Tuesday 16 July 2019

Trade deal makes Japan a land of rising opportunities

Japan is the fourth-largest economy in the world (by GDP) and in 2016 exports by Enterprise Ireland client companies increased by 19pc to €149m. (stock image)
Japan is the fourth-largest economy in the world (by GDP) and in 2016 exports by Enterprise Ireland client companies increased by 19pc to €149m. (stock image)

Tom Cusack

The concept of Wa, best described by the English word harmony, lies at the heart of the Japanese approach to business. Although it is important to search for a solution, this must not be achieved by disturbing the peace.

This July, the European Union and Japan reached a state of Wa, signing an agreement in principle on the main elements of a significant EU-Japan Economic Partnership Agreement.

For EU member states, the Economic Partnership Agreement will remove the vast majority of duties. In addition, it will focus on resolving non-tariff obstacles to trade, such as Japanese technical requirements.

Japan is the fourth-largest economy in the world (by GDP) and in 2016 exports by Enterprise Ireland client companies increased by 19pc to €149m. Irish success stories in the market include fintech companies like Fexco and Daon, medical-device company Aerogen and the renewables player C&F Green Energy.

Enterprise Ireland is focused on helping more Irish-owned companies increase their exports to Japan, particularly in the digital technologies, medtech, aviation, fintech and agri-tech sectors.

The elimination of tariffs on medical devices and pharmaceutical products is especially welcome news. Japan is already the second-largest healthcare and pharmaceutical market in the world, with national medical expenditure estimated at around €300bn.

With one of the fastest-ageing societies on the planet, the proportion of its 128 million population that is over the age of 65 is expected to exceed 30pc by 2025 and reach 40pc by 2055, creating ever-increasing demand for health-management services, medical devices, generics, over-the-counter medicines and novel pharmaceuticals.

The agreement is also set to open up the services markets, in particular for financial services, e-commerce and telecommunications - again, important sectors for Irish exporters.

Moreover, it will guarantee EU companies access to the Japanese procurement markets in 48 large cities and remove obstacles to procurement in the railway sector at national level. Selling to the Japanese government may appear to be a daunting prospect, but with the right local partner and/or staff, there are many opportunities in areas such as renewables, aviation, fintech, agritech, healthcare and digital technologies.

The Economic Partnership Agreement also brings good news to food producers as it will scrap duties on many cheeses, allow the EU to increase beef exports to Japan and reduce, or in some cases eliminate, duties on pork.

Given that Japanese buyers can be risk-adverse, the market is best suited to companies that can provide high-quality, market-proven services or products.

Success also demands an understanding of Japanese business culture and etiquette.

That said, demonstrating a small knowledge of Japan's culture and traditions will go a long way. Key national values to be aware of include personal responsibility and the ideal of everyone working together for the good of the larger group. Education, ambition, hard work, patience and determination are also highly regarded.

Relationships drive deals. Without the right depth of relationships with the right people, it can be very difficult.

Generally, decisions are taken over much longer time-frames, through a lengthy consensus-building process. Organisations should be prepared to invest for medium-term results, rather than expecting too many quick wins.

However, once a decision is taken, Japanese business relationships tend to last.

Based on the agreement in principle reached earlier this month, negotiators from both sides will now aim to resolve all remaining technical issues by the end of the year and conclude a final text of the agreement for approval by the European Parliament and member states, opening up a new era of opportunity in Japan.

Tom Cusack is Enterprise Ireland's Regional Director for Asia Pacific.

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