Looking Ahead for Japan

for January, 2014

Looking Ahead for Japan

Posted on 7 January 2014 in Inter-Cultural Training, Market Insight -

As well as having watched Japan very closely over the last year, I have been reading numerous predictions and thoughts on how 2014 will be for Japan-a testing year indeed for a country that is implementing change, holding out so many expectations whilst sitting under such global scrutiny. After the initial hype of Abenomics wore off and the rejuvenation of the economic didn’t happen overnight, it is inevitable that commentators are looking at possible negative outcomes and risks of Abe’s bold economic strategy. Some of these include:

  • Deflation is too entrenched for the desired inflation targets
  • The structural reforms so badly needed such as market labour reform, trade liberalisation and tax reform, which formed the main part of Abe’s third arrow have been too slow and are not being realised .
  • Energy costs are risiing and with no dates set on re-starting the nuclear plants, this will continue to rise
  • The upcoming sales tax hike in April is set to take  economic growth down to an annualised contraction of 4.6% from April to June which could lead companies to shelve investment plans and banks to pull back.
  • The weak yen will pose challenges for domestic competition.
  • The political tensions in the region could also pose further problems especially as Abe is pushing to realise his nationalistic policies.

However, there is plenty to be optimistic about. Data released  from November 2013 points to the fastest increase in the core consumer price index since 2008 with prices being pulled higher because of increased domestic demand at home. Alongside has a gradual rise in household spending, there has been a rise in the jobs to applications ratio and optimism amongst small companies is at a high. The impatience of investors may have been frustrated by the slowness of Japan’s financial institutions but 2014 may well bring the benefits of BoJ’s liquidity to the fore-for Asean countries in particular.  Since Japan is also changing its relationships with foreign markets (expanding into them as opposed to using them for production bases) the cheaper yen will only spur on this M & A.activity further. Aside from political tensions with China and  S Korea, Abe has been engaging politically in Asia having visited every single Asean member country to strengthen ties there. Japan also attracted a record number of foreign visitors in 2013, a trend that will no doubt continue in the lead up to the Olympics.

There is evidence of changing attitudes to women within the workplace with various policies being introduced albeit still in their infancy, an entrepreneurial, risk-taking spirit is rising with large corporations such as Itochu funding start-ups and using English as a language of business is being embraced by some companies and the teaching of English in schools is being tackled by the Government. Anyone with knowledge of Japanese culture and society will recognise that these changes will happen slowly and with their own sense of Japanese uniqueness.

If you read my tweets and Linkedin posts, you will see many more reasons to consider having Japan as part of your global strategy-Japan has recognised the need to open up and compete globally.  Many markets are becoming more open with generous subsidies available and are becoming more receptive to foreign investment and expertise. Those that spring to mind from clients I have worked with include the Clean Tech sector with the still very generous feed-in tariffs available and the medical & healthcare Industry, the second largest in the world with the still relatively affluent ageing-population creating increased demand. There are many others too-not least the opportunities potentially offered by the upcoming Olympics. (See my blog on this) There has also been a shift for SMEs entering the Japanese Market, who are finding that smaller Japanese SMEs are willing to partner with them instead of needing to partner up with the bigger players. Bids once reserved for domestic companies have been opened up for global competition: one example is that a foreign company has recently bid against domestic companies and won a contract to be involved in the Government led consortium for the floating wind turbine project off Fukushima. There is a great push to market Japan’s entertainment industry abroad through its joint Government and privately funded Cool Japan initiative. Japan is in late-stage negotiations with the EU for a FTA-one that will bring even more opportunities for trade although it would be naive to think Japan will succumb to a laissez-faire mentality overnight-the Government’s protective subsidies and high import tariffs are still stifling competition in the agricultural market and it will be interesting to watch Japan’s negotiations in the TPP regarding this particular issue. All in all though, there are many opportunities in Japan that can be easily identified through market research and visits although they still rely very much still on relationship building, patience and  long-term commitment. After all, without these, it just wouldn’t be Japan would it!

 

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