Softbank’s announcement to buy 70% of Sprint Nextel Corp. for $20.1 billion caused its stock to plunge 17% in Japan that day. Investors had been through it before: a company pays way too much to accomplish its CEO’s megalomaniac goals, only to get mired in a corporate culture clash, faulty execution, and other overseas nightmares. Past performance isn’t exactly an endorsement: from 2000 to 2011, the net amount of market value lost by Japanese acquirers a year after deal announcement was $330 billion—a “terrible” track record.

The Softbank announcement was the most visible part of Japan Inc.’s pursuit of foreign interests. But in its shadow, Japanese companies are quietly heading hand-in-hand with the Japanese government into iffier areas, like Bangladesh, where they struggle with the most basic impediments to investment.

“Political violence scares investors,” said Shiro Sadoshima, the Japanese Ambassador to Bangladesh, during a discussion on October 15. Investors were worried about the next election. And they have to deal with energy shortages and blackouts. Yet, by the end of September, 135 Japanese companies had a base of operation in Bangladesh, up from 113 a year ago. “It has doubled over the last five years,” the ambassador said. These corporate trailblazers include Honda, which has an assembly plant in Bangladesh and is planning to build a manufacturing plant.

The reason: rising labor costs in Southeast Asia where Japanese companies have invested heavily. So poor, low-wage Bangladesh is becoming a “golden opportunity,” the ambassador said, despite the chilling risks. Japan would be involved in developing energy projects and a deep-sea port perhaps, he said—and funding the metro rail project in Dhaka, well, Tokyo would give its response soon.

Japan Inc. at work. The government greases the wheels, and it promotes and helps fund projects overseas that Japanese companies then execute. The irony is that the government has become the most indebted in the world with no chance of being able to back out of its cul-de-sac. Even the Ministry of Finance isn’t hiding it anymore.

But it’s not just the central government that is intertwined with business. Local governments as well. For example, those that have been involved in developing and maintaining advanced water treatment systems are now scrambling to get their share of a worldwide market that is expected to reach $1.1 trillion by 2025.

One of them is Tokyo Suido Service Co. (TSS), of which the Tokyo government owns 51%. It has developed a water leakage detector that, when placed on the pavement, locates the sounds of water leaking from underground pipes. A device that the Metropolitan Waterworks Authority of Thailand could use. Its system is in such a state that about 36% of the water that goes into it leaks out before reaching the end user—”nonrevenue water,” it’s called. During a demonstration last year, the company identified 10 leaks and 50 malfunctioning water meters. Subsequent repairs allowed the Thai waterworks company to cut nonrevenue water to 3% in the tested areas. And two weeks ago, TSS inked a maintenance contract.

Japan Inc. has also been a formidable investor in China, and a major trading partner. Then the Senkaku Islands conundrum blew up. Japanese business leaders with experience in China were shocked by their government’s incompetence. China responded with state-encouraged ruckus, accompanied by mob violence and vandalism not only against Japanese businesses but against Chinese-owned ones that sell Japanese brands, such as car dealerships, and against Chinese individuals and their property if it happened to be a Japanese brand. This was followed by saber rattling on all sides.

A phenomenal mess. Japanese plants in China have been shut down. Chinese workers have been furloughed. Demand for Japanese products, particularly cars, has collapsed—at least temporarily. Intimidated Japanese businesspeople, if they’re still in China, are trying to keep a low profile, staying indoors, nurturing second thoughts, and perhaps dreaming about Bangladesh.

Japan had been flooded by Chinese tourists and their money. Suddenly … mass cancellations, empty rooms, dreadful calm instead of loud, and for Japanese ears chaotic, Chinese voices that came with the glitter of credit cards and the rustling of always pristine and nearly sacred ten-thousand-yen notes.

Instead of money, acrimony is once again flowing both ways. Japanese investments in China may become scarcer, as Japan Inc. sorts through its options. While this happened before, and was resolved before, this time the damage appears to be deeper. It’s a textbook case of how Japan Inc.’s normally slick strategies can descend into complete disarray. 

And here is my book about Japan. It all started in France with a Japanese girl—a “funny as hell nonfiction book about wanderlust and traveling abroad,” a reader tweeted. BIG LIKE: CASCADE INTO AN ODYSSEY. Read the first few chapters for free on Amazon.

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