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Exciting new export opportunities with Japan

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Australia’s free trade deal with Japan was implemented in January 2015. More than a year later, where are the opportunities emerging in Australia’s second-largest export market and the world’s third-largest economy?

Beef, grape and wine growers have been among those to capitalise on the competitive advantages facilitated by the Japan Australia Economic Partnership Agreement (JAEPA), described as the most liberalising bilateral trade deal Tokyo has ever signed.

However, in an October 12 speech to the Queensland Japan Chamber of Commerce and Industry (QJCCI), Tak Adachi, Trade and Investment Queensland’s (TIQ’s) Japan trade commissioner, highlighted opportunities due to changes in both government policy and society along with corporate policy.

Outbound M&A activity

“Japan is going global with record outbound M&A (merger and acquisition) activity – and what’s driving this is a declining and ageing population, cheap money and a globalisation strategy,” Adachi said.Tak Adachi

According to Dealogic, 2015 saw a record US$95 billion of outbound M&A by Japanese companies, despite the yen’s weakness against the US dollar. Australia has also been the recipient of Japanese investment, including Japan Post’s record $6 billion takeover of Toll Holdings last year and a recent $350 million takeover offer for tech firm ASG Group from Japan’s Nomura Research Institute.

With Japanese companies reportedly amassing US$1.5 trillion in cash holdings and negative interest rates introduced by the Bank of Japan, the potential for further growth in overseas acquisitions is obvious.

Social changes

Adachi also pointed to demographic changes in the world’s most advanced ageing society that are also affecting businesses and consumption. Japan boasts one of the world’s healthiest and longest living workforces, with the world’s longest life expectancy at birth of 83.7 years.

“Recently I ordered something from Amazon and the couriers arrived – an old couple both aged over 65, walking around with a little knapsack delivering books!” he said.

For marketers though, the rise of dual-income households is another important phenomenon that is helping to boost ecommerce via platforms such as Amazon and local company Rakuten. Helped by “Womenomics,” the government policy aimed at encouraging more female workers, the number of dual-income households has now reached the same level as single breadwinner households in 1980, with the latter halving over the same period.

While Japan’s population slipped below 126 million in 2015, down from its 2009 peak of over 127 million, the decline has yet to hit the nation’s capital. Greater Tokyo has experienced a net population inflow for 20 straight years, with more than 90 per cent of the new arrivals aged from 15 to 29, making it still the world’s largest and richest city with estimated gross domestic product of US$1.5 trillion.

Range of incentives

Australian businesses can tap into opportunities generated by the government’s “National Strategic Special Zones,” which in Tokyo include a range of incentives and support for foreign firms and entrepreneurs establishing businesses in the capital.

For example, entrepreneurs wishing to set up a business in Tokyo can gain residency for six months without satisfying the standard criteria, with special support from the local government.

Australian businesses eyeing expanding to Japan can benefit from obtaining expert local assistance, as explained by Ko Nagata, managing director of Global Sky Group, which operates the Queensland Business Centre in Tokyo.

“Australian businesses entering the Japanese market, especially SMEs, need language and marketing support to ensure they take advantage of opportunities in the world’s biggest and richest city,” he said.

“With the 2020 Olympics fast approaching along with the 2019 Rugby World Cup, Australians have both sporting and business reasons for venturing into the heart of Asia’s most advanced economy.”

‘Super Smart Society’

Under a 26 trillion Japanese yen (A$328 billion) plan announced in January 2016, the Japanese government aims to build a “Super Smart Society” which will make the nation the world’s most “innovation-friendly country” and foster technological solutions to socioeconomic challenges.

According to TIQ, the policy involves advancing the use of information technology, artificial intelligence, robots and the Internet of Things to enhance national competitiveness, affecting such industries as financial services, healthcare and transportation.

Adachi also pointed to tax changes which will see the corporate tax rate drop from 31.33 per cent in fiscal 2016 towards the 20 per cent range “in the next several years,” making Japan more competitive with its Asian rivals.

Opportunities for Australian know-how are also opening up in tourism, with the nation recently beating its 2020 target of 20 million foreign visitors years ahead of schedule.

Popular destination

“Don't be surprised if Japan becomes Asia’s France,” Adachi said.

The Tokyo-based trade commissioner also highlighted Japan’s energy deregulation as aiding resource exporters, along with market openings from JAEPA for Australian wine, chocolate and vegetables.

For education providers, government and private efforts to support students studying overseas have included the A$150 million “Tobitate” program, with Australian schools a popular destination for Japanese English-language students.

Adachi noted the popularity of International Baccalaureate (IB) education, with Japan seeking to increase the number of IB schools from 18 in 2013 to 200 by 2018.

For Australian exporters, carving out a niche in Asia’s safest and democratic society has rarely appeared more attractive as it transitions towards a new phase of growth.

Anthony Fensom is an experienced business writer and communication consultant with more than a decade’s experience in the financial and media industries of Australia and Asia. 

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