Speak though to people like Andrew Gauci, a two-decade resident of Japan, the head of Lendlease in the country and also the president of the Australian and New Zealand Chamber of Commerce and he concedes Japan struggles with its profile for business.
“People look at China, obviously, it’s the big market, but they forget Japan is also big. And Japan, with its long established relationships, is lower risk,” he says.
Meanwhile, Japan is improving its welcome for foreign investment while the perception of business is China is the situation is becoming more difficult. The latest American Chamber of Commerce in China survey of business conditions – the biggest annual barometer of foreign (not just American) sentiment – found 80 per cent of respondents (which include Chinese managers of foreign firms) feel less welcome.
“It’s clear from these findings that many foreign companies are being forced to rethink their strategies to respond to the challenges in the business environment,” Stephen Shih, a Beijing-based Bain & Co partner, noted about the survey.
The survey highlighted policy opacity, unpredictable regulation and a perceived stalling of economic reforms. Japan however – which in the past had been accused of similar issues – is actively streamlining regulation and processes for foreign investment. Geopolitically too the relationship between Japan and Australia is becoming firmer with shared anxieties around China and a Trump-led America.
The 2015 Japan-Australia Economic Partnership Agreement has been particularly positive. According to the Australian government “to date, JAEPA is by far the most liberalising trade agreement Japan has ever concluded”.
The regional opportunities Japan is focussing on – and encouraging foreign involvement in – are things like satellite centres. In the Tokushima Prefecture village of Kamiyamacho the offices create web content and conduct other digital work for Tokyo-based companies.
“The project leader's stroke of genius,” said Koizumi of the Kamiyamacho project, “was the notion of ‘creative depopulation.’ He realises overall population decline is unavoidable over the long term. But he set out to shape a demographic profile to engender lasting vitality for the village: young professionals, for example, and people to serve them, such as two who have opened a bakery and a French restaurant.”
In agriculture, another sector in which previously unwelcome foreign and corporate involvement is now welcomed, the rapidly ageing farming population has led a rethink. New laws allow corporates to lease more farmland.
While foreign investment in farming has long been a bridge too far for the agricultural sector, imported intellectual capital such as agricultural technology is less of an issue.
According to McKinsey & Co in a report “Strengthening Japanese Agriculture”, agtech “is advancing rapidly, and harnessing these innovations could help Japan to achieve its goals for the sector.
In one indication of the pace of technological development, venture capital funds are streaming into agtech companies, technology companies focused on addressing challenges in the agricultural sector. Between 2013 and 2014, the amount of venture capital funding invested into the industry grew fivefold, from $US900 million to $US4.6 billion.”
Regional centres – and especially those which will welcome rugby fans – are also focussing on foreign tourism which is currently concentrated in Tokyo, Kyoto and the ski fields of Hokkaido and Nagano prefecture.
In 2016 the number of foreign visitors to Japan reached 24.03 million, up 22 per cent from the previous year. This is a record high for the fourth consecutive year and nearly four times the level five years earlier. The government’s target for 2020 is 40 million.
The bulk of growth is from neighbouring Asian countries, particularly China, Taiwan and Thailand. The Japan Tourism Agency plans to have 100 regions specially designated and their brands promoted to foreign tourists.
However again more opportunity exists.
For companies outside Japan, particularly Australia and New Zealand, Japan is something of a forgotten giant. The regional opportunity was never really even understood, let alone forgotten.
Andrew Cornell is managing editor at BlueNotes