Globalisation through international trade, foreign direct investment (FDI) and international movements of
labour is a key force driving economic growth. However, Japan is an outlier among OECD countries, with the
lowest levels of import penetration, stock of inward FDI relative to GDP and foreign workers as a share of
employment, reflecting the legacy of policies during its post-war development. Policy reforms would help Japan
make greater use of goods, services, capital, technology and human resources from abroad. Given the close
links among trade, investment and labour flows, it is important to pursue a comprehensive approach, including;
i) reducing barriers to FDI and imports, particularly in agriculture, through multilateral trade negotiations and
regional trade agreements; ii) relaxing product market regulations, notably in the service sector; iii) fully
opening the M&A market to foreign firms; and iv) easing controls on the inflow of foreign workers, including
those in non-technical occupations. This Working Paper relates to the 2006 Economic Survey of Japan (www.oecd.org/eco/surveys/japan).
