Japan Tops Britain in U.S. Investment : Finance: Although unseated in 1992 as largest foreign investor, British are expected to reclaim distinction in ’93.

In a sign of America’s shifting economic orientation from Europe to Asia, Japan unseated Britain in 1992 as the largest overall foreign investor in the United States, according to a study released Wednesday.

Japan’s cumulative foreign direct investment of $96.7 billion accounted for 23% of the $419.5 billion total and edged out Britain’s 22.6% share, overtaking the perennial leader for the first time, the study by Arthur Andersen & Co. found.

However, the accounting firm noted that Japan has become the largest investor nation “perhaps temporarily,” because British investment has picked up again this year.

Andrew Kane, director of the firm’s international tax and business advisory service, said Britain is rebounding from its recession while Japan’s economy continues to be weak. Japan is also diverting more of its investment capital to high-growth areas in the Pacific Rim, he said.

“But probably we will see the Japanese eclipse the U.K. (in U.S. investment) over a longer period of time,” said Kane, who directed the study. “In any event, Japan wields and yields a great deal of influence over this economy.”

At the same time, a statement on the study issued by the accounting firm minimized the influence of Japanese multinationals in the domestic economy--apparently to deflect a potential negative backlash against Japan.

“Despite a guarded reaction by some Americans to several high-profile entertainment and real estate acquisitions, Japanese control of U.S. business is deceptively small,” according to the statement.

“As of 1990, Japanese investors owned only about 2% of the net worth of U.S. companies (excluding financial institutions) and 2% of manufacturing assets, accounting for less than 0.4% of the U.S.” gross national product, it said.

However, Larry Chimerine, an economist with the Washington-based Economic Strategy Institute, noted the disparity between Japan’s penetration into the United States and America’s difficulties investing in Japan. U.S. cumulative investment in Japan was $26.2 billion in 1992--approximately one-quarter of Japan’s stake in U.S. assets.

“The real story is that we don’t have the same role in their economy as they have in ours,” Chimerine said. “It’s a one-way street.”

Ironically, Japan’s new status as top foreign investor comes as its major companies--many of them hurt by declining real estate values--are pouring less money into the United States.

On an annual basis, Japanese investment has declined precipitously from a peak of $18.7 billion in 1987 to $5.3 billion in 1991 and $3.8 billion in 1992, according to the study, citing data from the U.S. Commerce Department and other government sources.

Britain, meanwhile, showed a net decrease of its holdings in 1992, down $5.7 billion from a year earlier to a cumulative investment of $94.4 billion. But British direct investment surged in the first nine months of this year, with the acquisition of 80 U.S. companies, the study shows.