Japanese investments in Israel surge in 2019

Number of deals nearly doubles previous year’s, worth a total of $100 million more, report by Harel-Hertz Investment House shows

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Illustrative image of a cherry blossom tree near Mount Fuji in Japan (Phattana; iStock by Getty Images)
Illustrative image of a cherry blossom tree near Mount Fuji in Japan (Phattana; iStock by Getty Images)

Japanese investments in Israel surged in 2019, with 53 new deals amounting to $815 million, according to data released by Harel-Hertz Investment House. This is the largest number of investments in deal terms since at least 2001, according to the data.

In 2018, there were 28 deals valued at some $710 million, the data showed. 2017, with 37 deals and more than $2 billion invested by Japanese firms in Israel, was the record year in terms of deal valuations. Mega deals that were inked that year included the sale of pharmaceutical firm NeuroDerm to Mitsubishi Tanabe Pharma for $1.1 billion in cash, in one of the biggest-ever purchases of an Israeli firm outside the tech field, and the $627 million acquisition of a 22% stake in geothermal energy firm Ormat by Japan’s ORIX.

Since the year 2000, Japanese investments in Israel have totaled over $7.2 billion in 233 investment deals, the data showed. The level of investments surged after 2015, following high-level visits by Prime Minister Benjamin Netanyahu to Japan in May 2014 and Japanese leader Shinzo Abe’s visit to Israel in January 2015. In May, El Al, Israel’s flagship airline, said it would start offering direct flights to Tokyo from March 2020.

For years, Israel-Japan trade stuttered and was kept under wraps, with the very conservative Japanese reluctant to embrace Israel because of traditional fears of upsetting its Arab oil suppliers, or because of cultural differences.

Prime Minister Benjamin Netanyahu (right) and his Japanese counterpart Shinzo Abe, January 18, 2015. (Miriam Alster/Flash90)

Japan, the world’s third-largest economy, is home to some of the largest manufacturing and automotive companies. As the world moves toward digitalization and software, these firms are now scouting overseas for tech solutions to help them maintain their edge over global competitors, and Israel has become a popular hunting ground for them.

The top five investors in the 2001-2019 period were the Japanese multinational conglomerate SoftBank Group, with 15 investments totaling some $1.1 billion; financial services firm SBI and its units, with 19 deals totaling $231 million; Mitsui Group and its units, with 20 deals totaling $167 million; and Hitachi and telecommunications firm Nippon Telegraph and Telephone (NTT), with 10 deals each totaling $36.3 million and $36 million respectively, the data showed.

Elchanan Harel, the founder and president of Harel-Hertz Investment House Ltd. (Courtesy)

Harel-Hertz said that while until 2015 Japanese investors in Israel were limited to a few large trading and industrial firms, this pool of investors is today diversified, and includes car manufacturers, financial institutions, insurance companies and small and medium-sized venture capital firms.

In 2019, the 53 investment deals were made by 34 companies, of which 24 were first-timers in Israel, Harel-Hertz said. Most of these players were strategic investors rather than purely financial ones.

Of these, most of the investments went to the information technology and cybersecurity sectors, 31%, and 18% to the life-sciences sector. The last two years have seen a jump in interest in the automotive and fin-tech fields, the data showed.

Harel-Hertz said the data provided is for those deals that were made public, and there may be more deals that were kept under wraps for business purposes.

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