As UK-Japan business ties strengthen, the number of firms looking to enter the Japanese market is increasing. On 12 March, Northern Ireland’s regional economic development agency, Invest Northern Ireland, partnered with the British Embassy Tokyo to host a webinar titled Spotlight on Japan.
Speaking on the effects the Covid-19 pandemic has had on Japan–UK trade, Mark Graham, regional director of Trade and Investment, North East Asia, Invest Northern Ireland, said: “Something that hasn’t changed is the pace of industry and commerce in Japan. Auto hospitality and luxury have been badly hit due to low demand and restrictions on entertainment. But largely speaking, the Japanese economic machine has kept churning.
“The UK has an excellent trading relationship with Japan—£15bn per year, making it the largest export market for the UK, outside the EU, US and China. Northern Ireland annual exports to Japan are just over £63mn, but that’s less than 0.5 percent of what the UK as a whole exports to Japan. Considering Northern Ireland represents 2.7 percent of the UK population, and 1.8 percent of the UK economy, there’s a gap there”.
Graham also spoke on digitalisation, suggesting that while Japan has been lagging, it is in the process of changing, largely thanks to the pandemic. “Along with a push from commerce, the Japanese government has gotten behind the push for an integrated digital society, with the creation of a new digital agency, which will bring together a large number of government departments and processes”.
When speaking on potential business opportunities for Northern Ireland in Japan, Graham stated that doing business in Japan is not simple. “Out of 190 countries, Japan is ranked 29th in terms of ease of doing business. Cultural barriers are massive. The regulatory framework gets in the way in sectors such as pharmaceuticals, and dominance of major Japanese institutions gets in the way in sectors such as finance. And the business etiquette is something that’s not easy for foreigners to understand and very easy to get wrong. It takes a long time to get results, and a lot of companies either don’t understand this or get impatient”.
Marie-Claire Joyce, head of trade at the British Embassy Tokyo, discussed the growth of Japan–UK trade.
“Japan is now a major export market for UK companies,” she said, adding that, “In fact, in 2019, trade between the UK and Japan amounted to £30bn. There are currently 1,000 Japanese companies invested in the UK, providing 150,000 jobs”.
This means that the recent UK–Japan Comprehensive Economic Partnership Agreement (CEPA) is significant. “We want to drive trade even further, and it’s estimated that this agreement will boost trade between our two countries by as much as over £15bn. It really is seen as a new and dynamic capture in our trading relations”.
Joyce also touched on the effects of another trade agreement to which the UK recently requested accession—the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“It is one of the world’s biggest free trade areas,” she noted, “covering over 13 percent of global GDP and accounted for £96 billion worth of UK trade in 2018 (7 percent of total UK trade). This agreement is really going to help the UK to strengthen trade ties between us and the 11 Pacific countries involved, and set new standards of global trade.
“The next significant improvement with CEPA is that it’s going to make the free flow of data much easier. There will be no restrictions on access to algorithms and no localization of data, which will save companies the cost and time of setting up servers in Japan. It is also going to be much easier for financial companies to operate in Japan, and patent applications are going to be much smoother to make. There’s going to be an increase in mobility, so companies who want to send their staff abroad will find it is going to be much easier to apply for visas, and to stay in Japan for much longer periods of time”.
Entering the market
Nick Shindo, director of sales and business development at First Derivatives, explained that for Northern Irish firms looking to enter the market, dedication is vital to success.
“The Japanese are very much into partnerships, collaborations, and understanding new tech and being strategic and non-transactional. So, if you can invest the time and can understand the local business differences, there is a lot of fun to be had”.
Steve Crane OBE, chief executive officer of Business Link Japan, echoed similar sentiments when he spoke about the Japanese market.
“Japan is one of those markets where you cannot expect to get a quick win. You definitely have to have a long-term thought process and a long-term strategy. But, of course, you get your payback over time. So, the points to really think about—and for you guys out there thinking about the Japanese market—ask yourself this question: are you prepared to take some of the pain of those balance points in order to get those benefits?”
Crane also touched on the mistakes that can be made when entering the Japanese market.
“One of the biggest mistakes people make is rushing in without learning the business culture. Do not come in with the thought that the way we currently do business in the UK will automatically work in Japan. I can guarantee it probably will not.
“Don’t swim against the tide, swim with the tide. In order to swim with the tide, you’ve got to learn the local business culture, and there are loads of great ways to pick it up, but it does need some time and effort to get your head around that”.
“You’re dealing with one language and one culture throughout the entire country. It is one huge, lucrative market. Once you’ve understood that, once you’ve got your head around that, you can relate that to the entire market. It is, of course, an incredibly stable market with incredibly good business ethics. Understanding the culture is a complex thing, it is very different from the way we do business and the way we think, and it takes time to learn the culture. You have to invest time and energy and get support in learning it”.