With a trade relationship with Australia stretching back more than half a century, Japan shouldn’t be dismissed as an export market, despite economic woes and the rise of its neighbour China. Read the headlines about Japan's economy over the past year and you'd be forgiven for believing it was the land of the settingsun. If you think Japan is entering its twilight years as one of the world's great economies, however, you'd be underestimating its intrinsic power. First, the facts. Yes, the Japanese economy is contracting. Its current economic woes stem from its exposure to the global market; as an export-oriented country, when worldwide consumption dropped, so did its revenue. However, many people forget the scale of Japan's domestic market, says Elizabeth Masamune, Austrade's senior trade commissioner in Tokyo, and Japan country manager. She points out that the 'doom and gloom' figures relate to export production, whereas there's a huge section of industry devoted to a domestic market of more than 125 million people. And while Japanese domestic consumption has stagnated, "what we certainly have seen is growth in trade and sales of Australian product to Japan," she reports. "Just because Japan might not be growing, it doesn't mean that our sales to Japan are not growing."
Areas of opportunity
Masamune identifies four main areas where Australian exporters can do well in Japan: the first is food. "Japan has only 40 percent food self-sufficiency, so they have to import food," she explains. Lately Japan has been buying from exporters in Asia, but food safety scares from suppliers such as China have presented an opportunity for Australian providers to re-establish a reputation as a quality supplier. "Japan takes 25 percent of Australia's food exports already so this is a very substantial opportunity in my view to just change out image a little bit, move up the value chain and also start supplying food-and wine-we weren't supplying before," she says. Australia is also strong in another commodity: minerals. Thankfully, Japan still wants our minerals and are willing to race China to buy those resources, despite a decline in demand due to a drop in its own export production. Unexpectedly for some, given Japan’s advanced reputation, technology ranks highly as a big opportunity for Australia. Japan invests more of its gross domestic product in research and development than any other nation and has 3.5 times more patent submissions than its nearest rival, the USA. "Technology is how they're going to maintain their competitive edge. Given that their population is declining and that they don't have any natural resources, they see this as the key way of being able to stay ahead," says Masamune. She suggests that Australian companies looking for investors could be in luck: "The Japanese have realised that it doesn't have to be invented in Japan to be good. They are quite happy to invest in helping start-up technology companies to get going. For Australian technology companies there's a very important market here." And the biggest opportunity? Demographic shifts, says Masamune. Japan's ageing population will see a few changes. The first is the retirement of a generation of workers, prompting a skills shortage. "They could have immigration but they're not very keen on that, so they need to bring more women into the workforce to boost productivity," notes Masamune. She says that means openings for diversity programs as well as facilities such as childcare, training for women and even an indirect market for timesaving household devices. The retirees, known as the dankai generation, will also become an important market in themselves. Dankai are typically wealthy and are likely to lead long, active lives. "They're into lifelong learning. Even grandma now has her version of Nintendo that she can play with that has bigger buttons on it," says Masamune. "The Japanese companies are onto this, but there would also be suitable products and services from Australia." Inbound tourism pitched at this generation would also be a good move, she suggests.
It's tempting for Australian exporters to look at emerging markets that are set to grow, rather than a mature, competitive market like Japan, but Masamune reminds businesses that our 50-year trading history provides a ready partner and an easy trade platform for exporters. But Australia does have to leave some of its preconceived ideas about the Japanese consumer behind, she warns. "You couldn't sit around and say, like you could 10 to 15 years ago, that all Japanese are middle class and they're all homogenous and they generally all behave in this way-they don't any more. There has been a significant diversifying of the market, which just makes it a bit more complex." We must also evolve our value proposition and be careful not to take the market for granted, she advises: "The worst thing an exporter can do is say 'my product's selling pretty well, I'm just going to sit and forget'." Finally, Masamune says we mustn't forget that Japan is a global economy. "There's a lot more opportunity for Australia and Japan to work together in Asia where we both have significant manufacturing, service and sales networks," she points out. "We have a presence across the region and we could definitely work in partnership on various projects."
Doing it differently
- Look at the regional economies. "The Osaka economy alone has a GDP twice the size of Australia," says Masamune.
- Find the crossover. Start looking at getting into a different industry segment or user base than you might have already acquired.
- Go low. Low cost fashion, at a quality level the Japanese will accept, is becoming increasingly popular.
- Aim high. There are still a lot of wealthy consumers in Japan: they constitute about a third of the world's luxury market.
- Go online. "Online sales are taking off. Rakuten is their version of Amazon and they're making a mint," says Masamune.
CASE STUDY: LINC Media
Japan, 1983: Two well-known electronic brands, a major patent dispute and huge amounts of money. The action made a lasting impact in Japan, says Terrie Lloyd, CEO of LINC Media, a business incubation company: "These days it’s hard to find Japanese companies, especially major ones, engaged in IP theft." For more than 26 years, Lloyd has run several businesses that provide information or services to foreign software, biotech and media companies accessing or looking to access to the Japanese market. "We’re basically a pre-sales company, so we go out and find distributors for the companies to sell their product in Japan," he says. With more foreign businesses entering the country over the years, Lloyd says it’s not difficult to set up shop in Japan but relationships on the ground make it easier, especially if you have a local representative: "Having a local partner to set up the company originally is usually cheaper and quicker." Lloyd represents biotech companies that have significant need for IP protection, and he says this is where patenting becomes vital. But patenting is not just about protection when doing business in Japan; it also makes these businesses more attractive to Japanese firms. "It’s a valuable commercial asset when you’re going in and negotiating terms." Armed with a patent attorney, registering patents for clients in Japan is pretty simple but can be expensive. Lloyd suggests businesses first consider the commercial viability of the product, and ask whether it’s worth the expense. He also recommends ensuring your patent is strong. "Japanese companies are very competitive, so if you have a weak patent, they will exploit it," he says. Lloyd encourages Australian businesses looking to enter Japan, saying there are many opportunities for new and exciting ideas. "The Japanese are somewhat bound in tradition. There are risk-takers here, but not as many as there would be in other countries, so it’s not that hard for a free-thinking, non-Japanese to do business here," he says. -Case study supplied by IP Australia (www.ipaustralia.gov.au)