On a visit to Singapore last week, he likened the 10-nation bloc known as the Association of Southeast Asian Nations (Asean) and Japan to the two engines on an aeroplane – the aeroplane being a vast economic area that he sees stretching from the Pacific to the Indian Ocean.
Asean, Mr Abe asserted, would also feel the effect of the “three arrows” he had unleashed – a reference to the three-pronged structural reforms that underpin “Abenomics”.
The region, with a population of over 620m, would be “the 21st century’s champion in fostering the vast middle class consumer market”, he added.
There is some justification for the hyperbole. Japanese investment in southeast Asia is resurgent, after almost two decades in the doldrums.
Japanese companies are on course to match the level of their engagement with the region in the early 1990s, before Japan’s deflationary spiral and the Asian currency crisis pared their ambitions.
Last year, they invested $6.4bn into Asean – mainly Singapore, Indonesia, Thailand, Malaysia, Vietnam and the Philippines. That was almost 50 per cent more than in 2005, according to the Japan External Trade Organisation.
Dealogic says the value of mergers and acquisitions pursued by Japanese companies this year in southeast Asia has hit $8.2bn, surpassing the value of any full-year of M&A in the region by companies from any single country.
Frederic Neumann, co-head of Asia economics at HSBC, sees a “strategic shift by corporate Japan”.
Expectations of an ever-weaker yen are making the returns on such outward investment by cash-rich Japanese companies more attractive in local currency terms. The initial thrust into southeast Asia has been by Japan’s banks buying into insurers, an obvious way to be part of the middle class growth story.
The biggest proposed Japanese deal by value in the region was Mitsubishi UFJ Financial Group’s bid, launched this month, for a majority stake in Thailand’s Bank of Ayudhya. In May, a consortium of Japanese engineering companies won a contract to build a metro system in Jakarta. Only last weekend Suzuki said it would invest Y60bn ($611m) in a new small car plant in Indonesia.
Japanese engagement in southeast Asia is hardly new – trading houses such as Marubeni, Mitsui and Itochu have been building power plants, selling rolling stock and trading foodstuffs in the region for decades. But now small- and medium-sized Japanese companies are part of the trend too, lawyers and consultants say.
All this should be a wake-up call to Europe and the US, which makes much of its geopolitical ‘pivot’ to Asia
And the whole engagement, this time, comes with solid political backing.
Before he arrived in Singapore, Mr Abe signed a deal with his Malaysian counterpart, Najib Razak, under which the Japan Bank for International Co-operation would guarantee issuance of “samurai” bonds issued by Malaysia’s 1MDB, a government-controlled fund set up in 2009. 1MDB has yet to issue any yen-denominated bonds, but it is ambitious and has the support of the country’s ruling party.
In Singapore, regional headquarters for companies with an Asean footprint, the Bank of Japan and the Monetary Authority of Singapore have just agreed a cross-border collateral arrangement allowing banks to pledge Japanese government securities in return for raising Singapore dollars from the MAS, the central bank. Yet for all such efforts, the Japanese will not always find it easy thanks to a new competitor: China. Its companies are fanning out in search of opportunities. Some have already made inroads into infrastructure – a Japanese strength. This month CSR Corporation, one of China’s largest makers of trains, said it would invest $127m in an “Asean manufacturing centre” in Malaysia.
United Overseas Bank, a Singaporean bank, recently set up a unit offering loans to Chinese companies looking to move into the region, including in renminbi. Use of the Chinese currency in southeast Asia will only increase as the renminbi continues its not-so-long march towards full internationalisation.
All this should be a wake-up call to Europe and the US, which makes much of its geopolitical “pivot” to Asia. While there are big US groups with long histories in Asean – such as General Electric, which installed Manila’s first street lights a century ago – it is time for more companies to understand the region’s opportunities, before it is too late.
Jeremy Grant is the Financial Times’ Asia regional corporate correspondent