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Introduction

This paper makes a comprehensive analysis on the development, effectiveness and implications of Japan’s foreign direct investment (FDI) to energy resource-rich countries in the Middle East. Experiences of the first Oil Crisis in 1973 forced Japan to embark on full-scale deployment of energy security policies and strategies, both for domestic and international market. FDI was then regarded as an important diplomatic tool to enhance mutual economic relations with energy resource rich countries, which was then expected to contribute to improving Japan’s energy security. In this regard, this paper will highlight the actual development, outcomes and implications of some of the typical Japan’s FDI in major Middle East countries’ energy related sectors, with an aim to discuss the effectiveness of the FDI strategy from a viewpoint of energy security of Japan and the impacts on the host countries’ economy and society. The paper also discusses the impact of Japan’s FDI strategy to influence other energy-hungry Asian countries including China, Korea and others to replicate Japan’s strategy.