In previous periods of export expansions, we witnessed a subsequent increase in trade friction. Similarly, the current rapid expansion of overseas investment has a high potential to cause severe investment friction. Applying Catastrophe theory, this paper aims to analyze how investment friction is generated, and search for a method to prevent such events. Most communities generally welcome the foreign investment because of job creation. But, some complain intensified local competition and foreign "over-presence". The worse a local economy may be, the stronger both opinions for and against Japanese investment may become. Misery index (inflation plus unemployment rate) and the growth rate of overseas investment accumulation as two exogenous variables, the proportion of opposing opinions as endogenous variable, and a "cusp catastrophe" potential function, I formulated an investment friction model. The model parameters were estimated using data from opinion surveys and economic statistics of 13 nations from ASEAN, EU and USA. Based on the findings of this model, investment friction is classified into two categories by origin. I conclude that: (1) Rapid growth rates in overseas investment usually cause a "depressed" friction with time-lag. (2) When local business conditions make a turn for the better, it is also the critical point for "independent" friction.
