Japan's companies are producing more overseas than ever before. Total overseas investment came in at 4 trillion yen in 2014, up 8% from the 3.7 trillion yen recorded in 2013, according to data put together by IMF economists Joong Shik Kang and Shi Piao.
Japan: Overseas Investment (Acquisition of Tangible Fixed Assets), 2002-2014
Source: IMF: Production Offshoring and Investment by Japanese Firms (2015)
This represents a failure of Abenomics because, despite ultra-loose monetary policy and the promise of reforms, Japanese firms are not ramping up their investment at home. Instead they are looking overseas for assets and production bases.
Also, this explains why Japan has not seen a significant increase in exports, despite a 20% depreciation in the Yen during recent years. An increasing amount of Japan's manufactured goods and high-value services are made or delivered overseas, thus shrinking the domestic manufacturing base.
The authors argue that this means the Japanese government must work even harder to pass ambitious structural reforms to support long-term growth for the Japanese economy.