Assessing the Impact of the Establishment of Japan Advanced Semiconductor Manufacturing on Taiwan's Foreign Direct Investment in Japan: An Interrupted Time Series Analysis

Yi-Chun Ko

No 2025-06, AGI Working Paper Series from Asian Growth Research Institute

Abstract: This study examines the impact of the establishment of Japan Advanced Semiconductor Manufacturing (JASM) on Taiwan's foreign direct investment (FDI) trends in Japan. Using interrupted time series analysis, we analyze both the immediate and long-term effects of JASM's creation on FDI, while controlling for external shocks such as the Great East Japan Earthquake in 2011, the United States-China trade war in 2018-2019, and the COVID-19 pandemic (2020-2022). Our results indicate an immediate decline in the number of FDI cases following JASM's establishment, accompanied by a positive post-event trend, suggesting gradual recovery and long-term growth. In contrast, the monetary value of FDI did not exhibit a significant immediate effect but demonstrated a positive trend over time. However, further analysis reveals that the initial negative impact on FDI may have been confounded by the effects of the pandemic rather than the JASM establishment itself. These findings highlight the complex dynamics of large-scale corporate investments and their influence on FDI patterns. They underscore the importance of maintaining investor confidence and policy stability to support long-term economic growth, especially in the face of external shocks.

Keywords: Foreign direct investment; Interrupted time series analysis; Japan Advanced Semiconductor Manufacturing; Taiwan semiconductor industry (search for similar items in EconPapers)
Date: 2025-03
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