Abstract: The Australian coal industry has been described as being a perpetual case of ‘profitless prosperity’. This implies that foreign companies invest in low-margin mining activities with motives other than profit. It is argued that foreign investors and Japanese trading companies in particular used government investment concessions and subsidies to help create oversupply in the seaborne coal market. The aim of this strategy is to depress contract prices at the cost of achieving reasonable profitability levels, which have historically been well below that of other investors in the Australian mining sector. This study shows that the quasi-integration via concessional funding arrangements is not a credible strategy employed by Japanese trading companies or the Japanese Government. The analysis rejects the hypothesis that via foreign direct investment, Japanese companies are securing coal at below average prices. Furthermore we find no clear evidence of Japanese trading companies using their information advantage as equity investors to secure coal at favourable prices during contract negotiations. Finally we examine the investment behaviour of new entrants in the Australian coal production sector to highlight the differences in investment strategy between Japanese companies and other foreign investors regarding the security of supply.