Podcast Highlights: Japanese Capital & FDI into the New Nordics

Oliver Hall, the Head of Tech Investments for Europe and Japan at Copenhagen Capacity, and a Co-Founder & Investment Director for Japanese Investments at the Nordic Asian Venture Alliance, joined the eXponential Finance podcast.

In recent years, there has been a significant increase in Japanese capital and foreign direct investment (FDI) flowing into the New Nordics region. In this podcast, we dive into the reasons behind this rising interest, the unique advantages offered by the Nordics, and the impact of sustainability and digital innovation on attracting Japanese investment, exploring the fascinating dynamics between Japan and the New Nordics.

The New Nordics: Definition and Significance

The term “New Nordics” was coined to describe the region that encompasses the Nordics and the Baltics. Estonia, a Baltic country, was responsible for coining this name. The Nordics consist of Denmark, Sweden, Norway, Finland, Greenland, and Iceland. The Baltics are made up of Latvia, Lithuania, and Estonia. Collectively, these countries are known for their high levels of digitization, sustainability practices, and progressive policies. They consistently rank among the top countries worldwide in terms of sustainability impact, carbon neutrality, and adherence to the United Nation’s Sustainable Development Goals (SDGs).

Japanese Interest in the New Nordics: A Growing Connection

Japan has shown a keen interest in the New Nordics region, driven by the desire to engage with innovative technology, sustainable practices, and digital advancements. This interest has led to a surge in both FDI and venture capital (VC) investments from Japan. Notably, Japan has become the largest investor in Copenhagen, Denmark, with 41 foreign successes, including major investments from companies like Fujifilm.

The Appeal of the New Nordics: Sustainable Practices and Digital Innovation

One of the primary reasons for Japanese interest in the New Nordics lies in the region’s commitment to sustainability and environmental concerns. Countries like Denmark, Sweden, and Finland have established themselves as pioneers in clean energy production, wind technologies, and carbon neutrality initiatives. For example, Denmark aims to become the world’s first carbon-neutral capital city, a goal that has attracted the attention of Japanese companies seeking sustainable investment opportunities.

Digital innovation is another crucial aspect attracting Japanese investors to the New Nordics. Estonia, known for its advanced digital infrastructure, has particularly caught the attention of Japanese investors. Digital citizenship infrastructures, unique digital services for the public and private sectors, and robust e-governance systems have piqued the interest of Japanese companies looking to import advanced technology and streamline their own processes.

Promising Verticals and Startups: Smart City, Health Tech, and Food Tech

Within the New Nordics region, certain verticals have garnered significant attention from Japanese investors. Smart city urban tech, health tech, and food tech stand out as the most promising sectors attracting Japanese capital. These verticals align with the region’s focus on sustainability, digitalization, and well-being. Startups from the New Nordics, specializing in these sectors, are actively seeking Japanese investment and partnerships through initiatives like the NAVA (Nordic Asian Venture Alliance).

Japanese Venture Capital and Foreign Direct Investment: The Differences

While FDI tends to have a stable flow, often driven by specific company requirements, venture capital investment can be more dynamic. Recent trends suggest that Japanese VC investment in the New Nordics has been robust, even during worldwide challenges like the COVID-19 pandemic. Japan’s increasing interest in venture capital and its efforts to establish corporate venture capital arms showcase a growing appetite for technological innovation and international collaborations.

Looking Ahead: Strengthening the Connection

The New Nordics region, with its progressive policies, sustainable practices, and digital excellence, has become an attractive investment destination for Japanese companies. Efforts are underway to maintain and grow this connection between the New Nordics and Japan. The NAVA project, for example, facilitates the exchange of knowledge between startups, investors, and ecosystems from both regions. Its aim is to foster collaboration and enable Nordic and Baltic startups to expand their presence in Japan.

Conclusion

The rising Japanese capital and foreign direct investment in the New Nordics region reflect the growing appreciation for the region’s commitment to sustainability and digital innovation. Japanese investors are drawn to the Nordics and Baltics due to their advanced technology, world-leading sustainability practices, and supportive work-life balance. As the relationship between Japan and the New Nordics continues to strengthen, efforts to explore new cross-border opportunities and collaborate on innovative projects are set to shape the future of the two regions’ business landscape.

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