Japan's foreign direct investment in Russia: a big return from a small opportunity.

In this paper, we demonstrate the trends and prospects of Japanese foreign direct investment (FDI) in European Emerging Markets (EEMs) against the background of the recent development of emerging markets in the world FDI flows and explore the specificities of the Russian market, the biggest EEM in terms of market size and inward FDI received. More specifically, we overview foreign capital flows from Japan to Russia and describe the achievements and problems of Japanese investors as related to business with Russia. We find that the Russian market seems to be a lucrative option for Japanese firms, despite limited institutional freedom afforded to outsiders and unfavorable investment conditions, including the language barrier due to the wide usage of Russian in the business field – factors that have been reflected in higher transaction costs. [ABSTRACT FROM AUTHOR]