How Does Japanese Investment effect the UK Economy

 Another Case: How Does Japanese Investment effect the UK economy?

• If a Japanese firm (e.g. Nissan) built a factory in the UK. This would be a surplus on the financial account. It counts as long term capital investment
• If the Japanese firm then sold the goods (Nissan cars) from the UK to Europe. This would be a credit(surplus on the UK current account)
• If profits from this Japanese firm were sent back from the UK to Japan,  this would count as a debit (deficit) on the current account.
• A deficit on the current account needs financing by a surplus on the financial account (used to be capital account). Therefore, this long term investment helps finance the UK current account deficit.

Other Effects on UK economy

• Increased Aggregate Demand AD.
• Local Multiplier effect. Regions where investment is concentrated will see lower unemployment and higher growth.
• Increased productive capacity. Increased AS and improved economic growth.

•  Guide to Investment