In this age of escalating economic globalization and cross-border business competition, Japan must develop into an attractive place for foreigners to invest, live or work. In particular, it needs to make itself more attractive to long-term foreign investors in order to promote structural reforms such as deregulation and industrial reorganization. The capital they invest here, along with the knowhow that comes with it, is a regenerating tonic for a moribund domestic economy. So it is essential that the nation open its door wider -- much wider -- to direct investment from abroad.

In this sense, it is welcome that the latest annual government report on international trade, released last Friday by the Economy, Trade and Industry Ministry, did not fail to shed light on the need for increased foreign direct investment here. The white paper rightly says that Japan should abandon its characteristically reactive policy, which aims to defuse economic frictions with the nation's trading partners, and adopt instead a proactive policy that encourages the inflow of technology and capital, as well as people and goods.

Mutual direct investment is gaining momentum, as the report points out, amid global moves toward the creation of common markets under bilateral and multilateral free-trade agreements. In Japan's case, however, inward direct investment -- money spent by foreign interests to build or buy shops and factories here -- remains minuscule compared with other industrialized nations. In 1998-99 it was $15 billion -- a far cry from the nearly $300 billion invested in the United States. Japan also lags far behind China ($40 billion), which is emerging as a world manufacturing center.