Japan’s Market is Open to the World
April 2012
*As a review of the situation surrounding the EU-Japan EPA/EIA, JETRO compiled data materials released or provided by the parties involved into this file. Recent European Success Stories in the Japanese Transportation Market Aircraft ・Skymark Airlines operate 6 Airbus A380 planes and plans to purchase 6 Airbus A330 planes. ・ Peach Aviation and Starflyer operate 10 and 7 Airbus A320 planes respectively ・ AirAsia has been operating 3 Airbus A320 planes.
Train parts ・JR East bought German brake systems for the Bullet Train (Hayabusa).
Source: Skymark, Peach Aviation, Starflyer, MLiT, and Knorr-Bremese EURailway-Japan products trade trade balance surplus in of railway EU vis a vis products Japan The EU had a trade surplus with Japan in railway products from 2001 to 2010. Japan mainly imported railway carriages, maintenance equipment and electronic parts.
Trade balance in railway products between Japan and the EU
year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 total average France -811 -490 -528 -44 -330 -892 111 -3,394 -236 -164 -6,778 -678
Germany -2,150 -2,645 -2,405 -834 -1,308 -2,325 -2,380 -3,455 -248 -318 -18,069 -1,807
Spain -1,846 -1,508 -1,847 -302 -971 -1,986 -1,722 -2,667 -173 -246 -13,168 -1,327
Italy -1,556 -27 -733 -2,493 -1,285 -2,815 -608 -899 -1,314 -2,146 -13,876 -1,388
UK -572 -284 -582 -322 -513 -1,523 5,555 14,975 14,026 -54 30,706 3,071
Austria -1,258 -1,225 -1,078 -679 -3,622 -5,312 -4,619 -4,598 -5,908 -4,953 -33,252 -3,325
EU total -5,639 -4,868 -3,527 -1,666 -7,628 -14,477 -3,613 2,141 6,202 -8,375 -41,451 -4,145 world total 50,214 36,507 32,145 77,940 127,812 69,685 57,899 81,443 55,797 47,998 637,440 63,744
Source: Trade statistics of the Ministry of Finance , Japan (in JPY million) More procurement information available in English
Providing tender information from all relevant government entities in English
Current JETRO site Mar 2011 Dec 2011 Dec 2012
47 Prefectures 19 Designated Cities
Central Over1,000 Local Rest of Local Government Municipalities Municipalities Entities 40 Core Cities （about 80%） 41 Exceptional Cities
Source: METI Examples of European companies involved in government procurement in Japan
Veolia Water Japan Japanese subsidiary of a French company (environment) Succeeded in signing contracts with five local governments (worth more than 19 billion yen) 2012-16 Siemens Japan Japanese subsidiary of a German company (industrial machinery) Received orders for expensive medical instruments from institutions, including national university hospitals (worth more than 4 billion yen) 2010- GlaxoSmithKline Japanese subsidiary of a British company (pharmaceuticals) Received a large order for an anti-influenza drug for government stockpile (worth more than 5 billion yen) 2009- Source:JETRO Rising EU car sales on the Japanese market
New registrations of European vehicles imported into Japan
New registrations of vehicles imported from Europe (especially Germany) to Japan rose from 2010 to 2011.
Group 2011 2010 % Change
VW (VW , Audi) *1 71,801 63,561 12.9%
BMW (*BMW, BMW Mini) *1 48,545 43,764 10.9%
Daimler (Mercedes, Smart) 34,426 32,037 7.5%
FIAT (Fiat, Alfa Romeo, Maserati, Lancia) 8,554 8,226 4.0% *2
*1. Including brands with headquarters located in Germany. *2. Including brands with headquarters located in Italy. Source: Japan Automobile Importers Association (JAIA) (passenger cars, trucks and buses) Bigger share of imported European cars in Japan than imported Japanese cars in Europe
Share of imported cars (Passenger cars)
5.5% (Imported European cars in Japan) vs. 3.9% (Imported Japanese cars in the EU)
Market share in Japan Market share in the EU (2011)
Other 88.5%
7.6%
3.9%
Manufactured in EU
European Brands Imported from Japan （Source：JAMA） （Source：ACEA, JAMA） Decision to reconsider beef import ban The Japanese government initiated the review in order to open up the Japanese beef market to Europe.
Prime Minister Noda informed French Prime Minister Fillon in October 2011 of his intention to review the import ban on beef (in line with scientific studies). On 19 December 2011, the Ministry of Health, Welfare and Labour asked the Food Safety Committee（FSC) to review the assessment of the health impact of food (including beef from France, the Netherlands, United States and Canada) with a view to reassessing its measures to combat BSE (from home and abroad) on the basis of the latest scientific knowledge. Following this request, the FSC decided on 22 December 2011 to have experts start re-examining the matter.
Source: MOFA, MHWL, FSC
FTA+ elementsSubstance in FTAs of Japan’s Japan EPA concluded
Government Procurement Government Intellectual Property Competition Of Business Improvement Cooperation Mineral Energy and Resources
Trade in goods Trade in services Investment
Market Prohibition SPS/TBT Mutual Market Access National Treatment MFN of MovementPersons Natural National MFN requirements stateand investor Dispute Settlement
Environment Environment
Treatment
Recognition
Access
Treatment Treatment
of of performance
between
Vietnam ○ ○ ○ ○ ○ ○ ○ ○ ○
Philippine ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ s
ASEAN ○ ○ ○ ASEAN Brunei ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Indonesia ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ Thailand ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ Malaysia ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Singapore ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
America Latin
Chile ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Mexico ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Europe Switzerla ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
nd
Source:Dr.Yorizumi Watanabe , Keio University European CEOs in Japanese companies in Europe
Most Japanese companies based in Europe appoint Europeans as top executives.
Automotive - Toyota: CEO of Toyota Motor Europe is French. The CEOs of most sales companies are local individuals. - Nissan: The CEO of Nissan Motor Manufacturing is British. - Honda: The CEOs of the main sales companies (Spain, Austria, UK, Czech) have been local individuals since 2010.
ICT - Panasonic: Panasonic Europe appointed a European (French) CEO in 2009. - Hitachi: Hitachi Europe appointed a European (British) CEO in 2004. - NEC: The CEOs of almost all sales companies are local individuals. - Fujitsu: The CEOs of Fujitsu Services and Fujitsu Technology Solutions are Europeans (British and German).
Source:Japan Machinery Center for Trade and Investment Expanding Japan-EU industrial partnerships
PSA – TOYOTA Motors Daimler – TORAY Isagro – SUMITOMO Chemical
PSA – Mitsubishi Motors FIAT – Toshiba Areva – Mitsubishi Heavy Industry
etc.
Source: METI Successful EU-Japan sectoral talks
EU and Japanese industries have started talks on an EU-Japan EPA. - Establishing common aims for an EU-Japan EPA - Identifying NTBs for both sides and seeking possible solutions or the enhancement of market access
Business Europe - Keidanren - Meeting of chairmen in July 2011 (Agreed on starting the discussion on EU-Japan) - B-B dialogue with the participation of 7 sectors in March 2012 Automotive: ACEA-JAMA - Meetings in September and December 2011 - Discussion of non-tariff Issues such as safety standards, zoning ICT: Digitaleurope - JEITA - Meeting of chairmen to discuss trade policy in September 2011 - Publication of a joint statement for promoting EU-Japan EIA in November 2011 - Discussion of non-tariff issues (ex. environmental regulations, intellectual property, movement of people, etc. ) Railway: EU railway manufacturers - Japanese railway companies - Meeting in October 2011 organised by JR East and Tokyo Metro in response to a request from the EU side - Exchanging views constructively on enhancing market access (ex. Japan’s non-discriminatory procurement.) Source:Japan Machinery Center for Trade and Investment Potential of Japan’s Market High performance of European companies in Japan
(100 mil JPY) SalesSales in in Japan Japan( (by by main foreign investors)investers) DirectDirect Investment investment Income income in in Japan Japan ( by (by region) region) Survey of trends in business activities of foreign subsidiaries (METI) (100 mil JPY) Balance of payments (BOJ) 250,000 : Survey of Trands in Business Activities of Foreign affiliates[METI] 9,000 :Balance of Payment[BOJ] 8,000 200,000 Europe, 7,000 55.3% EU, 6,000 63% 150,000 5,000 USA, 4,000 100,000 24.3% 3,000 USA, 33% 50,000 Others, 2,000 20.4% 1,000 Others, 4% 0 0 00FY 01FY 02FY 03FY 04FY 05FY 06FY 07FY 08FY 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: METI Popular European products on the Japanese market
Missed opportunities by European companies
(1990) (2010) 33,855 60,765 China: 1730
Other: 12158 US, 7586 China: 13413 Other: 22681
EU: 5071 US: 5911
Malaysia: 780 EU(27): 5821
Taiwan: 1232 S. Korea: 1690 Indonesia: Australia: 1787 1821 Malaysia: 1987 Taiwan: 2025 S. Korea: 2504 Australia: 3948 Indonesia: 2476 (billion Yen) Source: Ministry of Finance Although the Japanese import market has been growing, the Trade Statistics of Japan EU has been losing share even though the number of EU member states has increased. Total Value 179% China 775%, EU(12⇒27) 127%, Australia 289%
S. Korea 148%, Indonesia 136%, Malaysia 255% Source:METI Addressing Non-Tariff Measures 3 items adopted in the special meeting on NTMs
- As a first step, the Government Revitalization Unit (GRU) of the Japanese government determined to reform the following regulations. - These regulatory reforms were approved by the Cabinet on 8 April 2011. - The GRU released its Interim Report for “Items on Regulatory and Institutional Reform” on 13 April 2012. 1) Automotive zoning - On March 2012, the MLIT sent off for local governments the “Technical Guideline” for the standards to mitigate impacts on the surrounding environment. - The interim Report of GRU also proposed to follow-up the issue. 2) Liquor wholesale license - MOF (National Tax Agency) settled on the draft for reform and carried out the public comment procedures. The new Official Notice will be carried into effect on September 2012. 3) Food safety - food additives - The interim Report of GRU proposed to follow-up for the 15 unauthorized items.
Source: Cabinet Office (GRU) Progress on other NTM issues
Automotives - The administrative notice of the Explosive Control Act was revised in February 2012 in order to enable pyrotechnic safety devices for autos to be exempted from this act under certain conditions. - MLIT sent off for local governments the “Technical Guideline” for the standards to mitigate impacts on the surrounding environment on March 2012. - The interim report of the GRU on 13 April 2013 proposed about the harmonization of automobile standards (UNECE Regulations, High pressure gas container).
Medical Devices / Pharmaceuticals
- The interim report of the GRU on 13 April 2013 also proposed some measures as followings; Separation of regulations for medical devices from regulations for pharmaceuticals under the Pharmaceutical Affairs Act. Utilize private third-party certification bodies and accelerate the authorization procedures for medical devices already authorized in other countries. Elimination of “Vaccine Gaps”
The EU: No.１ investor in Japan €60 billion Japan: No.3 investor in the EU €140 billion (2010) MOF，BOJ balance of payments statistics
Japanese subsidiaries in the EU Survey of Overseas Business Activities as of 2009 , METI (100 million yen) Total: Total: Number of employees: over 446,000 * 700,000 Total: Total: 682,097 676,911 618,584 617,400 Total: Sales: 220 billion EUR 600,000 534,760 212,772 205,246 Intraregional procurement： 39 billion EUR Total: 197,054 204,584 500,000 456,054 186,004 *Number of employees by Japanese subsidiaries USA 400,000 161,822 173,379 176,399 Asia UK 132,532 150,434 144,060 EU Netherland 89,551 300,000 128,021 161,117 148,506 Others Germany 61,965 103,602 164,341 146,058 200,000 (23.6%) (22%) Belgium 29,612 141,338 (26.6%) (23.7%) 108,247 (26.4%) France 24,519 100,000 (23.7%) Italy 16,540 Spain 13,854 0 21 2005 2006 2007 2008 2009 2010 Source: METI Source: Bank of Japan Japanese Automakers’ Production/R&D Facilities in the EU
Toyota Toyota @Walbrzych @Jelcz Laskowice Nissan Subaru @London Toyota Toyota @Zaventem @Kolin @Zaventem, Mazda Honda Bernaston @Swindon @Oberursel Mitsubishi @Born ・Production: 13 plants in 8 countries Toyota ・R&D: 12 centres in 5 countries @Koln Nissan @Sunderland ・Employment: 146,000 people Honda @Offenbach ・Purchases of EU Parts*:€10.96 billion Toyota @Burnaston (*In FY 2010) Mitsubishi @Trebur Honda @Swindon Subaru @Ingelheim am Rhein Toyota @Valenciennes Nissan @Cranfield,Barcelona, Madrid,Brussels,Bruhl Toyota @Ovar Toyota Nissan @Nice Suzuki Isuzu Isuzu @Barcelona, Avila, @Esztergom @Tychy @Gustavsburg Mitsubishi Fuso Cantabria @Tramagal : Production Facilities : R&D Facilities Source:JAMA Japanese IT Companies’ Operations and Employment in the EU
Sweden Luxembourg Finland Denmark 7 / 708 1 / 42 2 / 416 2 / 347
Netherlands 12 / 2,157 Germany 26 / 21,132 Belgium 6 / 2,380 Finland Czech 9 / 4,760
UK Sweden 35 / 30,575 Poland Ireland 11 / 3,662 4 / 562 Denmark Ireland• More than 140 operations Slovakia France UK in 22 countriesNetherlands Poland 6 / 5,162 28 / 6,010 Belgium Germany Luxembourg • More than 100,000Czech employees Slovakia Austria Romania Hungary Romania in 22France countries 2 / 37 Slovenia Spain Italy Bulgaria 15 / 2,812 Bulgaria 1 / 12 Portugal Spain Greece Slovenia Greece 1 / 10 1 / 2
Others Portugal Italy - / 14,733 3 / 327 14 / 1,552 Austria Hungary 7 / 1,725 5 / 2,935 Numbers in the boxes: Operations of companies that are members of JEITA (Japan Electronics and IT Industries Association) / Employees of companies that are members of JEITA (Japan Electronics and IT Industries Association) Source:JEITA Japan’s large contribution to EFSF securities
Issue date Amount Target Country Purchase by Japan Jan. 25, 2011 €5.0 bn Ireland €1.025 bn 20.5% Jun. 15 5.0 Portugal 1.1 22.0 Jun. 22 3.0 Portugal 0.55 18.3 Nov. 7 3.0 Ireland 0.3 10.0 Dec. 13 2.0 Ireland/Portugal 0.26 13.0 Jan. 5, 2012 3.0 Ireland/Portugal 0.3 10.0 Jan. 17 1.5 Ireland/Portugal 0.12 8.0 Feb. 21 2.0 Ireland /Portugal 0.1 5.0 Mar. 6 3.4 Ireland/Portugal 0.16 4.7 Total 27.9 3.915 14.0
Japan is the biggest origin of funds for ESFS securities, after the euro zone countries (according to ESFS data). Source:MOF Benefit of the EU-Japan FTA
Possible benefit of FTAs for the EU
Japan India Canada Korea Malaysia Singapore
Nominal GDP 5.5 1.7 1.6 1.0 (US$ 1 trillion) 0.2 (2010) 0.2 Source: World Bank
FTAs’ Impact on EU’s real GDP 0.12 0.09 0.03 0.07 0.04 (%) 0.00
Source: RIETI (estimated by Dr. Kenichi Kawasaki) ※Considered only tariff elimination, not NTM and spillover effects *EU’s real GDP: US$ 16.25 trillion (2010) Source: World Bank Source:RIETI Surge of investment in Mexico after Japan-Mexico EPA
New direct investment in Mexico by Japanese Automakers following implementation of the Japan-Mexico EPA
Vehicle Production by Japanese Automakers in Mexico Japanese Automakers’ Production Facilities in Mexico (2004-2010 84% increase) Manufacturer Location In units 700000 Honda El Salto Japan-Mexico EPA 616791 takes effect (April 600000 2005) Toyota Tijuana 547877 541761
500000 456089 Aguascalientes 443843 Nissan 400000 372711 Civac (Cuernavaca) 335336 Isuzu Cuautitlan 300000 2004 2005 2006 2007 2008 2009 2010 Hino Silao + Mazda: Salamanca City (2013-) Honda: Celaya (2014-)
Source: Marklines Database Benefit of EIA for EU and Japan through Reducing Tariffs and NTMs “Assessment of barriers to trade and investment between the EU and Japan” (3 February, 2010) prepared for the European Commission, DG Trade, by Copenhagen Economics
- real gains by reducing regulatory differences.
- estimates that trade flows could increase by €43 billion for the EU and €53 billion for Japan. e.g.) - EU motor vehicle exports to Japan +84% or + €4.7billion - EU pharmaceutical exports to Japan +60-100% or + €3.4billion - EU medical device exports to Japan +51% or +€1.1billion
- The study uses information on the trade costs of regulatory barriers obtained through a survey of European firms operating in Japan.
Summary of impact EU Japan Export Effects +€14bn +€25bn (Tariffs) Export Effects +€29bn +€28bn (NTMs) Welfare Effects +€33bn +€18bn
Source: Copenhagen Economics EIA benefits EU automotive sector more Impact of EU-Japan EIA on automotive industries (report by Mitsubishi Research Institute)
EU Auto Market Japanese Auto Market
Projected sales in 2020: Projected sales in 2020: 16.3 million units 4.3 million units Implementation of an EU-Japan EIA Projected sales in 2020: Projected sales in 2020: 17.0 million units 4.4 million units (+742,000 units / 4.6% increase) (+97,000 units / 2.2% increase)
European brands: +470,000 units (+3.9%) European brands: +48,000 units (+25.1%) Japanese brands: +177,000 units (+9.2%) Japanese brands: +47,000 units (+1.2%)
Implementation of an EU-Japan EIA will facilitate automotive market expansion in the EU and Japan, bringing benefits for both European and Japanese brands.
Source:JAMA、Mitsubishi Research Institute 29 Surge in Japan’s car exports? Not likely.
From 2000 to 2007, exports of vehicles from Japan to the EU dropped slightly, while Japanese automakers’ production in the EU nearly doubled, despite the fact that the Japanese yen depreciated against the euro by nearly 60% during that period. Although currency rates can be a critical factor in pricing, directly affecting cost competitiveness, history shows that factors which should favour increased exports do not necessarily do so. Japanese automakers are committed to contributing to the further growth of the European auto industry, and therefore we are confident that tariff reduction via an EU-Japan EIA will not lead to increases in exports from Japan. Japanese automakers’ EU production and exports to the EU, 2000-2010 1,800,000 170
EU Production Weak 1,600,000 160
Japan ⇒ EU vehicle exports nn 1,400,000 Average currency rate (Yen/Euro) 150
Currency
1,200,000 140 rate
(Yen) Units
1,000,000 130 nn 800,000 120
Strong 600,000 110
400,000 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: JAMA; Mitsubishi UFJ Research and Consulting Japan’s Innovation Efforts
France Japan Germany UK China Korea ＧＤＰ (2010, in € billion) ＧＤＰper capita(2010, €) Patent application (patented) Patent application (patented)/100,000 people R&D Expense, 2009 (€ million)
Nobel Prize Winners in Science 4 9 6 8 0 0 (‘00-’10) Expense for Consumption, 2009 (€ billion) Consumption per capita, 2009 (€) License fees paid, 2010 (€ million) License fee received, 2010 (€ million)
Sources ・World Bank ・IMD World Competitiveness Yearbook 2011 Exchange Rate; 1 US dollar= 0.72862 euro ・Agence francaise pur les investissements internationaux(AFII) Hong Kong is not included in the column of China ・World Intellectual Property Office (WIPO)