This paper examines the extent to which the Asian currency crisis of 1997–1998 impacted upon the behaviour of Japanese foreign direct investment (FDI) in the manufacturing sector. Much literature has claimed that transnational corporations (TNCs) are unlikely to be firmly embedded in the host countries where they operate. If this is the case, then Japanese firms in Asia might have exhibited a high degree of disinvestment or plant closure and transfer of operations to other countries following the onset of the financial crisis. Although the events surrounding the Asian crisis and subsequent recovery are still unfolding, FDI data, surveys of Japanese firms, and initial reactions by Toyota Motor Corporation and Matsushita Electric Industrial were reviewed to examine this proposition. In general, the evidence suggests that Japanese TNCs have not fled Asia bur rather they responded in the following manner. First, flows of Japanese FDI into Asia overall held steady throughout fiscal year 1997–1998, although it was set to decline thereafter, at least for the short term. Second, at the level of individual corporations, there is some evidence to show that major firms have maintained their operations, and that they have shifted to an export-orientation so as to earn income from their Asian production in overseas currencies. Third, the survey evidence points to a long-term commitment to Asia by Japanese transnationals.