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The growing number of Japanese firms establishing their operations in the United States constitutes a new and expanding market that attracts much attention from American vendors. Japan's direct investment in the USA has grown from $5 billion at the end of 1980 to over $85 billion in 1993, growing at an average rate of 35 percent per year (US Department of Commerce, 1993 ). Throughout the 1970s and 1980s, Japanese manufacturing and real estate investments played a small part in overall investments in the USA, but several factors - the growing sales of innovative Japanese products in the US market, actual or threatened restraints on Japanese exports to the USA, and currency realignments which have strengthened the yen against the dollar - have combined to encourage the Japanese to place much greater stakes in US-based manufacturing investments. Likewise, Japanese banks, insurance companies and trading companies have expanded their activities in the USA, assuming new functions as their US assets increase. The great wealth generated by Japan's domestic economic growth has enabled the Japanese to seize opportunities to supplement their limited early direct investments with a giant acceleration of new investment activity within the United States (Wilkins, 1990).
Many US vendors are reaping great benefits from this phenomenon. According to a survey of 6,695 Japanese-affiliated manufacturing plants in the USA, conducted in 1993 by the Japan External Trade Organization (an agency of the Japanese Government), a total of 1,065 who responded to questions on local procurement indicated that more than one in four, or 26.5 percent bought 100 percent of what they used on the local market. The survey also showed a growing trend toward greater local procurement: in 1991, 62.1 percent of respondents said they relied on locally purchased materials for 70 percent or more of their production while, in 1992 and 1993, the comparative figures were 64.5 percent, and 67 percent (JETRO, 1994). As a rule, the longer Japanese manufacturers have been operating in the USA, the higher the ratio of local procurement of raw materials and parts.
There is a widespread feeling, however, that US vendors could be taking better advantage of the opportunities presented by growing Japanese investments in the USA. Reports in commercial newspapers, supported by the author's own consulting experiences,...