Despite scepticism about the long-term effectiveness of Prime Minister Shinzo Abe's "Abenomics" stimulus policies, one certainty is Japanese companies will continue to develop their presence in Thailand.
The Japanese economy picked up in the first half of the year after aggressive economic stimulus, but regardless of whether the momentum will continue in the longer term, overseas investment remains vital for business expansion and profit.
The Japan External Trade Organisation (Jetro) estimates that more than 50,000 small and medium-sized enterprises (SMEs) will relocate to Asean countries within the next five years, starting in April. About 5,000 will invest in Thailand.
The move is part of Mr Abe's aim to shift labour-intensive industries such as metals, automotive, electrical appliances and electronics to other countries. Mainly high-tech industries will stay home.
Jetro's senior economist Seiya Sukegawa said the Japanese economy is improving due to the depreciating yen and the good performance of the stock market.
"Under Abenomics, Japan is back, and many SMEs have the intention to develop overseas markets including in Asean," he told the Bangkok Post.
Japan's consumer price index (CPI), a main gauge of inflation, reached a five-year high in October, while the availability of jobs reached a six-year high. The Bank of Japan has said the CPI is likely to rise gradually, with inflation at 1.9% within two years.
Hidenobu Tokuda, an economist at Mizuho Research Institute, projects Japan's core inflation to approach 1% by the end of this year and then to rise more gradually next year.
The country is making progress towards ending deflation, he said.
As part of government policy, Jetro is supporting 1,000 companies to invest overseas within two years. Of the total, 80% plan to invest in Asean countries including Thailand.
Japan is the top foreign investor in Thailand, with 652 projects seeking investment privileges worth 288 billion baht approved by the Board of Investment in the first 11 months of this year.
According to a 2013 survey by the Japan Bank for International Cooperation (JBIC), Indonesia is ranked first in the most promising countries for overseas investment over the medium term, while Thailand is in third place, based on their growth potential.
China falls from first to fourth place for the first time since the survey was launched in 1992. Companies are concerned about increasing labour costs and difficulties in securing a workforce in China.
Shinji Ayuha, director of JBIC's research division, said economic growth is a key factor attracting Japanese manufacturers to Asean. "Whether Abenomics is successful or not, Japanese manufacturers' attitude towards overseas business will not change," he said.
Last year, Japanese investors voted for Thailand as the second top investment destination in the Asean region, following Indonesia. Jetro data confirm that preference for the first eight months this year.
The Technology Promotion Association (Thailand-Japan) (TPA) said discussion with Japanese bank managers showed that investors are more likely to invest in Thailand due to fewer risks.
"Political risks in Indonesia are even higher than in Thailand, and they have less readiness in terms of infrastructure, labour and technology," said Prajak Chertchom, senior general manager for business and technology at the TPA. "The Japanese are not concerned about the political situation here as they believe it will not escalate."
Japan's Finance Ministry reported outward foreign direct investment (FDI) totalled US$122.36 billion in 2012, up 12.5% from the previous year.
Japan's territorial dispute with China has escalated investment in Asean this year after attacks prompted the closure of Japanese factories on the mainland.
For the first 10 months, FDI in China totalled $6.4 billion, compared with US$13.08 billion in Asean. The 2012 figures were $13.48 billion and $10.68 billion respectively.
"Japanese firms know Thailand as a potential market and investment destination, so they are considering how to hedge their risks in case there is a disruption to the supply chain," said Mr Sukegawa, also vice-president of Jetro's Asia region, about a political disturbance.
About half of manufacturing companies in Asean have factories in other locations in case of problems related to natural disasters, political instability or product quality from suppliers. Some companies also procure from multiple sources.
But they are concerned about delays to important government projects such as construction of dykes for industrial estates, water management for the eastern region and policies related to free trade agreements.
TPA president Sucharit Koontanakulvong said SME investments would total at least 500 billion baht, or 100 million baht per project. Thai companies could benefit in terms of expanding their markets and creating new brands.
"A Thai company in the food industry, for instance, could develop local Japanese flavours with the help of Japan and export to their market," he said.
The TPA is surveying which forms of investment Thai companies are seeking, to be finalised in March.
The Japanese government has offered funding of 100 million yen (31 million baht) for a project that will help Thai firms with production and address language and cultural barriers.