12 Jun 2019
Osaka, Japan’s second largest city, hosted World Expo 1970, stunning the world with the sophistication of the nation’s industrial evolution. As Japan’s manufacturing and design capital, Osaka showcased electronic and precision equipment design and manufacture long thought the sole domain of advanced western economies.
Panasonic, a proud Osaka company, revealed a telephone with no cord – the mobile phone of its day. The company, together with world-famous Osaka brands including Suntory, ASICS, Mizuno, Kyocera, Daihatsu, Shimadzu and Sumitomo, continue to innovate today.
"Osaka is the focal-point for the region known as ‘Kansai’ which includes the world-famous cities of Kyoto, Kobe and Nara.”
History is destined to repeat. In just over five years Osaka will host World Expo 2025 where the city will use the theme “Designing Future Society for Our Lives” and once more showcase advanced technologies, particularly in fields such as life science, artificial intelligence, virtual reality and biotechnology.
But Osaka will have an earlier moment in the sun at the end of June when Prime Minister Shinzo Abe will welcome the G20 country leaders - amid concerns raised by the US-China trade war, Brexit, and various regional tensions.
Despite that underlying uncertainty, there is great anticipation locally the world will also get a glimpse of the new Osaka and the socio-economic transformation happening here. And this means commercial opportunities for Australian businesses.
Osaka is the focal-point for the region known as ‘Kansai’ which includes the world-famous cities of Kyoto, Kobe and Nara. Although the boundaries of the Kansai region differ depending on the source, the population is around 21 million with a Gross Regional Product (GRP) of approximately $US884 billion. This GRP would rank the region 18th in the world on the G20 table.
Back in 1970, when Kansai was the centre for exports of high tech expertise, the region represented 20 per cent of the Japanese economy. But two factors meant the region was particularly impacted by the Japanese economic slowdown. Manufacturers set up assembly plants in lower cost Asian countries; and most companies listed in Osaka transferred their headquarters to Tokyo following the amalgamation of the Japanese stock exchanges into the single JSX.
These two developments meant the regional economy suffered due to Osaka-based companies reducing their local footprint even as global demand for branded Japanese electronic products rose on strong demand from increasingly wealthy China and other Asian countries.
Today Kansai leaders aim to highlight the transition through this challenge by pivoting to the region’s strengths in education and industry-linked research. This is not to mention the revitalisation of its historical appeal as the cultural tourism centre of Japan.
Moreover, the success of this pivot arguably embodies the United Nations Sustainable Development Goals – making the Kansai region a prime example of “Society 5.0”.
Although Kansai now accounts for just under 17 per cent of the total Japanese economy, it’s the story of this reshaping of the local economy that is most interesting. Despite a 20 per cent drop in the exports of finished products, a corresponding boom in service economy exports has meant the Kansai economy has been able to keep roughly in step with Japan’s economic growth as a whole.
Kansai is still a significant exporter of high-valued inputs into global products like iPhones which are assembled in China. So the impact of the US-China trade wars is already reverberating here as orders from China dry up.
Inbound tourists alone are a massive ‘export’ for Japan but the consequent growth in services to support the inflow of tourists has provided enormous economic stimulus. By December 2018, annual inbound tourists exceeded 30 million for the first time, with the surge dominated by tourists from China.
The tourist boom has been replicated in a patchy manner throughout a number of Japanese regions, however the concentration of history, culture, shopping, food, and experiential immersion tourism around the Kansai region has ensured much stronger local growth.
In many ways, the powerhouse of the Kansai economy over the 150 years since Japan opened up to Western influence has been the strong linkages between industry and elite education institutions.
Kansai is the birthplace of the Japanese pharmaceutical industry and the linkage with research commercialisation remains strong. In fact, two recent Nobel Prizes in medicine have emanated from Kyoto University.
According to the Kansai Bureau of Economy, Trade and Industry, around 50 per cent of the world’s lithium batteries are produced in Kansai. Osaka is the centre of combined government and industry research into new and better battery and energy storage systems.
In 2020, when Tokyo hosts the ‘Hydrogen Olympics’, shipments of liquefied hydrogen from Australia will start arriving at the newly-built liquefied hydrogen handling terminal on Kobe Airport Island. This is a project being run by Kawasaki Heavy Industries and Iwatani, two more global companies with local origins, who are also at the forefront of solving the engineering challenges involved in Japan’s aspirations to build the hydrogen economy.
Kansai economic leaders are keen to see the Japanese government finally legislate to allow casinos in Japan. Osaka’s vision is for an ‘integrated resort’ emulating Singapore’s Sentosa Island as its crowning glory, making the city a truly international tourism destination.
Yumeshima, the man-made ‘Dream Island’ in Osaka Bay, will be the venue for both the World Expo 2025 and the site of the integrated resort. Construction of the infrastructure for these two venues over the next five years will also provide a significant regional economic boost and absorb some construction industry capacity made redundant by the completion of the Tokyo Olympic infrastructure in 2020.
Kansai tourism is benefitting substantially across the three years from 2019 through 2021, which the local tourism industry refers to as the ‘Golden Sports Years’. Kobe and Osaka will both host Rugby World Cup games in 2019 which will see tourist numbers spike. 2020 will see another spike with the Olympics and Paralympics. In 2020, several cities in the Kansai area will host pre-Games camps for national teams. In fact the entire Australian Paralympic Team which will be hosted by Kobe City. Then in 2021, the 10th World Masters Games targeting to attract 50,000 competitors to Kansai.
Japan is now the second largest source of foreign direct investment into Australia including numerous investments from the Kansai region. Japan also continues to be Australia’s third largest export destination, with strong demand continuing for quality Australian products in a variety of sectors.
Access for food and beverage products has increased significantly through gains made through the Australia Japan Economic Partnership Agreement (JAEPA) ratified in 2015 and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP–11).
Australian companies have typically relied on commercial relationships with their Japanese partners rather than establishing a presence on the ground in Japan. But this too has been changing.
ANZ has been in Japan for 50 years with a physical presence in Osaka since 1990. The bank is not an outlier. Strong growth in inbound tourism in Japan has also enticed PeakDMC – a subsidiary of Intrepid Travel – to establish their Japanese subsidiary in Kyoto in 2017. Telix Pharma from Melbourne set up their Japanese subsidiary in Kyoto to get closer to their R&D partners at Kyoto University. Patties Pies’ Japanese subsidiary has launched in Kobe, and SEAPA, an Adelaide-based manufacturer of baskets used to grow oysters, found Osaka the most convenient base to service their customers in both the West and North of Japan.
So as the eyes of the world turn to the intrigue of the G20, Austrade and ANZ encourages you to look with fresh eyes at the possibilities of building your business in partnership with this changing commercial powerhouse.
ANZ has been established in Japan for 50 years, opening an office in Tokyo on December 3, 1969. A full banking authority was approved in 1985, an Osaka branch in 1990 and a licence to deal in securities in 2018.
ANZ Japan has been instrumental in supporting the development of Australia-Japan trade and investment throughout that period, a time in which Japan became Australia’s most significant trade partner. The bank offers a full range of services to corporate and institutional clients together with retail and wealth products for individual investors.
David Lawson is Consul-General and Senior Trade Commissioner for the Australian Consulate-General in Osaka and Australian Trade and Investment Commission
Glossary of terms
Yōkoso - welcome
関西 - Kansai
観光と教育 - tourism and education
オーストラリアの投資 - Australian investment
お誕生日おめでとうございます - happy birthday
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
12 Jun 2019
09 May 2019