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Japanese companies show keen interest in Israeli startups

Focus on cyber security, fintech and self-driving software

The prodigious technological capabilities of Israeli startups is attracting attention from all over the world.   © Not selection

TEL AVIV -- Investment by Japanese companies in Israel is soaring in expectations of tapping into technologies such as autonomous driving through a business partnership with local startups.

The value of investment by Japanese firms totaled 5.2 billion yen ($45.7 million) in 2015, a 4.7-times increase from 2013 and 26 times the amount in 2012, according to the Bank of Japan's Balance of Payments statistics.

According to the Tel Aviv office of the Japan External Trade Organization, or JETRO, the number of Japanese companies' local subsidiaries in Israel was around 35 as of early 2015. The figure jumped to about 50 as of November 2016.

The rapid entry into the Middle Eastern country by the Japanese companies reflects their efforts to team up with local startups that have high technological capabilities in cyber security, fintech and self-driving technology.

Sony announced last January the acquisition of Altair Semiconductor, a communications chip maker in Israel, for $212 million.

  © Not selection

In 2015, major Japanese advertising company Dentsu bought digital performance marketing agency abaGada Internet.

Online marketing giant Rakuten in 2014 acquired messaging and calling app Viber, whose operations are based in Israel.

The development of a collision avoidance system by Israel-headquartered Mobileye, which Nissan Motor features in its cars, has made the country the linchpin for the global auto industry.

Google purchased the Israeli map app Waze in 2013 with an eye toward putting driverless cars on the road.

The negative image of Israel that has been harbored by Japanese companies seems to be improving.

The business leaders' impression of the country apparently changed drastically when they accompanied Japan's Prime Minister Shinzo Abe to visit the country in January 2015.

One factor that has held back Japanese companies from doing business in Israel is that country's relationship with Arab countries, which have strained relations with Israel.

Some of the companies which have made foray into Israel deliberately do not list the name of an office set up in the country on their corporate profiles.

However, global companies including Intel, Apple, Google, Microsoft, Samsung Electronics are positioning Israel as an important operations base.

China is also an active investor in the country, as a private-sector survey showed 20% of investment in local startups came from China in 2015.

Israel, too, is looking to diversify its economic relations with foreign countries beyond the U.S. and Europe, on which it has focused in the past.

The country has also put its hopes on cooperation with Japan as a springboard for expanding further into Asia whose economies are growing rapidly.

Israeli Prime Minister Benjamin Netanyahu has placed bilateral cooperation as one of his key national policies.

Cyber security is currently at the center of Japanese companies' attention -- the area in which Israel is also taking a keen interest ahead of the 2020 Tokyo Olympics.

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