Embassy Sept / Oct 2021

UK–Japan trade ties

Raring to grow as we move out of the pandemic

I started as Deputy Trade Commissioner for North-East Asia (Japan, the Republic of Korea and Taiwan) at the British Embassy in Tokyo in August. I first moved to Japan in 2016 with my wife and two children, both of whom are in the British School in Tokyo.

My teams provide support to UK companies exporting to Japan and the wider region and to North-East Asian companies investing in the UK. We increasingly work hand in hand with those negotiating trade policy agreements, such as the UK–Japan Free Trade Agreement (FTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and on market access barriers.

We also work closely with our colleagues in the Devolved Administrations in Scotland, Northern Ireland and Wales, all of whom are now based at the British Embassy Tokyo, promoting trade and investment from all parts of the UK.

This is my second role at the British Embassy Tokyo having previously been the Head of Investment, where I supported Japanese companies to set up and grow in the UK.

Boosting trade and investment

There’s so much potential in the commercial relationship, it’s a great time to take on this role. Trade and investment between our two countries is already in a healthy position, despite the significant impact of the pandemic. Total trade in goods and services was £23.9bn toward the end of the first quarter of 2021, with UK exports to Japan (£12.2bn) and UK imports from Japan (£11.6bn) roughly equivalent. Japanese investment into the UK is also highly significant with a stock of £90.5bn, compared with the stock of UK investment into Japan of £5.2bn.

The UK–Japan FTA, which entered into force on 1 January, and the UK EU Trade and Cooperation Agreement (TCA), signed in December 2020, are bolstering opportunities for trade and investment. The UK Government ran the UK–Japan FTA campaign from March to July 2021, showcasing opportunities for UK exporters in a range of innovative webinars and other digital events. During the course of the campaign, we engaged with 1,100 UK companies and 1,240 Japanese companies, with at least 370 British companies introduced to Japanese buyers.

The TCA between the UK and the EU provided Japanese companies operating in the UK with increased certainty on the UK’s future trading relation­ship with the EU leading to an increase in confidence in the UK as an investment location.

A great example of this is Nissan Motor Corporation and Envision AESC announcement that they will be creating the UK’s first gigafactory to produce batteries for the automaker’s electric vehicles. There was a real sense of excitement and interest from UK companies about exporting to Japan. While it was recognised that Japan was not an easy market to break into, the high standards of quality and competitiveness were viewed as a positive challenge. UK companies with significant experience of trading with Japan felt the impera­tive to “up their game” and had improved their business. If you can make it in Japan, you can make it anywhere!

From left: Deputy Trade Commissioner for North East Asia Darren Goff, Ambassador Julia Longbottom CMG and Head of Investment Japan Harriet Loos aboard HMS Queen Elizabeth.

Security, technology, R&D

Driven by shared values and mutual benefit, the UK and Japan’s relationship is growing closer in multiple areas.

Whether it’s shaping a global trading system, working together to improve economic security or increasing collaboration on innovative technologies and cutting edge research and development, the UK and Japan see eye to eye on a vast range of different areas.

The UK government committed in its recent Integrated Review to further step up its engagement with the Indo-Pacific, a region critical to the UK’s economy, security and commitment to open societies. Japan is at the heart of this “tilt” to the Indo-Pacific. 

The arrival of the Carrier Strike Group (CSG), including HMS Queen Elizabeth, in early September, was a powerful demonstration of the UK’s close and enduring partnership with Japan and the UK’s commitment to maritime security in the Indo-Pacific region. To celebrate the visit we held a high-profile virtual event to commemorate the Queen’s 95th birthday this year as well as the arrival of CSG. We were also able to hold some tours of HMS Queen Elizabeth for a small number of important stakeholders in Japanese and UK businesses, and for those focused on the defence industry

Trade policy 

Of course, the UK’s ambitious trade policy in this part of the world does not stop with the signing of the UK–Japan FTA. The UK’s accession to the CPTPP continues to progress positively. On the UK–Japan FTA we are moving to implementation of the agreement, underpinned by a series of committees and working groups, which will act as the vehicles of implementation, enforcement and enhancement of the agreement.

We have identified specific areas, such as life sciences, food and drink, where we would like to cooperate further with Japan based on feedback from businesses. We are also keen to hear from any further British businesses with specific examples of where our trade policy could help improve access to the Japanese market.

AI, cybersecurity, fintech, digital 

Technology and innovation is another area where there is real congruence between Japanese and UK businesses. The UK is world leading in areas including artificial intelligence, 5G cybersecurity, fintech and digital health, where UK universities and scale-up companies are carrying out cutting edge R&D and innovation. There is considerable scope for large Japanese blue-chip companies to gain a technological advantage by building partnerships with these UK businesses and universities.

Green revolution

The world is reaching a crucial point in its fight against climate change. Much progress has been made over the past year with  both Japan and the UK making ambitious pledges in respect of decarbonisation.

The 2021 United Nations Climate Change Conference, also known as COP26—which takes place in Glasgow this November—has seen the UK Government take a leading role in supporting businesses and governments across the world to make more ambitious commitments.

Moving towards zero emissions requires a revolution in how we generate and use energy. This transformation offers significant economic opportunities in growing sub-sectors including floating offshore wind, hydrogen, carbon capture, nuclear and zero-emission vehicles. Over the past few years, we have seen Japanese businesses invest heavily in renewable energy. The Japan Bank for International Cooperation (JBIC) invested £700m into offshore wind in 2018. Mitsubishi Corporation and Chubu Electric Power Co., Inc. are investing more than £1.5bn into the transformation, and Envision AESC is partnering with Nissan Motor Corporation to invest more than £1bn into the UK’s first gigafactory for electric vehicle battery production. In the lead up to COP26 the Government will be holding a Global Investment Summit in the UK which will focus on strengthening opportunities in renewable energy.

In December 2020 Octopus Energy Group announced a major strategic partnership with Tokyo Gas Co., Ltd., which launched the UK firm’s brand in Japan and will provide renewable energy among other services. We’d like to see many more UK energy companies break into the Japanese market and support its decarbonisation agenda.

The TCA between the UK and the EU provided Japanese companies operating in the UK with increased certainty on the UK’s future trading relation­ship with the EU leading to an increase in confidence in the UK as an investment location.

Prime Minister Boris Johnson visited Nissan Motor Corporation’s Sunderland plant in July. Photo: Nissan Motor Corporation

A great example of this is Nissan Motor Corporation and Envision AESC announcement that they will be creating the UK’s first gigafactory to produce batteries for the automaker’s electric vehicles. There was a real sense of excitement and interest from UK companies about exporting to Japan. While it was recognised that Japan was not an easy market to break into, the high standards of quality and competitiveness were viewed as a positive challenge. UK companies with significant experience of trading with Japan felt the impera­tive to “up their game” and had improved their business. If you can make it in Japan, you can make it anywhere!

Trade policy 

Of course, the UK’s ambitious trade policy in this part of the world does not stop with the signing of the UK–Japan FTA. The UK’s accession to the CPTPP continues to progress positively. On the UK–Japan FTA we are moving to implementation of the agreement, underpinned by a series of committees and working groups, which will act as the vehicles of implementation, enforcement and enhancement of the agreement.

We have identified specific areas, such as life sciences, food and drink, where we would like to cooperate further with Japan based on feedback from businesses. We are also keen to hear from any further British businesses with specific examples of where our trade policy could help improve access to the Japanese market.

AI, cybersecurity, fintech, digital 

Technology and innovation is another area where there is real congruence between Japanese and UK businesses. The UK is world leading in areas including artificial intelligence, 5G cybersecurity, fintech and digital health, 

Financial services

There are ambitious aims to make Tokyo an international financial centre, while the Expo 2025 Osaka offers an opportunity to increase the profile and success of Osaka’s financial services industry.

The UK has been increasing its partnership with Japan over the past few years with the City of London Corporation and Tokyo Metropolitan Government signing a memorandum of understanding in December 2017 and bilateral trade in fintech has been increasing.

There’s clearly scope to increase this further through the annual dialogue, created as part of the UK-Japan FTA, between financial services regulators to further reduce regulatory friction. This framework will facilitate closer UK–Japan cooperation on financial services regulation in the future, supporting the reduction of market fragmentation and barriers, and increasing trade and investment.  

It’s an exciting time to be at the fulcrum of UK–Japan commercial relations, with opportunities across a range of different areas. We look forward to seeing many more UK companies make a success of their business in Japan and to supporting Japanese investment in the UK.