Beverage with 41 percent of the company’s shares. Accordingly, the domestic beverage market, which is led by Lotte Chilsung, will experience drastic changes.

Samsung Electronics and Sony have recently launched a joint venture to produce LCD panels in Asan city, Chungnam.

“Japanese businesses, which have overcome a long economic recession, are turning their attention to Korea, whose market has been wide open since the financial crisis,” said Oh Mun-seok, a managing director at LG Economic Research Institute. “Some Korean businesses will be hit hard, but we will see more job creation in a positive sense”

Keuk-In Bae bae2150@donga.com