An analysis of Taiwanese banks' foreign direct investment timing in Japan: The role of external environmental factors

Taiwan's banking sector operates in a highly competitive market with narrow profit margins, creating significant pressure for internationalization. This study investigates the external environmental factors influencing the timing of Taiwanese banks' foreign direct investment (FDI) in Japan, with a particular focus on geopolitical risks. The research, based on secondary data analysis and in-depth interviews with senior executives from four Taiwanese banks that have recently invested in Japan, finds that key drivers such as the U.S.-China trade war, supply chain restructuring, Taiwan's New Southbound Policy, changes in Japan's defense and economic security policies, as well as the depreciation of the yen, widening interest margins, and Japan's policy support, play a crucial role in shaping the timing of these investments. Notably, geopolitical risks emerge as a significant determinant in FDI timing decisions. By highlighting the importance of geopolitical risks, this study contributes to the theoretical framework of FDI timing and recommends further research on cross-industry and investment performance to refine analytical framework for FDI timing in a fragmented global economy. Key Words:timing of foreign direct investment, Taiwanese banking industry, geopolitical risks, Japan