Japan Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Japan is the EU’s second largest trading partner in Asia and sixth overall, while the EU is Japan’s third largest trading partner. Japan is also an important investor in EU countries. EU exports to Japan consist mainly of engineering, transport and chemical products, imports from Japan to the EU are engineering, transport, chemical and agricultural products.

  • Allcountrylist: Overview of major industries in Japan, including mining, construction, transportation, tourism, and foreign trade.

Trade exchange with the EU (million EUR)

2017 2018 2019 2020 2021
Exports from the EU (million EUR) 54,061.60 57,798.00 62,629.00 55,207.80 62,353.10
Imports into the EU (million EUR) 57,128.50 59,684.50 63,030.20 54,956.10 62,361.30
Balance with the EU (million EUR) 3067.0 1,886.5 401.2 -251.7 8.2

Source: European Commission

Trade relations with the Czech Republic

According to the current turnover, Japan is the 16th most important foreign trade partner of the Czech Republic, while the volume of mutual trade shows a long-term moderate growth. For Japan, according to the volume of exports, the Czech Republic is in 39th place, according to the volume of imports, it is in 51st place. The Czech Republic’s trade balance with Japan has been passive for a long time. Outside of Europe, Japan is the 4th most important trading partner of the Czech Republic. Various industrial equipment, machines and means of transport contribute the most to the volume of Czech exports, industrial consumer goods are an important item. A traditional and growing item is food and beverages and especially pet food. Japan is also one of the biggest buyers of Žatecký hops. In imports from Japan, the largest import group is machinery and means of transport, as well as industrial consumer goods (specialized devices).

Trade exchange with the Czech Republic (billion CZK)

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 67 19.8 22.6 20.8 ON
Imports to the Czech Republic (billion CZK) 18.2 68.2 70.5 66.7 ON
Balance with the Czech Republic (billion CZK) -49 48.4 47.9 45.8 ON

Source: CZSO

Trade relations with countries outside the EU

The most important trading partners of Japan are located in the Indo-Pacific region: China, USA, Taiwan, South Korea, Hong Kong, Thailand and only then Germany. From Japan’s point of view, the fastest growing markets are also in its neighborhood: Indonesia, India, Thailand, the Philippines and Australia. As supply chains shorten, this trend can be expected to continue to strengthen. At the same time, the Japanese government will try to limit the dependence of Japanese exports on the Chinese market.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 539,518.9 569,621.0 537 131.0 489,897.2 580 246.9
Imports to countries outside the EU (million EUR) 514,154.0 576 525.2 549,819.8 486,578.9 591 288.7
Balance with non-EU countries (million EUR) 25,365.0 -6,904.2 -12,688.8 3,318.3 -11,041.8

Source: EIU, Eurostat

Foreign direct investment

The Japanese government encourages the inflow of foreign direct investment (FDI) into the country, and attracting it is set as an official goal in several government strategies. Gradually, all formal barriers to business activities of foreign investors were removed, with a few exceptions (the media and telecommunications sector). The government agency responsible for the inflow of FDI is the Ministry of Economy, Trade and Industry (METI) together with the JETRO agency. Together, they created a “one-stop shop” for foreign investors to help them establish themselves in the Japanese market and the related administration.

Despite this and other factors such as the level of development and well-being, an independent judiciary, a low level of corruption and a stable legal environment, the share of FDI in the country’s GDP is the lowest in the OECD. Foreign investment runs up against a traditional reluctance to mergers and acquisitions as well as an inflexible labor market. Similarly limiting are the long-term relationships between companies and suppliers, which make it difficult to enter the local market. For these reasons, the Japanese market is also extremely difficult for a Czech investor, and Czech investments are not registered in the country.

FDI came mainly from the United States of America, the Cayman Islands, the European Union and South Korea, and was directed mainly to the electrical engineering, transport equipment manufacturing, chemical and pharmaceutical industries and financial services sectors.

FTAs and treaties

Treaties with the EU

The EU-Japan Economic Partnership Agreement (EPA) began negotiations in 2013 and was finalized in December 2017, with the exception of the investment chapter. Subsequently, the EPA was signed by both parties in July 2018 and entered into force on February 1, 2019 after a ratification process. The EPA created a free trade area that covers a third of the world’s economy and more than a fifth of world trade. At the same time, it represents a significant simplification and cheaper trade cooperation between the EU and Japan.

Immediately on the entry into force of the agreement, 90% of EU exports to Japan were duty-free, and after the end of the transition periods for the most sensitive products, 97% of EU exports will be duty-free. Independent studies show that applying the benefits contained in the EPA could lead to a potential increase in EU exports to Japan of up to 33%, and Japanese exports to the EU could increase by 24%. In addition, by concluding the agreement, both sides sent an important signal to the whole world that the EU and Japan support free trade based on rules, shared values ​​and the protection of the highest standards. The entry into force of the EPA brings with it significant business opportunities for Czech companies, especially in the area of ​​food and agricultural exports (e.g. removal of customs duties on malt, cocoa products, tobacco products, wine and spirits, increase in the import quota for dairy products,

Contracts with the Czech Republic

  • Treaty between the Czechoslovak Socialist Republic and Japan on the prevention of double taxation in the area of ​​income taxes, Prague, 11 October 1977, published No. 46/1979 Coll.
  • Agreement between the Czech Republic and Japan on social security. The contract was signed in Prague on February 21, 2008 and entered into force on June 1, 2009. Updated on February 1, 2017.

Other countries

Japan has a dense network of bilateral and regional trade agreements that govern trade with, for example, China, South Korea, Australia, Chile, India, Indonesia, Malaysia, Mexico, Mongolia, the Philippines, Singapore, Thailand, Switzerland, Canada and a number of other countries. The most important regional agreements include the CPTPP, RCEP and the agreement with ASEAN. In 2019, Japan signed two agreements with the US that reduce tariffs on selected agricultural and industrial products and set rules for digital trade,

Developmental cooperation

Japan is a developed country and is therefore not a recipient of development cooperation from the Czech Republic. Both countries occasionally cooperated in the past on some development projects in third countries, such as in Georgia or the Western Balkans.

Prospective fields of study (MOP)

Energy industry

The energy sector is promising for opportunities in Japan in the long term. Japan has very limited raw material resources, and after the shutdown of most nuclear power plants as a result of the Fukushima accident in 2011, the Japanese government’s interest in supporting the development of renewable energy sources has increased significantly. One of the long-term promising options, in which Czech companies have been actively participating for many years, is the development of hydropower, because due to the mountainous terrain and the large number of rivers and canals, Japan is an ideal place for the construction of small and medium-sized hydropower plants. The government is also investing considerable resources in the research and practical application of hydrogen technologies, in which Japan sees a great future. Considering the elimination of the consequences of the aforementioned accident in Fukushima, which will last several decades, there is also continued high demand for technologies to remove nuclear contamination and technologies to further increase the safety of power plants. Prospective opportunities are also offered by future sources of nuclear energy, especially in the area of ​​the development of small nuclear reactors, for which Japan has high expectations and considers them to be a cheaper and, above all, a safer variant of classic nuclear power plants.

ICT

As in all other developed economies, in the case of Japan, the rate of use of information technology in society is very high. The declared states of emergency in the spring of 2020 and the beginning of 2021 forced the conservative Japanese authorities and companies to switch to intensive online operations and only underlined the need for high-quality and reliable provision of general IT technologies, such as cyber security, processing of large amounts of data, network monitoring or high-quality localization and translation programs. The transition of a large number of companies to at least partial home office-type operation then created a great demand for the digitization of documents, the development of an online payment system and the acceleration of preparations for the so-called “digital yen”, which should consist in the interconnection of cashless payment systems, which are independently provided at present by several different institutions (in particular commercial banks, public transport operators and mobile operators). Other prospective ICT sectors that will emerge strengthened from the current crisis include the Internet of Things, artificial intelligence, effective management of municipalities and their complete infrastructure (so-called “smart cities”) or e-commerce, where the number of purchases made is increasing online.

Entertainment and leisure

Even before the coronavirus crisis, the gaming industry was one of the fastest growing sectors of the world economy. In Japan, computer games are very popular and saw a further increase in usage during the state of emergency. Japan’s game industry market, with a size of almost 15 billion USD, is the third largest market in the world after the USA and China. From this segment, the area of ​​mobile games is growing the fastest, which already amounts to billion USD in 2020, and with regard to the gradual improvement of powerful mobile phones, its further steep growth is expected. In addition, Japan has long been one of the countries that sets the trend in the development and future direction of this industry – local companies such as Nintendo, SEGA or Sony/Playstation are among the icons of the gaming industry. The Czech Republic has a long-term very strong position in this sector, game studios such as Warhorse Studios, Bohemia Interactive, Amanita Design, Beat Games or DIVR Labs has achieved global success with many game titles and most of them have already successfully entered the Japanese market. In addition to video games, opportunities for success in the Japanese market also include a very widespread segment of educational games, simulators for practical training and entertainment, or games focused on amateur artistic creation (videos, music, design, drawings, etc.), which are also popular and widespread in Japan. This is also related to the growing interest in VR/AR/MR technologies.

Healthcare and pharmaceutical industry

The aging population and the famous Japanese longevity place significant demands on health care and its financial and personnel provision. Japan’s traditional inclination towards modern technologies and especially towards robotics creates potential for Czech companies in the field of specialized medical devices, digital technology or diagnostic devices, including devices capable of continuously monitoring the patient without being confined to a bed and calling for help if necessary, or robotic solutions that can contribute to the mobility of clients or facilitate the work of caregivers and medical staff in any way. At the time of the strictest coronavirus restrictions, for example, humanoid robots have proven themselves very well in treatment or care facilities for the elderly, not only in the role of “feeders” of various medicines or aids, but also as substitute companions, who replaced patients with limited contact with their closest relatives. The use of robotics in Japanese healthcare will undoubtedly continue to increase based on similar experiences. For Czech companies and research institutions, the post-coronavirus era will bring an increase in opportunities in the field of supplies or joint research and development in the field of medical devices, medical and diagnostic devices and hospital equipment, possibly in the development and testing of drugs and vaccines. A separate chapter, where the pharmaceutical industry organically mixes with the field of ICT, is the planned development of so-called “Smart laboratories” for the automation, intensification and acceleration of research using artificial intelligence, IoT and robotics.

Agricultural and food industry

Japan is the fourth largest importer of food in the world and the largest importer of meat. One of the main reasons for low self-sufficiency is the relatively small area of ​​land usable for agricultural purposes, currently around 12% of the total area is used. Food self-sufficiency is therefore one of the important topics of Japanese agrarian policy. Japan now has food self-sufficiency at a record low 37%. During the state of emergency caused by the Covid-19 epidemic, due to the reduced opening hours of restaurants, the demand for semi-finished products, ready-to-eat meals and basic foods such as meat increased due to greater interest in cooking at home. In the post-coronavirus era, customers are expected to return to restaurants and the associated increased consumption of alcoholic beverages and ingredients used in restaurant facilities for food preparation.

Japan Trade