Japanese investments in Israeli tech continue to languish despite the otherwise overall improvement registered in foreign funding in 2024. A survey conducted by Harel-Hertz Investment House indicates an alarming decrease of 31% in new Japanese investments in the country in the first half of 2024.
Of the $317 million invested in Israel in the first six months of the year, $263 million were follow-on investments, meaning they were aimed at preserving and supporting existing investments. However, there is concern about a lack of new investments.
The decline in Japanese investments began in the last quarter of 2023, with the outbreak of the war. This trend has continued, although there was a noticeable recovery in the second quarter of 2024 compared to the first quarter.
Many Japanese companies, some of which have evacuated their offices in Israel, express great concern about the ongoing conflict and fear an escalation into a broader regional conflict. The distinct absence of visiting Japanese businessmen in Israel makes it challenging for decision-makers in Tokyo, particularly in the field of investments.
Adding to this is the dramatic decline in the value of the Japanese yen against major currencies. Total Japanese investments in Israel now constitute 9% of all foreign investments, down from 13% in 2023.
An important characteristic of Japanese investments is the significant portion represented by strategic investments made by the funds of Japan’s largest enterprises. Notably, six new leading companies have recently begun investing in Israeli technologies. The composition of these investments reveals growing interest among Japanese investors in cyber and security technologies, industrial intelligence, and fintech, with a relative decline in investments in the fields of medicine and environmental technologies.
Conversations with Japanese officials indicate that interest in Israeli technologies remains a key factor in maintaining Japanese-Israeli relations. Many officials note that their investment activities are likely to increase once the conflict subsides and direct visits to Israel become feasible again.