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This paper examines the impact of Japanese foreign direct investment (FDI) on Australia with an emphasis on employment creation, skills and human capital development, and industrial relations. Particular focus is given to the Australian automotive industry as it receives one of the largest shares of Japanese FDI and has a significant proportion of employment by Japanese subsidiaries. The paper begins with an analysis of the growth and pattern of Japanese FDI in Australia and the structural changes of recent decades. This section also examines trends in the inflow of FDI and reinvestment by industry, and geographical and sectoral distribution of Japanese FDI in Australia and employment by Japanese firms over time. The sections that follow consider changes in the investment mode and ownership structure of investment, and motivation for Japanese businesses to invest in Australian industry. The paper then details the impact on Australia of Japanese FDI in terms of direct employment, value added, exports and local procurement. It then goes on to assess Japanese management and employment practices and industrial relations, and then studies the extent to which management methods are transferred to the Australian context. The next section provides background information on government industrial relations policy since the Workplace Relations Act 1996 and its effects on Japanese and Australian firms. The authors conclude that, overall, Japanese subsidiaries in Australia appear to have employment and industrial relations practices that are relatively similar to other enterprises. However, the diffusion of management to local employees seems to be slower in Australia than in other industrialised countries. An appendix outlines the coverage and limitations of Japanese statistics on FDI.