A recent Economist article, “Give peace a rating” (June 2, 2007), discussed the use of indices measuring “peace” to rank countries. The Economist’s sister co. Economist Intelligence Unit has one, found in the accompanying image (see below) from the article. Japan ranks 5th-highest in the EIU’s index. This is obviously a positive factor in terms of FDI and channeling investment funds to equities and making corporate investments. However, one problem Japan has in particular, is political/legal uncertainty — which at least partially explains the comparatively low levels of FDI and slow pace of outside M&A.

In fact, certain things such as high corporate taxes are discouraging. At the same time, ambiguity surrounding tax implications of engaging in a triangular merger, for instance, is equally negative for attracting investment. That said, we expect the situation to improve in Tokyo as there’s a sense of urgency to make Tokyo-Japan more competitive and attractive in financial services.