Australia has a strong relationship with Japan, providing a solid foundation for Australian SME exporters seeking to enter the Japanese market.
For SME exporters looking to do business in Japan, it is important to consider the potential barriers that may affect them entering this market, to ensure these factors do not act as a barrier to success.
Japan’s population of approximately 127 million makes it one of the world’s largest consumer markets.
High levels of disposable income and demand for premium, high-end goods and services provide a number of great opportunities for Australian exporters.
Mining, agriculture and services all have strong markets in Japan, representing numerous export opportunities for Australian exporters in these industries.
An open door
Japan and Australia’s bilateral economic relationship was further strengthened by the signing of the Japan Australia Economic Partnership Agreement (JAEPA) in July 2014, which provides benefits for Australian exporters on entering the Japanese market.
Once JAEPA has been implemented in full, 97 per cent of Australian exports to Japan will be duty free. This will make a significant difference to resources, energy and manufacturing exports, which will all be duty free on entry to the Japanese market. Agricultural industries such as beef, fruit and vegetables will also receive gradual tariff reductions.
JAEPA will also make it easier for Australian exporters to compete on a cost perspective with multinational players and local businesses in Japan.
Assessing export barriers
Japan’s business climate is generally on par with most other advanced economies.
There are, however, some notable differences to operating in the Japanese market compared to the Australian market, which Australian businesses should be aware of.
One such barrier is the language and culture. English is not widely spoken in business in Japan and therefore most Australian SMEs will find they need to use an interpreter when meeting potential customers and partners.
A second area of potential difficulty is local regulation affecting foreign firms. For example, paying tax can be significantly harder in Japan relative to other OECD nations. Seeking the advice of a local accountant or tax adviser can help Australian SMEs to understand the intricacies of local tax law.
Being aware of these and other potential barriers to doing business in Japan will ensure Australian SME exporters are well-positioned to take advantage of the many exciting opportunities available in the Japanese market.
Andrew Watson is Executive Director, Export Finance, Efic