Abstract
The purposes of this paper are to clarify the roles and characteristics of sogo shosha investment and to explore the locations of their economic activities in Canada. Japanese direct foreign investment (DFI) in Canada has been relatively moderate in size while still significant in its impact. Since mature Japanese manufacturers, financial institutions and real estate companies made large investments during the 1980's, the proportion of sogo shosha investment in the total Japanese investment in Canada declined relatively. The expansion and diversification of Japanese DFI in Canada in the last decade stemmed from the changes in investment climate of the host country and the appreciation of yen. Sogo shosha, or the nine largest Japanese general trading companies, have been the chief promoters of Japanese trade and major vehicles for carrying out Japanese overseas investment during the postwar period.
Sogo shosha's investment in Canada has focused on the three major sectors; commerce, natural resource development and manufacturing. Investment in commerce resulted in establishing their wholly-owned trading subsidiaries and marketing companies. Sogo shosha participate in natural resource development projects and manufacturing joint ventures with minority equity shares and long-term purchasing contracts. Thus, the primary purpose of sogo shosha investment is to enhance their trading activities, and the leverage is enormous despite their relatively small amount of investment. Sogo shosha investment is considered a unique prototype of Japanese DFI.
Sogo shosha first emerged in the Canadian economic arena in 1954 after World War II. With the establishment of their wholly-owned trading subsidiaries which are often subordinate to the American counterparts, sogo shosha located their offices in the four strategic cities. Their locational preferences are complex. Nonetheless, the recent relocation of sogo shosha headquarters to Toronto corresponds to its dominance in the Canadian urban industrial hierarchy. The locational preference of Vancouver over Montreal is a special feature of the Japanese trading companies.
