International Flow of Capital and World City Tokyo

Since the collapse of the bubble economy, the growth strategy of Tokyo as a world city has been doubtful. The purpose of this paper is to reexamine the world city theory and the reality of world city Tokyo. Firstly, this paper tries to clarify the mechanism of world city formation regarding the international flow of capital such as the development of location of multinational enterprises and the growth of international financial transactions. The hierarchy of world cities has been strongly influenced by the organizational structures of multinational companies and those spatial developments over the world. According to the increasing outward investment, such as not only factories but also regional head offices, the international city system has been established. As for the location factors influencing overseas office operations, the proximity to clients and market prospects, language and the business climate is important. The city choice is also changed by the home country of multinational enterprises and the system of cities in the host country. The globalization of finance has played another important role in the growth of world cities. According to the liberalization of financial markets in the 198Os, three international financial centers, London, New York and Tokyo, have rapidly and synchronously grown. The largest money supplier was Japan backed by the large current account surplus, the high savings ratio and the bubble economy. International money flow is influenced by the disparity of interest rates and the degree of a free financial system in a country. In the late l980s, most Japanese money flowed out as a security investment into the USA and an equity finance in the Euro market. Under the dominance of USA as a key-currency nation, dollar convertible money flow has played a key role and many transactions have been liquidated at the New York market. The weakness of the Tokyo market became an issue in the early l99Os when the bubble collapsed. Although the good performance has been kept in New York and London, the growth rate is lower in Tokyo and some foreign financial companies are shifting those branches from Tokyo to Hong Kong and Singapore. Lastly, this paper tries to point out the characteristics and problems of world city Tokyo. New York and London are very strong centers of financial functions and producer services, On the other hand, Tokyo is characterized by the agglomeration of manufacturing industries and the concentration of headquarters. In the l98Os, the internal structure of Tokyo has been drastically changed. According to some propaganda that Tokyo is growing as a world city, some older residential areas adjoined to CBD have been destroyed to construct office buildings. . However, since the collapse of the bubble, the office market has indicated a large excess of supply over demand and there has remained much unoccupied lands and many vacant offices. Crises of the international financial and the office markets in Tokyo have disclosed the city's limit of growth as a world city.