Why Japan Inc. Is Buying American Companies at a Rate Not Seen Since the 1980s

Bruce Willis’s character is working a Christmas party at Nakatomi Plaza, the U.S. headquarters of a fictional Japanese trading company, in a scene from the 1988 action film Die Hard, which is set in a Los Angeles skyscraper. The structure is shiny. The Japanese executive is strong and sophisticated. The anxiety of the time—that Japanese corporations were surreptitiously acquiring America’s most valuable real estate and that Americans should feel somewhat uneasy about this—is the implicit backdrop of the entire scene.

The film was a cultural abbreviation for a long-developing economic reality. The acronym had become reality by November 1989, when Mitsubishi Estate paid $846 million to acquire Rockefeller Center in New York. Politicians, columnists, and at least one Tom Clancy novel were alarmed by Japan’s loud, costly, and rapid acquisition of America.

When the Bank of Japan raised interest rates in December 1989, the nation’s asset bubble burst with a speed and severity that no one had predicted, bringing an abrupt end to that buying frenzy. At the end of that year, the Nikkei had reached 39,000; it wouldn’t reach that level again until 2024.

Japan Inc. Buying America — Historical & Current Context

The purchases made in the 1980s appeared to be the extravagance of a different civilization during Japan’s three decades of economic drift. Businesses withdrew. At a considerable cost, Rockefeller Center was eventually returned to American ownership. The threat of Japan purchasing America has faded into cultural memory, appearing as background information in discussions of why the current fear of China feels so historically familiar or as nostalgic bait in listicles about the 1980s.

Compared to the bubble-era buying frenzy, what’s happening now is more subdued, methodical, and intriguing in certain aspects. With decades’ worth of cash on hand, a domestic market that is aging more quickly than almost any other in the developed world, and shareholder pressure that has finally begun to arrive in Japan following years of Tokyo Stock Exchange governance reforms, Japanese companies are once again buying American companies at a rate that is attracting notice. The sectors are distinct.

The Rockefeller Center, Columbia Pictures, Pebble Beach Golf Course, and MCA Entertainment were among the trophy properties that Japan purchased in the 1980s. The current wave is more concentrated on industries where Japanese businesses see strategic logic rather than symbolic value, such as technology, healthcare, infrastructure, and manufacturing.

While not exactly the same, the economic mechanisms underlying this are similar to those of the 1980s. The story involves money. Japanese companies, many of which have significant dollar-denominated revenue streams from their current U.S. operations, have natural hedging incentives to invest more capital in dollar-denominated holdings when the dollar appreciates against the yen, making American assets more affordable for Japanese buyers. The 1980s trickle turned into a flood due to the Plaza Accord of 1985, which had the effect of quickly making the dollar extremely cheap in terms of yen.

Similar math has been produced, albeit less dramatically, by the current exchange rate environment. If anything, the structural domestic pressures are stronger. The population of Japan is actually declining. Domestic consumer markets are shrinking. Any Japanese business seeking significant revenue growth must look outside its borders, and the United States continues to be the most alluring large market because it is politically more welcoming to Japanese investment than it is to Chinese investment, culturally accessible, and legally predictable.

The way that Americans now view this is noteworthy. Japanese investors were “acquiring more and more of America,” according to a Christian Science Monitor correspondent in Boston in 1988. Felix Rohatyn, an investment banker, warned that the US might need restrictions on foreign ownership.

Malcolm Forbes, the publisher, demanded that a review board be appointed by the president. It was famously referred to as an economic Pearl Harbor by Paul Harvey. Japanese acquisitions in the US now go through Washington with little difficulty. Chinese transactions are closely examined by the US Committee on Foreign Investment, but Japanese transactions are subject to far less scrutiny. It seems that Japanese investment is no longer perceived as the anxiety of the 1980s, but rather as the capital deployment of a reliable ally with similar interests.

As this develops, it seems that a more recent pattern—Warren Buffett’s decision to purchase substantial stakes in five major Japanese trading houses starting around 2020—is a more instructive parallel than the trophy purchases of the bubble era. That action, which caught many observers off guard at the time, was essentially a wager that shareholders were finally pressuring Japan’s massive, cash-rich, undervalued conglomerates to use their capital.

A few years later, Buffett’s undervalued conglomerates are using that money to make acquisitions in the United States. There is a certain circularity in the reasoning. The value of Japan was recognized by American capital. The capital of Japan is now observing American assets. It’s possible that the current situation represents a more developed form of cross-Pacific capital allocation rather than a throwback to the 1980s; it is patient, strategic, and far less likely to result in a Japanese company selling Rockefeller Center at a loss to any buyer who is willing to take it.