Japan External Trade Organization

JETRO Global Trade and Investment Report 2016
- Broad economic zones and the growth strategies ofJapanese corporations Overview
August 9, 2016

Japan External Trade Organization (JETRO)
Overseas Research Department

Chapter 1
The world economy, trade and direct investment

Chapter 1 Section 1: World Economy and the Issues It Faces

Moderate pace of growth in world economy■ Growth in the world economy remains at approximately 3% after 2012
After 2012, the world economy sustained a moderate pace of growth of approximately 3% for the fourth consecutive year. According toprojections made by the IMF in July 2016, the world’s real GDP growth rate in 2015 was 3.1%, indicating a slowdown from 2014 (3.4%).
It is expected to remain at 3.1% for 2016.

Figure I-1: Trends in real GDP growth rate/contribution ratio by country/region
2014
Contribution
Percent change
ratio
World
Advanced economies
United States
EuropeGermany
France
Italy
Spain
United Kingdom
Japan
Emerging and developing economies
Emerging and developing Asia
China
India
ASEAN 5Latin America
BrazilMexicoEmerging and developing Europe
Russia/Commonwealth of Independent States
RussiaMiddle East and North Africa
Sub-Saharan Africa
South Africa
Notes:
Source:

3.4
1.9
2.4
0.9
1.6
0.6
-0.3
1.4
3.1
0.0
4.6
6.8
7.3
7.2
4.6
1.3
0.1
2.2
2.8
1.1
0.7
2.7
5.1
1.6

100.0
24.4
11.3
3.3
1.6
0.4
-0.2
0.6
2.2
0.0
76.3
57.4
34.1
13.7
7.0
3.4
0.1
1.3
2.7
1.6
0.7
6.1
4.6
0.3

(%)

2015
Contribution
Percent change
ratio

3.1
1.9
2.4
1.7
1.5
1.3
0.8
3.2
2.2
0.5
4.0
6.6
6.9
7.6
4.8
0.0
-3.8
2.5
3.6
-2.8
-3.7
2.3
3.3
1.3

100.0
26.3
12.3
6.6
1.7
1.0
0.5
1.5
1.7
0.7
73.6
63.1
36.7
16.5
8.1
0.0
-3.7
1.6
3.8
-4.4
-4.2
5.7
3.3
0.3

2016 (forecast)Contribution
Percent change
ratio

3.1
1.8
2.2
1.6
1.6
1.5
0.9
2.6
1.7
0.3
4.1
6.4
6.6
7.4
4.8
-0.4
-3.3
2.5
3.5
-0.6
-1.2
3.4
1.6
0.1

100.0
24.6
11.2
6.2
1.7
1.1
0.6
1.2
1.3
0.4
76.1
63.3
36.4
16.7
8.3
-1.1
-3.0
1.6
3.7
-0.9
-1.3
8.3
1.6
0.0

2017 (forecast)Contribution
Percent change
ratio

3.4
1.8
2.5
1.4
1.2
1.2
1.0
2.1
1.3
0.1
4.6
6.3
6.2
7.4
5.1
1.6
0.5
2.6
3.2
1.5
1.0
3.3
3.3
1.0

100.0
22.2
11.5
4.8
1.2
0.8
0.6
0.9
0.9
0.1
78.6
58.6
32.2
15.9
8.1
3.8
0.4
1.5
3.1
2.0
0.9
7.4
3.0
0.2

1) The definitions of advanced/emerging and developing countries follow the World Economic Outlook (IMF). ASEAN 5 refers to Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. The Middle East and North
Africa includes Afghanistan and Pakistan. 2) The contribution rate is calculated using the weighted PPP (purchasing power parity) of 2015 released in April.
"WEO, April/July 2016" (IMF).

Copyright (C) 2016 JETRO. All rights reserved.

3

Chapter 1 Section 2: World Trade and Japan’s Trade

World trade declines by 12.7%, marking the first negative growth in 6 years■ World trade in 2015 declines by 12.7% to $16.4 trillion
World trade (merchandise trade, nominal export basis) in 2015
declined by 12.7% year-on-year to $16.4 trillion (JETRO
estimate), marking the first decline in six years. Export prices fell
dramatically by 14.0% due to the drop in resource prices, while
dollar-denominated trade prices fell on the impact of dollar
appreciation. Real exports (quantity basis) excluding the impact
of price fluctuations increased marginally by 1.3%, but haveslowed down from the 3.5% increase in the previous year.
Figure I-2: World trade related indicators(Unit: % unless indicated at the end of column)

2011
World trade (export) (US$ 100 mil)Nominal growth rate2012

180,535 180,980
19.4
0.2

2013

2014

2015

184,768
2.1

188,366
1.9

164,467
-12.7

8.3

2.4

2.5

3.5

1.3

Price growth rate

11.1

-2.1

-0.4

-1.6

-14.0

Materials

29.3

-0.4

-1.4

-6.2

-34.9

BEC (export growth rate)

Real growth rate

20,000FigureI-3: Trends in global trade(US$ billion)

18,00020.0

16,00015.0

14,000

10.0

12,0005.0

10,000

0.0

8,000

-5.0

6,000

-10.0
Export value (left axis)

4,000Real growth rate (right axis)

2,000

2000 01

02

03(2010 = 100)

-0.4

3.5

1.6

-12.3

-0.7

3.0

1.2

-16.1

160

Iron ore

Parts and accessories

11.2

0.1

4.5

2.5

-5.0

1.1

3.4

4.3

-6.3

140

Natural gas

14.1

Capital goods

14.4

1.2

1.0

2.4

-6.6

Consumer goods

13.8

1.0

5.3

5.7

-6.1

07

08

09

10

11

12

13

14

-25.0
15 (Year)

Crude oil

100

2.0

0.3

0.2

2.3

0.7

105.0

104.1

96.3

50.8

80

Natural gas price (US$/million BTU)

10.6

12.0

11.2

10.5

7.3

60

Dollar's nominal effective exchange rate

△ 5.7

3.8

2.2

2.5

15.3

Copyright (C) 2016 JETRO. All rights reserved.

06

Coal
120

104.0

Note: 1) Trade values in 2014 and 2015 and nominal growth rate in 2015 are estimated by JETRO. 2) Real growth rate
= nominal growth rate – export price growth rate. 3) The definitions of materials, intermediate goods and finishedgoods are based on the HS2007 version of BEC (the United Nations) and RIETI-TID2014 (the Research Institute of
Economy, Trade and Industry). 4) Crude oil prices are the average of Dubai, Brent and WTI. 5) Natural gas prices are
Russian market prices.
Source: Trade statistics of respective countries and regions and "IFS, May 2016" (IMF)

05

Figure I-4: Resource price changes

24.7

Crude price (US$/barrel)04

Note: 1) Trade values in 2014 and 2015 and nominal growth rate in 2015 are estimated by JETRO.
Source: Trade statistics of respective countries and regions and “IFS, May 2016” (IMF)

19.8

Industrial production index growth rate
(developed countries)

-20.0

0

Processed goods

Finished goods-15.0

Nominal growth rate (right axis)

180Intermediate goods

(%)
25.0

40
20
0
1995

97

99

01

Source: "IFS May 2016" (IMF)

03

05

07

09

11

13

15
(Year)

4

Chapter 1 Section 2: World Trade and Japan’s Trade

Trends by country in world trade■ Strong imports for the US in 2015
Total imports for the US fell by 4.6% year-on-year to $2.2
trillion due to the impact from the significant drop for mineral
fuels (45.5% decline) . However, an increase in import value
was recorded for many import items, such as electricalequipment (3.9% growth) and transport equipment (6.8%
growth). Real imports for 2015 increased by 5.6%, marking
an acceleration from the 5.0% growth in 2014.
■ Increase in exports of China’s component parts to
ASEAN
China’s imports declined rapidly by 18.4% to $1.6 trillion.
Although mineral fuels also posed a significant impact, a
slowdown in capital investment contributed to a significant
decline of 12.5% for general machinery. On the other hand,
imports of consumer goods such as pharmaceuticals andcosmetics continued to grow from the previous year.
China’s exports fell by 2.7% to $2.3 trillion. While sectors
such as general machinery (9.1% decline) and textile andtextile products (4.9% decline) contributed to the decrease inimports, electrical equipment (5.2% growth) and transport
equipment (2.3% growth) maintained their strong
performance. For exports to ASEAN, which has remained
relatively robust, particular growth was recorded for theexport of intermediate goods (processed goods and parts) to
Vietnam.

■ Strong performance of electrical equipment in Vietnam
and the Philippines
Vietnam was the only principal country that recorded yearon-year increases in both exports (7.9% growth) and imports(11.9% growth). Trade in electrical equipment has been
expanding in recent years. Moreover exports of electricalequipment for the Philippines (12.2% growth), and oftransport equipment for Mexico (4.6% growth), increased
significantly.
Copyright (C) 2016 JETRO. All rights reserved.

FigureI-5: World trade value by country and region (2015)
Value

NAFTA
United States
CanadaMexicoEU-28
Germany
FranceUnited Kingdom
Japan
Australia
East Asia
China
South Korea
TaiwanASEAN 6Singapore
Thailand
Malaysia
VietnamIndonesia
Philippines
India
RussiaBrazilTurkeySouth Africa
World (estimate)
Advanced economies
Emerging anddeveloping

Exports
GrowthShare
rate

Contribution

Value(US$ million, %)Imports
GrowthShare Contribution
rate

2,293,442
1,502,572
410,081
380,789
5,396,840
1,330,190
505,864
468,058
625,068
187,687
4,199,997
2,280,541
526,757
264,020
1,128,679
346,701
210,865
199,959
162,112150,393
58,648267,930
343,543
191,134
143,749
81,641
16,446,732
9,867,960

-8.0
-7.3
-13.7
-4.2
-12.4
-11.0
-12.8
-8.8
-10.0
-21.8
-6.0
-2.7
-8.0
-10.7
-10.2
-15.4
-6.3
-14.6
7.9
-14.7
-5.1
-16.7
-30.9
-15.1
-8.7
-10.3
-12.7
-11.3

13.9
9.1
2.5
2.3
32.8
8.1
3.1
2.8
3.8
1.1
25.5
13.9
3.2
1.6
6.9
2.1
1.3
1.2
1.0
0.9
0.4
1.6
2.1
1.2
0.9
0.5
100.0
60.0

-1.1
-0.6
-0.3
-0.1
-4.1
-0.9
-0.4
-0.2
-0.4
-0.3
-1.4
-0.3
-0.2
-0.2
-0.7
-0.3
-0.1
-0.2
0.1
-0.1
0.0
-0.3
-0.8
-0.2
-0.1
0.0
-12.7
-6.6

3,062,815
2,248,232
419,351395,232
5,263,443
1,050,449
572,400
631,791
648,343
200,344
3,315,769
1,601,761
436,499
227,764
1,049,745
296,799
201,938
175,978
165,649
142,695
66,686
394,014
182,719
171,449
206,839
85,722
16,800,440
10,326,487

-4.9
-4.6
-9.6
-1.2
-13.6
-13.0
-15.4
-9.2
-20.7
-11.9
-16.2
-18.4
-16.9
-16.5
-12.1
-19.0
-11.5
-15.8
11.9
-19.9
3.4
-14.6
-36.3
-25.2
-14.4
-14.2
-12.9
-12.0

18.2
13.4
2.5
2.4
31.3
6.3
3.4
3.8
3.9
1.2
19.7
9.5
2.6
1.4
6.2
1.8
1.2
1.0
1.0
0.8
0.4
2.3
1.1
1.0
1.2
0.5
100.0
61.5

-0.8
-0.6
-0.2
0.0
-4.3
-0.8
-0.5
-0.3
-0.9
-0.1
-3.3
-1.9
-0.5
-0.2
-0.7
-0.4
-0.1
-0.2
0.1
-0.2
0.0
-0.3
-0.5
-0.3
-0.2
-0.1
-12.9
-7.3

6,578,772

-14.8

40.0

-6.0

6,473,952

-14.2

38.5

-5.6

Notes: 1) Export/import value and growth rate of world/EU-28/developed and emerging/developing economies are JETRO estimates.
2) EU-28 includes internal trade.
3) ASEAN 6 in this chart is these six countries: Singapore, Thailand, Malaysia, Indonesia, Philippines, and Vietnam.
4) East Asia in this chart are the following 9 countries/regions: China, South Korea, Taiwan, and ASEAN 6.
5)Advanced countries include 36 countries and regions based on the definition of DOT (IMF).
Sources: Statistics from individual countries/regions

5Chapter 1 Section 2: World Trade and Japan’s Trade

Trends by product in world trade■ Significant decline in the export of resources
Exports of all resource-related products fell significantly against abackground of factors such as the slowdown in the Chinese economy,
which is a principal export destination. Exports of mineral fuelsdecreased dramatically by 40.3% to $1.6 trillion with a negative
5.9% contribution ratio to a decrease in world trade (12.7% decline).
A double-digit decline was recorded for crude oil (decrease of 45.4%
to $748.8 billion), natural gas (decrease of 33.7% to $216.6 billion),and iron ore (decrease of 41.4% to $69.9 billion).
■ 9.7% decline for general machinery, while communicationequipment and electronic parts performed well
A decline of 9.7% was recorded for general machinery, as a result of
the impact from the slowdown in capital investment. Exports fell
across the board in sectors such as mining and construction
machinery (18.3% decline), machine tools (13.4% decline), andturbines (6.1% decline). On the other hand, there were also items
among the IT products that performed well, including
communications equipment (3.9% growth) and electronic parts suchas semiconductors (1.3% growth).
■ Growth in exports of transport equipment to North America
Exports of transport equipment fell by 4.3% to $1.8 trillion. One of
the key factors contributing to the fall was the decline of exports to
China. On the other hand, exports to the US increased. Exports to the
US from Germany (5.2% growth), Korea (9.7% growth), Mexico(6.7% growth) and other countries exceeded export figures for theprevious year. Furthermore, the amount of trade within NAFTA in2015 increased by 2.5% to $237.2 billion. Average growth rate from2010 to 2015 increased by 7.9%, exceeding average growth rate forthe world (3.4% increase), showing the trend of growth in the tradeof transport equipment within NAFTA in recent years.

Figure I-6: World trade by product (export basis, 2015)(US$ million, %)
Value
Total
Machinery and equipment
General machinery
Mining and construction machines
Machine tools

TurbineSemiconductor manufacturing equipment
Computer and peripheral equipment

Electrical equipment
Communication equipment
Electronic components such as semiconductors

Transportation machinery
Automobiles
Passenger vehicles

Automobile parts
Precision equipment

Chemicals
Pharmaceuticals & medical supplies
Food
Other materials and their products

Iron ore
Mineral fuels, etc.

Mineral fuels
Coal
Natural gas
Crude oil
Textiles and textile products
Base metals and base metal products
Steel
IT related products (Total)
Parts
Final goods
Materials
Intermediate goods
Processed goods
Parts
Final goods
Capital goods

Copyright (C) 2016 JETRO. All rights reserved.

16,446,732
6,665,710
1,929,784
79,29033,815
101,234
48,186459,438
2,332,063
544,243626,760
1,809,524
811,416
671,676
390,564594,339
2,199,293
501,290
1,161,215
5,051,964
69,921
1,761,135
1,639,943
77,690216,580
748,799764,7021,080,641
599,526
2,461,923
1,183,339
1,278,584
1,507,661
7,624,396
4,794,586
2,829,810
6,530,628
2,726,450
3,804,178

Consumer goods
Note: JETRO estimates
Source: Trade statistics of respective countries and regions

Growthrate△ 12.7△ 5.1△ 9.7△ 18.3△ 13.4△ 6.1
2.7△ 10.9
△ 1.5
3.9
1.3
△ 4.3
△ 4.5
△ 3.7
△ 6.0
△ 5.8
△ 9.6
△ 3.3
△ 10.3△ 24.0△ 41.4△ 39.4△ 40.3△ 22.6△ 33.7△ 45.4△ 7.0△ 14.0△ 16.9
△ 2.7
△ 1.9
△ 3.5
△ 34.9△ 12.3△ 16.1
△ 5.0
△ 6.3
△ 6.6
△ 6.1

Share

100.0
40.5
11.7
0.5
0.2
0.6
0.3
2.8
14.2
3.3
3.8
11.0
4.9
4.1
2.4
3.6
13.4
3.0
7.1
30.7
0.4
10.7
10.0
0.5
1.3
4.6
4.6
6.6
3.6
15.0
7.2
7.8
9.6
48.7
30.6
18.1
41.7
17.4
24.3

Contribution△ 12.7
△ 1.9
△ 1.1
△ 0.1
△ 0.0
△ 0.0
0.0
△ 0.3
△ 0.2
0.1
0.0
△ 0.4
△ 0.2
△ 0.1
△ 0.1
△ 0.2
△ 1.2
△ 0.1
△ 0.7
△ 8.5
△ 0.3
△ 6.1
△ 5.9
△ 0.1
△ 0.6
△ 3.3
△ 0.3
△ 0.9
△ 0.6
△ 0.4
△ 0.1
△ 0.2
△ 4.5
△ 5.9
△ 5.1
△ 0.8
△ 2.4
△ 1.1
△ 1.4

6

Chapter 1 Section 2: World Trade and Japan’s Trade“Slow trade” becomes apparent in emerging/developing economies

Copyright (C) 2016 JETRO. All rights reserved.

3.5(Real trade growth / real GDP growth)

3.2
3.0

3.0

2.9

2.8
2.3

2.5

2.1

2.2

1.9

2.0 1.9

2.6
2.3

2.1

2.1
1.7

1.6
1.7

1.5

1.7

1.6

1.7

1.4

1.3
1.1

1.2
0.8

1.0

0.7

0.8

0.5

0.3

0.4

0.3
0.1

0.0
85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15

Note: Value for 2009 cannot be calculated due to real GDP growth turning negative this year. (Year)

10.0

8.0

(%)

FigureI-7(ii): Comparison between trade growthand GDP growth (by region)

2.1

2.2

1.9

3.0

2.5

2.4

1.7

0.6

1.5

6.0

2.0

0.8

4.0

1.0

2.0

World

Advanced economies

2005-15

1995-2005

1985-95

2005-15

1995-2005

1985-95

0.0

2005-150.0

1995-2005■ “Slow trade” apparent in emerging/developing economies
By region, it is clear that signs of “slow trade” are particularly
remarkable in emerging/developing economies. While the growthrate of trade expansion is high in comparison with advanced
economies, from the perspective of comparison against GDP, trade
has slowed down more quickly in emerging/developing economies
than in advanced economies.
As a hypothesis for explaining the “slow trade” phenomenon, IMF
points out that the factors behind ”slow trade” could be broadly
categorized into cyclical factors and structural factors. If the
primary reason behind “slow trade” lies in cyclical factors, trade
growth can be expected to return to its previous pace alongside withthe recovery of the world economy and rise in resource prices; onthe other hand, if structural factors are dominant, short-term
recovery would be difficult, and sluggish trade may become
prolonged into the future.

FigureI-7(i): Ratio of world trade growth to world GDP growth

1985-95■ “Slow trade” phenomenon of sluggish trade in comparison
with GDP growth rate
“Slow trade” is an economic phenomenon where the growth rate oftrade is smaller than the world economic growth rate.
World real trade (import volume basis) has been rising at a rate
exceeding the growth rate of real GDP, except during times ofcrisis such as the bursting of the IT bubble and the Lehman Shock.
There were also years when real trade grew more than twice as fast
as the real GDP.
In recent years, however, the trade expansion has begun to slow
down. In particular, since 2012, trade growth has consistently andcontinuously fallen below GDP growth. The growth rate of real
trade against that of real GDP has remained at 0.5 from 2012 to2015.

Emerging/developing
economies

Real trade growth (left axis)
Real GDP growth (left axis)
Real trade growth / Real GDP growth (right axis)
Note: Actual GDP values which are the basis of average growth rates are calculated from PPP. Real trade
growth is based on import volume. Source: "WEO, April 2016" (IMF) and "IFS" (IMF)7

Chapter 1 Section 2: World Trade and Japan’s Trade

Slump in investment pushes trade downward■ Slowdown in the world economy inhibits trade
Cyclical factors are an attempt to provide an explanation from the short-term perspective after 2012. Sluggish world economic growth iscited as the one of the factors of slow trade. The world economy is recovering at a slow pace. In particular, the decline in demand in
China, which has driven the world economy to date, has had a significant impact in inhibiting exports to China from its neighboring
countries.
■ Significant slowdown in the trade of capital goods and intermediate goods
Secondly, the slump in global investment has inhibited trade growth. When capital investment in the manufacturing industry faces a
downturn, it reduces the imports of parts and goods necessary for those production facilities. World real imports continue to demonstrate
a strong correlation with investment trends, and are closely related to growth/decline of investment. Imports of capital goods andintermediate goods, which are the main drivers of capital investment, slowed down globally after 2012. Overall growth in the trade ofcapital goods and intermediate goods falls below the growth in the trade of consumer goods. In China as well, there has been significant
slowdown in the trade of intermediate goods, which makes up 53.0% of total imports, and of capital goods, which makes up 15.9% of
the same. This reflects the slowdown in investments in China.
Figure I-8: Relationship between world trade and investment(Year-on-year, %)FigureI-9: Contribution of imports by product category in China
15.0

15.0

(YoY change, %)Intermediate goods -processed goods
Intermediate goods -parts
Capital goods
Consumer goods

10.0

10.0
5.0

5.0

0.0

-5.0
Real investment

0.0Real imports

-10.0

-15.0

-5.0
98
2000
02
04
Source: "WEO, April 2016" (IMF)06

Copyright (C) 2016 JETRO. All rights reserved.

08

10

12

15
14
(Year)

01

02

03

04

05

06

07

08

09

10

11

12

13

Note: Contribution ratio of each product type to the year-on-year percent change ofChina's total import value. Source: Trade statistics of China

14

15(Year)

8

Chapter 1 Section 2: World Trade and Japan’s Trade

Saturation of the global value-chain, and changes to China’s positioning■ Deceleration in the pace of value-chain expansion
The slowdown in the pace of the global value-chain expansion, which has driven world trade to date, has been pointed out as a possible
structural factor behind slow trade. As cost differences between regions is one of the determinants for investments, rising production costs inemerging/developing economies partly weakens the incentive for developing businesses in these regions. As a result, this is perceived to have
put the brakes on trade flow moving within value-chains. Intra-regional trade ratio that reflects the degree of progress in fragmentation stoodat about 25% up till 2003 in ASEAN. For ASEAN + Japan and Korea, it remained high after rising to a level of about 35%, and has continued
to stay at this level.
■ Changes to China’s positioning
The rise in the domestic supply capabilities of China, which had been the “factory of the world,” can also be considered to be one of theinhibiting factors of trade. China has been engaged in the assembly of parts procured from neighboring countries, and the export of products
to end markets. However, with improvements in technological capabilities in recent years, the share of imports for processing trade has
declined, and added value within China has been growing. Self-manufacturing in China has advanced, and this is considered to havecontributed to the inhibition of China’s imports as well as of overall trade in the world.

Figure I-11: Imports for processing trade in China

FigureI-10: Domestic value-added ratio to exports of each country/region
(%)
100.0

Japan

US

ASEAN

China

(US$ 100 million)

EU

(%)

Amount of imports for processing trade

6,000

60.0

Percentage to total imports (right axis)
90.0

5,000

50.0

4,000

40.0

3,000

30.0

2,000

20.0

1,000

10.0

80.0

70.0

60.0

50.0

95
2000
05
08
09
10
11
95
2000
05
08
09
10
11
95
2000
05
08
09
10
11
95
2000
05
08
09
10
11
95
2000
05
08
09
10
11
95
2000
05
08
09
10
11

40.0

Total Manufactures

Textile products

Chemicals and nonmetallic mineralproducts
Source: "OECD-WTO Trade in Value Added" (TiVA)

Copyright (C) 2016 JETRO. All rights reserved.

Machinery andequipment

Electrical and opticalequipment

Transportationequipment(Year)

0

0.0
95

97

Source: CEIC

99

01

03

05

07

09

11

13

15
(Year)

9

Chapter 1 Section 2: World Trade and Japan’s Trade

World trade to sustain modest growth after 2016
■ Slowdown in semiconductor demand and recovery forpassenger vehicles from the start of 2016
The amount of exports for the 22 major countries/regions for whichdata could be acquired up to the first quarter of 2016 declined by
8.4% to $2.5 trillion. As trade inhibiting factors such as sluggish
resource prices and stagnation in demand in emerging economies
have remained, exports for many items including general machinery(7.9% decline) and electrical equipment (4.7% decline) havecontinued to fall. Despite strong performance in 2015, IT products
such as communication equipment (6.0% decline) and electronic parts
such as semiconductors (1.6% decline) also recorded a fall.
A product that recorded export amount that exceeded the amount forthe same period last year was passenger vehicles (1.1% growth to$123.1 billion). This was driven by exports from Japan (5.7% growth),
Canada (27.4% growth), and Thailand (76.3% growth). Other
products that have regained momentum include pharmaceuticals(1.7% growth to $73.7 billion) and turbines (3.7% growth to $21.2
billion).
■ Recent trend of improvement in Europe and China
The amount of imports for the US fell by 5.5% to $512.7 billion.
Although product sectors such as automobiles (8.4% growth)remained robust, imports for general machinery (5.5% decline) fell
below the previous year against the background of slowdown incapital investment. On the other hand, imports for Germany andFrance have gradually reduced their margin of decline, while China
has begun to record month-on-month increases for imports in April
and May.

■ Modest growth even after 2016
According to WTO, world trade volume is expected to recover slowly,
increasing to 2.8% in 2016 and 3.6% by 2017. However, WTO has
predicted that in the near future, the margin of expansion for trade is
not expected to recover the momentum that it had prior to the Lehman
Shock.
Copyright (C) 2016 JETRO. All rights reserved.

FigureⅠ-12 : Changes in world trade by quarter of 22 key
countries/regions (export basis )(Million USD, %)Share of 22
countries/regions
in 2015

Total

67.1

General machinery

76.0

Turbine82.8

Semiconductor manufacturing equipment

83.6

Electrical equipment

82.4

Communication equipment

80.4

Electronic parts such as semiconductors

93.1

Transport equipment

78.0

Passenger vehicles

75.8

Precision equipment

80.2

Chemicals

65.6

Pharmaceuticals & medical supplies

59.5

Food

55.3

Iron ore (imports)

92.7

Mineral fuels (imports)

75.8

2015
Ⅰ

2,692,540(△ 7.4)363,037(△ 5.0)20,440(△ 5.6)9,655(△ 5.3)441,757(1.6)
96,599(7.5)
135,063(3.1)
346,120(0.1)
121,726(△ 6.2)
115,523(△ 2.8)361,315(△ 7.1)
72,522(△ 3.1)
155,644(△ 6.6)
22,943(△ 41.5)
323,647(△ 41.2)Ⅱ2,784,379(△ 9.3)373,021(△ 8.0)21,037(△ 1.2)
10,086(13.8)
468,694(△ 1.5)102,308(7.8)
143,396(△ 2.1)
360,286(△ 3.8)
127,691(△ 7.3)
119,632(△ 6.1)
371,116(△ 7.7)74,508(△ 1.2)
160,315(△ 11.1)
19,284(△ 46.9)
321,332(△ 38.5)

2016
Ⅲ

2,775,997(△ 10.9)
363,190(△ 10.0)
20,038(△ 8.9)10,772(25.0)
490,781(△ 1.8)107,070(5.6)
152,205(△ 1.4)343,325(△ 4.8)126,363(△ 2.5)
119,756(△ 6.6)361,269(△ 10.1)
76,167(△ 2.5)
160,829(△ 9.9)20,441(△ 35.4)
307,379(△ 41.1)

Ⅳ

2,786,030(△ 10.2)
367,356(△ 11.5)
22,298(△ 4.2)
9,773(△ 1.7)519,451(△ 1.5)
131,762(2.9)
153,136(1.5)
360,913(△ 4.0)133,593(△ 1.2)122,034(△ 5.6)
349,810(△ 8.1)75,255(2.4)
165,486(△ 7.5)19,024(△ 30.2)
259,421(△ 42.4)

Ⅰ2,467,510(△ 8.4)334,452(△ 7.9)21,186
(3.7)
9,676
(0.2)
421,062(△ 4.7)
90,796(△ 6.0)132,913(△ 1.6)
333,753(△ 3.6)
123,090(1.1)
107,206(△ 7.2)
343,168(△ 5.0)73,744(1.7)
152,497(△ 2.0)15,209(△ 33.7)
205,798(△ 36.4)

Notes:1)The key 22 countries/regions are Japan, Germany, China, United States, France, United Kingdom, South Korea, Canada, Hong Kong,
Singapore, Russia, Taiwan, Australia, India, Switzerland, Brazil, Malaysia, Thailand, Philippines, Mexico, Argentina and Republic of South Africa.
2) Figures inside ( ) show the growth rates compared to the same period of the previous year. 3) Iron ore and mineral fuels are import basis andothers are export basis. 4) The world export value that forms the basis for calculating the share, is the total of approximately 180 countries andalso includes the estimates of those countries whose customs statistics were not obtained. The world import value is the total of 53 countries
whose statistics could be obtained.
Sources: Statistics from individual countries/regions

Figure I-13:Quarterly changes in trade trends for the US, Germany, and China($1 million, %)Exports
Imports
2015
2015
2016
I
II
III
IV
I
I
II
III
IV
United States
372,761 387,487 371,700 370,624 347,663 542,385 573,849 575,022 556,976
-5.0
-5.6
-8.1
-10.5
-6.7
-1.6
-4.4
-5.1
-6.9
Germany329,861 334,814 334,951 330,563 326,261 263,544 261,583 264,165 261,158
-12.8
-11.8
-11.2
-8.0
-1.1
-15.7
-15.4
-11.7
-8.8
China
513,510 557,926 596,960 612,145 463,903 372,920 402,936 415,086 410,818
4.5
-2.3
-6.0
-5.2
-9.7
-21.4
-16.9
-18.1
-17.3
Note: 1) The total amount for each quarter may not correspond to the total for the year shown in Figure I-5 due to statistical
updtes and other factors. 2) Figures in the brackets ( ) show year-on-year growth rate.
Sources: Statistics from individual countries/regions

2016
I
512,724-5.5
259,323-1.6
326,255-12.5

10

Chapter 1 Section 2: World Trade and Japan’s Trade

Improvements in Japan’s trade balance■ Trade balance moves toward surplus for the first half of 2016
Japan’s trade in 2015 (customs clearance basis) fell by 10.0% to $625.1 billion, while imports fell by 20.7% to $648.3 billion.
Consequently, a trade deficit of $23.3 billion was posted, marking the fifth consecutive year of a trade deficit. Nevertheless, the deficit
has shrunk by approximately $100 billion from the deficit of $122.8 billion recorded in 2014. The trend for the falling trade deficit hascontinued, and trade balance is expected to return to the black in the first half of 2016 with a surplus of $17 billion. On a yen basis,
exports for 2015 increased by 3.4% to ¥75.6 trillion, while imports fell by 8.7% to ¥78.4 trillion.
Figure I-14: Japan’s trade (2011 – May 2016)

Yen-based

Dollar-based(Unit: $ million, 100 million yen, %)
2016
2011
2012
2013
2014
2015
Jan
Feb
Mar
Apr
May
Jun
Jan-June
Total exports
820,793
801,335
719,205
694,270625,068
306,01444,87948,64657,06953,00846,80355,609(Growth rate)
7.0
-2.4
-10.3
-3.5
-10.0
-2.9
-12.9
-3.2
-1.2
-3.0
-2.5
5.2
Total imports
853,070888,584
838,889
817,103648,343
289,00250,164
46,52850,44845,547
47,142
49,172(Growth rate)
23.4
4.2
-5.6
-2.6
-20.7
-12.3
-18.0
-13.7
-9.8
-17.4
-5.4
-7.9
Trade balance-32,277-87,250-119,684-122,832-23,275
17,012-5,285
2,117
6,621
7,461
-338
6,437
(Year-on-year difference)-107,854-54,973-32,435-3,14899,557
31,370
4,370
5,790
4,794
7,943
1,476
6,997
Total exports
655,465
637,476
697,742
730,930
756,139
345,186
53,51457,03764,56858,89150,91860,258(Growth rate)
-2.7
-2.7
9.5
4.8
3.4
-8.7
-12.9
-4.0
-6.8
-10.1
-11.3
-7.4
Total imports
681,112706,886
812,425
859,091
784,055
327,066
59,991
54,63857,07750,68551,34753,327(Growth rate)
12.1
3.8
14.9
5.7
-8.7
-17.2
-17.8
-14.2
-14.9
-23.3
-13.7
-18.8
Trade balance-25,647-69,411-114,684-128,161-27,916
18,121-6,477
2,399
7,491
8,207
-429
6,931
(Year-on-year difference)-9,199-43,763-45,273-13,477
100,245
35,097
5,127
6,659
5,256
8,790
1,724
7,540
Export volume index
96.2
91.6
90.2
90.7
89.8
87.8
78.4
85.8
98.0
90.2
80.6
93.9
(Growth rate)
-3.8
-4.8
-1.5
0.6
-1.0
-2.3
-9.1
0.2
-1.0
-4.6
-2.4
3.1
Import volume index
102.6
105.0
105.3
106.0
103.0
100.7
103.5
97.3
108.2
95.7
98.3
101.5
(Growth rate)
2.6
2.4
0.3
0.6
-2.8
-1.1
-5.0
-2.4
5.2
-7.5
3.6
0.4
Crude oil import price
108.7
114.8
110.5
105.1
55.0
37.1
36.9
30.4
32.2
37.0
40.7
45.2
(Dollar/barrel, growth rate)
37.3
5.6
-3.7
-4.9
-47.7
-36.0
-41.7
-38.6
-41.3
-34.2
-31.5
-29.4
Exchange rate (yen/dollar)
79.8
79.8
97.6
105.8
121.0
111.8
118.3
115.0
113.1
109.9
109.2
105.5
(Yen appreciation, %)
10.0
0.0
-18.3
-7.8
-12.5
7.5
0.0
3.1
6.5
8.8
10.6
17.3
Note: 1) Yen-based values were converted to dollar-based values by JETRO. 2) Volume index is 2010 basis. 3) Exchange rate is interbank average rate.
4) Growth rate is year-to-year comparison. 5) Figures of imports in June are nine-digit provisional.
Source: "Trade Statistics" (Ministry of Finance), "Foreign Exchange Rate" (Bank of Japan)

Copyright (C) 2016 JETRO. All rights reserved.

11

Chapter 1 Section 2: World Trade and Japan’s Trade

Increase in current account surplus for the first time in five years■ Significant fall in deficit for both trade balance and service balance
Looking at Japan’s balance of payments in 2015, the current account surplus was $135.6 billion, a significant increase of $99.1 billion
from $36.5 billion in 2014. This was the first time in five years that an increase has been recorded for the current account surplus. A
primary factor contributing to the increase in surplus was the fall in the trade balance deficit (2014: $100 billion deficit→ 2015: $5.3
billion deficit). The deficit for service balance, which has constantly been in the red, has also shrunk (2014: $28.8 billion deficit→2015: $14.0 billion deficit), contributing to the increase in current account surplus.
■ Surplus posted for travel service balance for the first time in 53 years since 1962
Within the service balance, a surplus of $9 billion was recorded for travel service balance, marking the first surplus in 53 years since1962. With the rise in tourist numbers to Japan, mainly from China, as well as a significant increase in travel expenditure in Japan, theamount of travel receipts has increased significantly mainly in Asian countries such as China. In addition, a new high of $19.6 billion
was recorded for the surplus obtained from charges for the use of intellectual property rights, etc.

Figure I-15: Japan’s current accountFigure I-16: Japan’s service trade($ billion)($ billion)

300

40

Primary income balance
Others (Note 2))

250
20

200

Other business services

150

Charges for the use of
intellectual property
right royalties
Financial

0

100
50

-20

Insurance/ Pension

0Construction

-40

-50

Travel-100-60

Transportation-150
Services balance

-200

-80

05

06

07

08

Goods
Portfolio investment income
Current account

09

10

11

12

Services
Other primary income

13

14

15

15.
1-5

Direct investment income
Secondary income

Sources: "Balance of Payments" (Bank of Japan, Ministry of Finance, "Foreign Exchange Rates" [Bank of Japan])

Copyright (C) 2016 JETRO. All rights reserved.

16.
1-5(P)

05

06

07

08

09

10

11

12

13

14

15

15.
1-5

16.
1-5(P)

Notes: 1) Yen-based values are converted to dollar-based values by JETRO. 2) "Other" includes manufacturing services on physical inputs owned by others,
maintenance and repairs, communications, computers and information, personal, cultural and recreational, and government services.
Sources: "Balance of Payments" (Bank of Japan, Ministry of Finance), "Foreign Exchange Rates" (Bank of Japan)

12Chapter 1 Section 2: World Trade and Japan’s Trade

US is the largest export partner for the third consecutive year
■ China is the largest import partner for 14 consecutive years
Looking at exports by country for 2015, the US remained as the largest export partner for the third consecutive year, with the amount of exports
reaching $125.9 billion (2.8% decline). In the US, consumption has remained steady, resulting in growth for the automobile sector. On the other hand,
China has encountered sluggish growth with a 14.0% decline to $109.3 billion. The slowdown in growth for the Chinese economy has also
contributed to an overall decline in sectors such as general machinery including machine tools and textile machinery, electrical equipment, andtransport equipment.
In imports, China was the largest import partner for the 14th consecutive year, despite a 11.8% decline to $160.7 billion. In the main import productcategory of electrical equipment, although the import volume for mobile phones remained at the same level as the previous year, the amount of importfell as a result of yen depreciation. In the EU, there has been a rapid increase in the import of pharmaceuticals from Ireland. As a result, Ireland
moved from 13th place in the previous year to the top place for the amount of pharmaceutical imports.

Figure I-17: Japan’s exports & imports by country/region

Figure I-18: Characteristics of Japan’s trade in 2015

(Unit: $ million, %)2014
Total exports

2015

YoY
changeContribu
tion

2016
Jan-JunYoYchange694,270625,068

-10.0

-10.0

306,014

-2.9

-2.9

Unites States

129,441

125,852

-2.8

-0.5

62,380

-0.7

-0.1

EU

72,08266,004-8.4-0.9

35,822

10.5

1.1

China

127,105

109,266

-14.0

-2.6

52,281

-3.0

-0.5

ASEAN

105,241

95,052-9.7-1.5

45,247-7.5-1.2

Thailand

31,55527,999

-11.3

-0.5

12,945-8.5-0.4

Malaysia

14,23912,009

-15.7

-0.3

5,874

-5.6

-0.1

Indonesia

14,848

11,550

-22.2

-0.5

5,205

-14.8

-0.3

Vietnam

11,856

12,535

5.7

0.1

6,049

-5.8

-0.1

Philippines

9,929

9,492

-4.4

-0.1

4,907

3.5

0.1

817,103648,343

-20.7

-20.7

289,002

-12.3

-12.3

Unites States

71,751

66,638-7.1-0.6

32,152

-6.7

-0.7

EU

77,74971,265-8.3-0.8

35,667

5.8

0.6

China

182,071

160,674

-11.8

-2.6

74,851

-4.9

-1.2

ASEAN

116,499

97,953

-15.9

-2.3

44,649

-11.3

-1.7

Thailand

21,877

20,437

-6.6

-0.2

9,755

-7.1

-0.2

Malaysia

29,353

21,538

-26.6

-1.0

8,580

-26.6

-0.9

Indonesia

25,78919,774

-23.3

-0.7

8,939

-12.8

-0.4

Vietnam

15,497

15,142

-2.3

0.0

7,561

3.4

0.1

Philippines

10,252

8,877

-13.4

-0.2

4,198

-5.7

-0.1

Total imports

Notes: Yen-based values are converted to dollar-based values by JETRO.
Source: "Trade Statistics" (Ministry of Finance)

Copyright (C) 2016 JETRO. All rights reserved.

Characteristics for 2015

Contribu
tionLargest export partner for third consecutive year. Due to robust consumption, export volume forExportautomobiles increased by 4.4%, while the amount of exports also increased by 5.2%.
United States
Import

The amount of imports for food products, which make up approximately 20% of imports, fell by 20% dueto the impact of market downturn.

Decline for the fourth consecutive year. Sluggish growth in the areas of machine tools, textile machinery,and computer parts in the general machinery sector. While there were some electrical equipment items
that performed well due to demand for smartphone parts, there was a decline in areas such as heavy
electrical machinery.
Largest import partner for 14th consecutive year. In the electrical equipment sector, the import volume
for mobile phones remained at a similar level as in the previous years. However, the amount of imports
Importfell as a result of yen depreciation. Demand for photocells, which registered rapid growth last year, wason the decline and posted a drop in imports.
A fall in exports was posted for areas such as machine tools, engines, and iron and steel in Thailand, andfor areas such as mining and construction machinery, machine tools, and automobiles in Indonesia.
ExportVietnam posted favorable results, with increases in areas such as mining and construction machinery,machine tools, trucks, and IT-related parts.
Due to the impact of the drop in energy prices, the amount of imports from Malaysia and Indonesia fellsignificantly. The total amount of imports from Vietnam also declined, but the amount of imports forImporttextiles and textile products such as clothing increased on the back of transfer of production operations
from China.
In addition to a growth in the passenger vehicle sector for Italy, there was a rapid increase for pipes tobe used in pipelines, contributing to a 3.4 times growth for the iron and steel sector. On the other hand,
ExportGermany posted a drop in areas such as passenger vehicles and integrated circuits once again, despite
growth in the previous year.
There was a decline for transport equipment due to a drop for passenger vehicles for Germany, and forhelicopters for France. The amount of imports for Ireland increased significantly on the back of rapid
Importgrowth in the area of pharmaceuticals. Ireland moved from 13th place in the previous year to the top
place for the amount of pharmaceutical imports.
Export

China

ASEAN

EU

Source: Compiled by JETRO

13

Chapter 1 Section 2: World Trade and Japan’s Trade

Significant reduction in trade deficit for mineral fuels due to the fall in resource prices■ Sluggish growth for general machinery, etc. due to the impact of slowdown in investment demand
Looking at exports by product, the sluggish growth of the general machinery sector was prominent, with an 11.3% decline to $117.7 billion.
Exports of mining and construction machinery to the US, which makes up 30% of the export market, have declined, while exports to resource
countries such as Australia and the Middle East, as well as to China, have also declined. Exports of machine tools to the main export partners ofChina and the US also fell. With respect to imports, the impact from the fall in energy prices led to a significant decline in the amount of imports
for mineral fuels by 42.6% to $150.6 billion.
■ Trade deficit also shrank alongside with the reduction in the deficit for mineral fuels
Looking at the trade balance by product, we can see that while the surplus for transport equipment, general machinery, and electrical equipment isshrinking, the deficit for mineral fuels has been on a decline after hitting its lowest point in 2012. Partly due to the significant drop in resource
prices in 2015, the deficit fell by 40%, $246.9 billion deficit in 2014 to $139.4 billion deficit in 2015, marking a dramatic improvement. This trend
is still continuing in 2016.
Figure I-19: Japan’s exports and imports by main productFigure I-20: Japan’s trade balance by main product(Unit: $ million, %)2014
Total Exports
General machinery
Mining and construction machines
Machine tools
Electrical equipment
Electronic parts such as semiconductors

2015

YoY
changeContribu
tion

2016
Jan-JunYoYchangeContribu
tion694,270625,068

-10.0

-10.0

306,014

-2.9

-2.9

132,572

117,650

-11.3

-2.2

59,760

-1.4

-0.3

9,337
9,098
104,074

7,883
7,707
95,608

-15.6
-15.3
-8.1

-0.2
-0.2
-1.2

4,534
3,117
45,690

5.0
-28.3
-2.9

0.1

($ million) 79.6
400

34,76332,267-7.2-0.4

15,266-4.6-0.2

Transportation machinery

161,727

151,497

-6.3

-1.5

78,5476.5

1.5

Iron and steel products

46,51537,776

-18.8

-1.3

16,593

-17.6

-1.1

84
200

67
61

817,103648,343

-20.7

-20.7

289,002

-12.3

-12.3

Mineral fuels

262,448

150,633

-42.6

-13.8

51,966

-35.6

-8.7

Crude oil

131,20267,365

-48.7

-7.9

23,145

-33.3

-3.5

76,05774,062-2.6-0.2

36,9252.9

0.3

19,97523,14715.9

0.4

11,81916.0

0.5

General machinery

65,14459,539-8.6-0.7

29,994-1.5-0.1

Electrical equipment

99,01990,266-8.8-1.1

42,355

-3.8

-0.5

Food

64,50958,461-9.4-0.7

28,570-2.0-0.2

Chemicals
Pharmaceauticals & medical supplies

Notes: Yen-based values are converted to dollar-based values by JETRO.
Source: "Trade Statistics" (Ministry of Finance)

19.8

60

61

139

157

-156

-164

75.6

-32.3

-87.2

-119.7-122.8

-23.3

67

58

-14.4

17.0

92
61

173
121

28.5

94

107

95

56

45

37

29

42

156

71

100

157

112

161

73
12

5

5

140

133

125

30

30

3

3
61

65

0
-128

-100

Total Imports

91.7

300

-0.4
-0.4

68.0

-186

-139

-248
-258

-200

-47

-75
-142

-247

-289

-265

12

Transport equipment
General machinery
Chemicals
Other
13
14
15

-300

-400

-500
05

Mineral fuelsElectrical equipment
Food
Products by raw material (excluding mineral fuels)
06
07
08
09
10
11

15.1-6

16.1-6

Notes: The numbers above in the double line boxes represent the trade balance. Source: "Trade Statistics" (Ministry of Finance)

14
Copyright (C) 2016 JETRO. All rights reserved.

Chapter 1 Section 2: World Trade and Japan’s Trade

Impact of decline in the export of intermediate goods to China■ Delay in recovery for exports
Compared to major exporting countries, the structure of Japan’s exports has a higher ratio of intermediate and capital goods. Looking at the export
structure of China, US, Germany, and Japan by taking the average from 2010 to 2015, we see that the combined share of intermediate and capital
goods was approximately 70%. However, Japan’s share reached 81.3%. The characteristic of this export structure has created a situation where Japanis easily impacted by a slowdown in investment worldwide, including China. In particular, the share of exports to China makes up approximately
20% of Japan’s total exports; of these about 90% comprises intermediate and capital goods. As the Chinese economy has eased its speed of expansion,and China’s domestic supply capability has also improved, the momentum of increase in China’s imports of intermediate and capital goods has
slowed down. This, in turn, has had a significant negative impact on the recovery of Japan’s exports. Looking at Japan’s contribution to its totalexport by product category in 2015, intermediate goods had the largest impact with a decrease in total export with a negative 7.1% contribution ratio,of which export to China was the largest at negative 1.8% among major trade partners.

Figure I-21: Export structure of major countries by product category

100.0

Figure I-22:
Japan’s contribution ratio to total export by product category (2015)(Unit: %)(Unit: %)

World
90.0
Raw materials

80.0
70.0

70.3%
60.0

73.0%

Intermediate goods +Capital goods

70.5%

81.3%

US

EU

China

ASEAN

Total exports

-10.0

-0.5

-0.9

-2.6

-1.5

Raw materials

-0.2

-0.0

-0.0

-0.1

0.0

Intermediate
goods

-7.1

-0.5

-0.5

-1.8

-1.3

Capital goods

-2.5

-0.3

-0.3

-0.5

-0.3

Consumer
goods

Capital goods

64.7%
Intermediate
goods

50.0
40.0
30.0
20.0
10.0
0.0
World

China

US

GermanyJapan

Note: 1) The definitions of commodity classifications are based on the HS2007 version of BEC (the United Nations) and
RIETI-TID2014 (the Research Institute of Economy, Trade and Industry). 2) 2010-2015 average
Source: Made by trade statistics of each country

Copyright (C) 2016 JETRO. All rights reserved.

Consumer
-0.4
0.3
-0.1
-0.2
-0.0
goods
Note: 1) The definitions of commodity classifications are based on the HS2007
version of BEC (the United Nations) and RIETI-TID2014 (the ResearchInstitute of Economy, Trade and Industry). 2) The total contribution ratio of thecommodities does not correspond to that of total exports because of dublicate
items.
Source: "Trade Statistics" (MOF)

15

Chapter 1 Section 3: World FDI and Japan’s FDIWorld inward FDI recovers with 38.0% growth■ Significant increase in FDI to Europe and America
According to the United Nations Conference on Trade and Development (UNCTAD), world inward FDI in 2015 (balance of payments basis, net, flow)
increased by 38.0% year-on-year to $1.8 trillion. This marks a recovery from the previous year, when it remained at a low level due to a significant drop in
the amount of investment to the US. It was also the highest level since the Lehman Shock. The contribution ratio by advanced countries reached 34.5%. The
primary factor for this was that FDI to advanced economies, which makes up 54.6% of the total, increased by 84.4% ($962.5 billon). The increase foradvanced economies was significantly impacted by the growth in cross-border M&A toward Europe and America. On the other hand, FDI toward
emerging/developing economies fell due to the impact of the decline in resource prices in Central and South America as well as Africa. However,underpinned by Asia, positive growth was maintained with the posting of 5.9% increase ($799.7 billion).

Figure I-23: Trends in global inward FDI

Figure I-25: FDI for major countries/regions(Unit: US$Million, %)(US$ billion)
2,200
FDI in developed economies
FDI in emerging/developing economies
Cross-border M&As
Greenfield investment

2,000
1,800

Value

1,600
1,400
1,200
1,000
800
600

400
200
0
2003

04

05

06

07

08

09

10

11

12

13

14

15 (Year)

Note: 1) The definition of developed economies follows UNCTAD, and is the total for 39 countries/regions. 2) The figure for emerging anddeveloping economies are obtained by subtracting the figures for developed economies from the world total (excluding the financial centers in
the Caribbean region).
Source: UNCTAD and Thomson Reuters

Figure I-24: Top 10 countries/regions for FDI (2015)
Inward FDI
United States
Hong Kong
China
IrelandNetherlands
Switzerland
Singapore
Brazil

1
2
3
4
5
6
7
8
9 British Virgin Islands
10 Canada
Source: UNCTAD(Unit: US$Million)
Outward FDI
379,894 United States
299,969
174,892 Japan
128,654
135,610 China
127,560
100,542 Netherlands
113,429
72,649 Ireland
101,616
68,838 Germany
94,31365,262 British Virgin Islands
76,16964,648 Switzerland
70,27751,606 Canada
67,182
48,643 Hong Kong
55,143Copyright (C) 2016 JETRO. All rights reserved.

United States
CanadaEU28
IrelandNetherlands
FranceUnited Kingdom
Germany
Switzerland
Australia
Japan
East Asia
Hong kong
China
South Korea
TaiwanASEAN
Singapore
Indonesia
Vietnam
Malaysia
ThailandIndia
Latin America
BrazilMexicoChile
CIS
RussiaMiddle East
TurkeyThe United Arab Emirates

AfricaAngolaSouth Africa
Developed economies
Emerging and developing economies

World

379,894
48,643
439,458
100,542
72,64942,88339,53331,71968,83822,264-2,250443,648
174,892
135,6105,042
2,415
125,689
65,262
15,50811,80011,121
10,84544,208167,582
64,64830,285
20,17628,806
9,825
42,362
16,508
10,97654,0798,681
1,772
962,496
799,659
1,762,155

Inward FDI
Percent
Share
Contribution
Change
256.3
21.6
21.4
-16.9
2.8
-0.8
50.5
24.9
11.5
222.9
5.7
5.4
39.2
4.1
1.6
182.3
2.4
2.2
-24.6
2.2
-1.0
3506.0
1.8
2.4
937.5
3.9
4.9
-43.8
1.3
-1.4
16.9
25.2
5.0
53.3
9.9
4.8
5.5
7.7
0.6
-45.6
0.3
-0.3
-14.9
0.1
0.0
0.8
7.1
0.1
-4.7
3.7
-0.3
-29.1
0.9
-0.5
28.3
0.7
0.2
2.2
0.6
0.0
206.6
0.6
0.6
27.8
2.5
0.8
-1.6
9.5
-0.2
-11.5
3.7
-0.7
18.0
1.7
0.4
-5.0
1.1
-0.1
-42.5
1.6
-1.7
-66.3
0.6
-1.5
-2.1
2.4
-0.1
36.0
0.9
0.3
1.4
0.6
0.0
-7.2
3.1
-0.3
351.7
0.5
0.5
-69.3
0.1
-0.3
84.4
54.6
34.5
5.9
45.4
3.5
38.0
100.0
38.0

Value
299,969
67,182
487,150
101,616
113,42935,069-61,441
94,31370,277-16,739
128,654291,785
55,143
127,560
27,64014,773
66,66935,485
6,250
1,100
9,899
7,776
7,501
32,992
3,072
8,072
15,51330,52826,55831,311
4,778
9,264
11,3251,892
5,349
1,065,192
409,050
1,474,242

Outward FDI
Percent
Share
Contribution
Change
-5.2
20.3
-1.3
20.6
4.6
0.9
64.4
33.0
14.5
135.6
6.9
4.4
102.7
7.7
4.4
-18.2
2.4
-0.6
-11.2
6.4
-0.9
4.8
13.3
8.7
1.1
-19.9
19.8
-5.5
-55.9
3.7
-5.3
3.6
8.7
0.3
-1.4
1.9
0.0
16.2
1.0
0.2
-11.5
4.5
-0.7
-9.3
2.4
-0.3
-11.7
0.4
-0.1
-4.3
0.1
0.0
-39.5
0.7
-0.5
76.4
0.5
0.3
-36.3
0.5
-0.3
5.0
2.2
0.1
37.7
0.2
0.1
-2.8
0.5
0.0
31.4
1.1
0.3
-57.2
2.1
-3.1
-58.6
1.8
-2.9
53.7
2.1
0.8
-28.2
0.3
-0.1
2.7
0.6
0.0
-25.3
0.8
-0.3
-55.5
0.1
-0.2
-30.3
0.4
-0.2
33.0
72.3
20.1
-21.0
27.7
-8.2
11.8
100.0
11.8

Note:
1) T he definition of developed economies follows UNCT AD, and are the total for 39 countries/regions with inward FDI, the total for 38 countries/regions with outward FDI.
2) T he figure for emerging and developing economies are obtained by subtracting the figures for developed economies from the world total (excluding the financial
centers in the Caribbean region).
3) T he amount of East Asia is summed with figures of China, South Korea, T aiwan, Hong Kong, and ASEAN.
4) T he amount of Latin America exclude the financial centers in the Caribbean region.

165) Due to the difference in FDI data compilation, the figure for Japan (Directional principle) in the table do not correspond to "Japan`s FDI" (Asset and Liabilities principle).
6) "-" denotes figures that could not be calculated.
Source: UNCT AD

Chapter 1 Section 3: World FDI and Japan’s FDI

Trend of growth for outward FDI from emerging/developing economies■ Active overseas expansion among Asian corporations
Looking at world outward FDI by countries/regions, in recent years,
we can see a significant expansion in the proportion of Asia
(excluding Japan) among emerging/developing economies. The
proportion of Asia in world outward FDI had risen from 6.5% in2000 to 20.3% in 2015. China’s growth was particularly remarkable,
and its composition ratio, coupled with Hong Kong, reached 12.4%
in 2015. The composition ratio for ASEAN also increased from 0.8%
in 2000 to 4.5%. The amount of outward FDI from Korea andTaiwan has also been on the rise from the mid 2000s. Among topranking corporations of the respective Asian countries, there arecompanies that are not far behind Japanese corporations in terms ofsales and profit levels. By harnessing the knowhow and profits
gained from domestic markets experiencing significant growth, thesecompanies are becoming increasingly active in their overseas
expansion effort.

Figure I-27: Total sales rankings of Asian Companies (over US$ 10
billion)(Unit: US$Million)
Total Sales
Company Name

Percentage change of total sales

Country/region

Net Profit

China State Construction Engineering Corporation Ltd Building/Residential Construction
SAIC M otor Co., Ltd
Automobiles

China
China

Accounting(times)Comparison withperiod140,129
2015/12
2.6 5 accounting period ago
106,691
2015/12
2.3 5 accounting period ago

China M obile Ltd
China Railway Group Limited
China Railway Construction Corporation Limited

M obile Communications
General Contractors
General Contractors

Hong Kong
China
China

106,355
99,316
95,566

2015/122015/122015/12

1.5
1.4
1.4

5 accounting period ago
5 accounting period ago
5 accounting period ago

17,272
1,951
2,012

CITIC Ltd

Civil Engineering
Diversified Banking Institutions

China
Hong Kong

64,35753,761

2015/122015/12

1.6
5.9

5 accounting period ago
5 accounting period ago

2,498
5,393

China Telecom Corporation Ltd
Legend Holdings Corporation

Fixed Communications
Personal Computers

China
China

52,70549,304

2015/122015/121.6
1.4

5 accounting period ago
3 accounting period ago

3,191
741

Lenovo Group Ltd
Flextronics International Ltd

Personal Computers
Electronics M anufacturing Services

Hong Kong
Singapore

44,912
24,4192016/03
2016/032.1
0.9

5 accounting period ago
5 accounting period ago

-128
444

Olam International Ltd
PT ASTRA INTERNATIONAL TBKWholesale - Agricultural Products
Retail - Automobiles

Singapore
Indonesia

21,092
18,555

2015/122015/121.7
1.3

4 accounting period ago
5 accounting period ago

74
1,457

Top Frontier Investment Holdings, Inc.
JARDINE CYCLE & CARRIAGE LTD

Asset M anagement
Retail - Automobiles

Philippines
Singapore

14,80915,718

2015/122015/123.1
1.0

2 accounting period ago
5 accounting period ago

4688

Singapore Telecommunications Ltd
The Siam Cement PCL
Charoen Pokphand Foods PCL

M obile Communications
Organic Chemicals
Feed Products

Singapore
ThailandThailand

13,381
12,84012,307

2015/03
2015/122015/12

1.0
1.4
2.1

4 accounting period ago
5 accounting period ago
5 accounting period ago

2,938
1,326
323

Singapore Airlines Ltd
CP ALL PCL

Air Transportation
Convenience StoresSingapore
Thailand

12,093
11,444

2015/03
2015/121.1
2.7

4 accounting period ago
5 accounting period ago

286
400

Samsung Electronics Co., Ltd
Hyundai M otor Co., Ltd

Diversified Electronics Companies
Automobiles

South Korea
South Korea

241,675
110,759

2015/122015/121.8
1.9

5 accounting period ago
5 accounting period ago

22,517
7,729

POSCO Co., Ltd
LG Electronics Co., Ltd

China/
Hong Kong China Communications Construction Co., Ltd

ASEAN

Industry

4,147
4,741

Blast Furnace SteelDiversified Electronics Companies

South Korea
South Korea

70,08968,062

2015/122015/121.7
1.4

5 accounting period ago
5 accounting period ago

218
150

Kia M otors Corporation
South Korea
Hyundai Heavy Industries Co., Ltd

Automobiles
Heavy M achinery

South Korea
South Korea

59,646
55,683

2015/122015/121.6
1.4

5 accounting period ago
5 accounting period ago

3,168-1,626

Hanwha Corporation
SK Holdings Co., Ltd

Explosive M aterials
Systems Integrators

South Korea
South Korea

49,83547,6602015/122015/124.0
0.6

5 accounting period ago
5 accounting period ago

-343
6,439

Hyundai M obis Co., Ltd
Lotte Shopping Co., Ltd
Hon Hai Precision Ind. Co., Ltd.

Automotive Body/Interior Components
Department StoresElectronics M anufacturing Services

South Korea
South Korea
Taiwan43,38435,083140,3122015/122015/122015/12

2.3
2.1
1.5

5 accounting period ago
5 accounting period ago
5 accounting period ago

3,680
-461
4,598

90.0

Pegatron Corporation
Quanta Computer Inc.

Electronics M anufacturing Services
Electronics M anufacturing Services

TaiwanTaiwan37,99531,532

2015/122015/122.3
0.9

5 accounting period ago
5 accounting period ago

745
558

80.0

Compal Electronics, Inc.
Taiwan Semiconductor M fg. Co., Ltd.

Electronics M anufacturing Services
Semiconductors - Logic

TaiwanTaiwan26,52526,405

2015/122015/120.9
2.0

5 accounting period ago
5 accounting period ago

272
9,597

70.0

Wistron Corp.
WPG Holdings Limited

Electronics M anufacturing Services
Wholesale - Semiconductor/Electronic Component

TaiwanTaiwan19,511
16,1392015/122015/121.0
2.0

5 accounting period ago
5 accounting period ago

42
170

60.0

Asustek Computer Inc.
Uni-President Enterprises Corp.

Personal Computers
Non-Alcoholic Beverages

TaiwanTaiwan14,786
13,027

2015/122015/121.1
1.2

5 accounting period ago
5 accounting period ago

535
442

Inventec Corporation
Tata Sons Ltd

Electronics M anufacturing Services-

TaiwanIndia

12,38042,987

2015/122015/03

1.0
1.6

5 accounting period ago
4 accounting period ago

174-

Tata M otors Ltd
ERICSSON INDIA PRIVATE LIM ITED
Tata Steel Ltd

Automobiles
Software - Other Business Support
Blast Furnace Steel

India
India
India

42,65033,31922,412

2015/03
2014/122015/03

1.6
1.0
0.9

4 accounting period ago
2 accounting period ago
4 accounting period ago

2,288
1,857
-642
3,247
848

Figure I-26: Share of developed andemerging/developing economies to world outward FDI
(%)

100.0

TaiwanDeveloped economies
50.0
40.0

Emerging and developing economies
Asia
India

30.0

Tata Consultancy Services Ltd
Bharti Airtel Ltd

Systems Integrators
M obile Communications

India
India

15,482
15,056

2015/03
2015/03

1.9
1.2

4 accounting period ago
4 accounting period ago

20.0

LARSEN & TOUBRO LIM ITED
M ahindra & M ahindra Ltd

General Contractors
Automobiles

India
India

14,652
10,446

2015/03
2015/03

1.3
1.5

4 accounting period ago
4 accounting period ago

779
513

10.0

Toyota M otor Corporation
Honda M otor Co., Ltd

Automobiles
Automobiles

Japan
Japan

236,602
121,630

2016/03
2016/03

1.1
1.2

5 accounting period ago
5 accounting period ago

19,265
2,870

Japan Post Holdings Co., Ltd
M arubeni Corporation

Truck - Express Delivery/Courier Services
General Trading Companies

Japan
Japan

118,767
101,694

2016/03
2016/030.6
1.0

5 accounting period ago
5 accounting period ago

3,548
519

Nissan M otor Co., Ltd
Nippon Telegraph & Telephone Corporation

Automobiles
Fixed Communications

Japan
Japan

101,540
96,138

2016/03
2016/031.0
0.8

5 accounting period ago
5 accounting period ago

4,364
6,145

Hitachi, Ltd
M itsui & Co., Ltd
Japan Post Insurance Co., Ltd

Diversified Electronics Companies
General Trading Companies
Life Insurance

Japan
Japan
Japan

83,587
80,11080,017

2016/03
2016/03
2016/03

0.8
0.7
0.5

5 accounting period ago
5 accounting period ago
4 accounting period ago

1,434
-695
707

0.0

〔注〕①先進国はUNCTADの区分に基づく39カ国・地域の合計値。

(Year)

Note:1) The definition of developed economies follows UNCTAD, and is the total for 38 countries/regions.
2) The amount of Asia is summed with figures of China, South Korea, Taiwan, Hong Kong, ASEAN, and India.
3) The figure for emerging and developing economies including Asia are obtained by subtracting the figures for developed economies
from the world total (excluding the financial centers in the Caribbean region).
Source: UNCTAD

Copyright (C) 2016 JETRO. All rights reserved.

Japan

Softbank Group Corporation
M obile Communications
Japan
76,2502016/03
2.2 5 accounting period ago
Note: 1) Consolidated statement basis. 2) Including both of listed and private company. 3) Excluding natural resources, energy, and electric power company. 4) The definition of industries follows SPEEDA.

Source: Data from SPEEDA

3,950

17

Chapter 1 Section 3: World FDI and Japan’s FDI

Japan’s outward FDI exceeded $100 billion mark for the fifth consecutive year
■ US continues to be the largest investment destination
Japan’s outward FDI in 2015 fell by 4.1% year-on-year to $130.8 billion (balance of payments basis, net, flow). Despite the drop from the previous
year, it had exceeded $100 billion mark for the fifth consecutive year since 2011. Looking at outward FDI by type, we see that equity capital has
increased by 8.4% to $78.9 billion. One of the factors contributing to the increase in equity capital could be the growth in both outward M&A andGreenfield investments among Japanese corporations. Looking at the principal destinations, we can see that the amount of investment to the US fell
by 7.1% year-on-year to $44.9 billion. Investment in the US made up 34.3% of total investments, and the US continued to be the largest investment
destination for the sixth consecutive year after 2010. Japan’s outward FDI, categorized by countries/regions, showed that most of the major
investment destinations have reduced their shares in recent years. Amidst this, the share of the US has continued to increase from 2012 to 2014, andreflecting the enhanced presence of the country as an investment destination.

Figure I-28: Trends in Japan’s outward FDI by type
1,700($100 million)(Unit: US$Million, %)Debt instruments

1,500

1,556

2013

Reinvestment of earnings
1,363
1,308

Equity capital
1,300

Figure I-29: Japan's outward FDI by country/region

Net

1,176
1,168

1,100
900
700
500
300
100
-100

Note: 1) Yen-based values are converted to dollar-based values by JETRO. 2) Figures are based on BPM6.
Source: "Balance of Payments" (MOF, BOJ)

2014

2015

Jan-May,

Percent
Percent
2015（ P)
Share
ChangeChange40,47043,23732,26724.7-25.4
14,013
25.0
3.3
Asia
9,104
10,389
8,867
6.8
-14.6
3,247
5.8
-18.3
China
23,61923,134
20,244
15.5
-12.5
6,665
11.9
-30.5
ASEAN
3,545
8,233
6,500
5.0
-21.1
1,211
2.2
-53.6
Singapore
10,174
5,744
3,799
2.9
-33.9
1,608
2.9
-12.9
Thailand
3,907
4,933
3,560
2.7
-27.8
1,153
2.1
-20.2
Indonesia
1,265
1,290
2,839
2.2
120.1
454
0.8
-78.8
Malaysia
1,242
923
1,450
1.1
57.1
1,374
2.5
202.9
Philippines
3,266
1,604
1,360
1.0
-15.2
739
1.3
10.1
Vietnam
2,155
2,214-1,706
1,563
2.8
India
46,50550,12646,01335.2-8.2
23,397
41.8
25.2
North America
43,70348,32944,893
34.3-7.1
23,115
41.3
26.4
United States
10,197
6,671
7,730
5.9
15.9
1,640
2.9
-66.7
Latin America
1,750
1,112
989
0.8
-11.0
468
0.8
74.4
Mexico
4,037
3,334
1,412
1.1
-57.6
376
0.7
-72.3
Brazil
6,098
6,331
7,661
5.9
21.0
1,705
3.0
-72.1
Oceania
5,835
4,908
6,690
5.1
36.3
1,046
1.9
-80.2
Australia
32,22727,546
34,57426.4
25.5
15,70028.0
13.6
EuropeEU30,99926,11733,762
25.8
29.3
14,46625.8
7.0
135,049
136,347
130,752
100.0-4.1
55,979
100.0
-4.2
World
Note: 1) Yen-based values are converted to dollar-based values by JETRO.
2) Because the BOP-related statistics have been revised, there is no strict continuity in the data before 2013 and after 2014.
3) The figures for 2016 are provisional. 4) "-" denotes figures that could not be calculated.
Source: "Balance of Payments" (MOF, BOJ)
Share

18
Copyright (C) 2016 JETRO. All rights reserved.

Chapter 1 Section 3: World FDI and Japan’s FDI

Progressive shift in Japan’s outward FDI to ASEAN■ Expansion in composition ratio of non-manufacturing industries forinvestment in China
Investment in the Asian region, which ranks third highest in the world, fell by
25.4% year-on-year to $32.3 billion. Within Asia, investment in ASEAN fell by
12.5%, but remained at a level of $20 billion for the third consecutive year. On theother hand, investment in China fell by 14.6% to $8.9 billion, reflecting thecontinued difference of about two times in the amount of investment between
China and ASEAN after 2013. Investment in Singapore, which is the highest
among Japan’s investments in ASEAN, fell by 21.1% to $6.5 billion. With regard
to the amount of investment in other key ASEAN countries, investment inThailand, Indonesia, and Vietnam declined, but investment in Malaysia and thePhilippines increased. Furthermore, looking at FDI toward China by industry, we
see that while the amount of investment has been on a downward trend for bothmanufacturing and non-manufacturing industries after peaking in 2012,
composition ratio has increased significantly for non-manufacturing industries
after 2005.

Figure I-31: Japan’s FDI into ASEAN by country
2005

2011

2012

2013

(Unit: %)

2014

2005

6,575

12,64913,479

9,104

10,3898,867

ASEAN (US$ million)

5,002

15,721

14,34923,61923,134

20,244

11.1

28.6

10.9

15.0

35.6

32.1

Thailand

42.5

20.4

29.4

43.1

Figure I-32: Japan’s FDI into China by major industry

2015

China (US$ million)

Singapore

Figure I-30: Japan's outward FDI - Comparison between
China and ASEAN

24.8

18.8

Manufacturing

2011

2012

2013

2014

(Unit: %)

2015

77.5

69.3

68.2

62.2

60.1

60.5

Food

3.4

1.7

2.0

3.6

2.7

3.3

Textiles

4.3

4.3

1.7

1.0

0.0

-0.6

Chemicals & pharmaceuticals

9.5

8.2

6.4

5.9

6.0

4.1

Iron, non-ferrous and metals

5.8

10.1

6.8

7.3

5.0

2.7

General machinery

7.0

14.1

12.8

11.9

12.8

16.7

Indonesia

23.7

23.0

26.6

16.5

21.3

17.6

Electric machinery

13.1

8.0

9.6

6.8

8.5

10.5

Malaysia

10.5

9.2

9.1

5.4

5.6

14.0

Transportation equipment

15.7

11.7

21.0

17.6

16.2

14.2

22.5

30.7

31.8

37.9

39.9

39.5

Wholesale & retail

7.3

14.9

14.6

12.2

18.8

20.1

Finance & insurance

8.2

5.9

4.6

10.9

15.0

11.3

Real estate

2.0

5.1

7.4

10.1

2.6

4.9

Services

1.5

1.8

2.8

2.9

1.7

1.9

100.0

100.0

100.0

100.0

100.0

100.0

Philippines

8.8

6.5

5.1

5.3

4.0

7.2

Vietnam

3.1

11.8

17.9

13.8

6.9

6.7

Other

0.3

0.6

1.0

0.9

1.8

3.6

Note: 1) Because the BOP-related statistics have been revised, there is no strict continuity in the data before 2013 andafter 2014.
2) "Other" is the sum of Brunei, Laos, Myanmar and Cambodia.
3) The FDI values into Thailand for 2011 and 2012 exclude investments in the finance and insurance sectors related toits floods. (fourth quarter of 2011: $3.924 billion; first quarter of 2012: -$3.674 billion)
Source: "Balance of Payments" (MOF, BOJ)

Copyright (C) 2016 JETRO. All rights reserved.

Non-manufacturing

Total

Note: 1) Because the BOP-related statistics have been revised, there is no strict continuity in the data before 2013 and after 2014.
2) Each figure for manufacturing and non-manufacturing does not correspond to the sum of the breakdown because the figures
include other industries.
3) "-"indicates net inflow.
Source: "Balance of Payments" (MOF, BOJ)

19

Chapter 1 Section 3: World FDI and Japan’s FDI

Non-manufacturing industries drive the increase in outward FDI stock■ Growing outward FDI for non-manufacturing industries
Japan’s outward FDI stock as of the end of 2015 increased by 6.2% year-on-year to $1.3 trillion. With respect to changes in the composition ratio by industry,
the share of non-manufacturing industries, which has occupied 40% of the total in 2005, exceeded 50% by 2008, and grew to 55.5% in 2015. Looking at the
breakdown, the finance and insurance industries, as well as wholesale and retail industries, made up a large proportion, while the share of the mining andcommunication industries has also increased from 2005. On the other hand, the share for manufacturing industries during the same period fell from 59.8% to44.5%.
Japan’s direct investment income credit declined by 9.2% to $89.5 billion in 2015. Although it has fallen since 2014 ($98.6 billion) when it was at ahistorical high, it nevertheless remained at a high level. By industry, a large proportion was contributed by transportation equipment in the manufacturingsector, and the finance and insurance industries as well as wholesale and retail industries in the non-manufacturing sector. However, although the rate of
returns on outward FDI (2015) was at the high level of 12.3% for transportation equipment, it remained at 6.3% and 8.3% for the finance and insurance
industries, and the wholesale and retail industries respectively. The rate of return for the manufacturing sector tended to be high, while the rate of return wasobserved to be at a low level for the non-manufacturing sector. Improving the rate of return in the rapidly expanding non-manufacturing sector is posing achallenge to countries.

Figure I-33: Share of outward FDI stock in Japan bymajor industry(Unit: US$Million, %)end of2005

end of2011

end of2012

end of2013

end of2014

end of2015

Manufacturing

59.8

48.3

47.2

46.7

45.3

44.5

Food

4.3

6.3

6.0

5.2

6.1

6.0

Chemicals & pharmaceuticals

9.3

10.1

8.4

8.9

7.5

7.7

Gneneral machinery

2.8

4.0

4.0

3.8

4.1

4.3

Electric machinery

14.8

8.5

8.7

8.5

7.7

7.6

Transportation equipment

17.8

9.4

9.8

10.0

9.1

8.8

40.2

52.4

52.8

53.3

54.7

55.5

2.0

7.5

8.6

8.0

8.2

7.7

Figure I-34: Direct investment income credit and rate of returns
on Japan’s outward FDI by major industry（US$ million）

18.0
Direct investment income
creditOutward FDI rate of
return (right axis)

16,000Non-manufacturing
MiningCommunications

1.2

1.8

2.2

4.2

4.3

4.8

Wholesale and retail

11.0

13.0

13.5

12.6

14.9

14.1

Finance and insurance

17.2

22.4

20.5

20.0

18.6

19.9

Services

3.5

1.8

2.2

2.5

2.6

2.5

392,226

974,148

1,056,907

1,132,217

1,185,447

1,259,050

Outward FDI stock

Note: 1) Because the BOP-related statistics have been revised, there is no strict continuity in the data
before 2013 and after 2014.
2) Figures of outward FDI stock are based on BPM6.
3) For 2011, only figures of "Total" are revised by the notice of correction. The figures of industry
breakdown data are not revised.
Source: "international Investment Position of Japan" (MOF, BOJ)

Copyright (C) 2016 JETRO. All rights reserved.

(%)

18,00016.0

14,00014.0

12,00012.0

10,000

10.0

8,000

8.0

6,000

6.0

4,000

4.0

2,000

2.0

0

0.0

2014

2015

Chemicals andpharmaceuticals

14

15

Generalmachinery

14

15

Electric
machinery

14

15

Transportationequipment

14

15

Mining1415

Wholesale andretail14

15

Finance andinsurance

Note: 1) (Rate of returns on Japan’s outward FDI) = (Current direct investment income credit) / (Stock of outward direct
investment at the end of 2015) x 100 (%).
Source: "Balance of Payments" (MOF, BOJ), "international Investment Position of Japan" (MOF, BOJ)

(year)

20

Chapter 1 Section 3: World FDI and Japan’s FDI

Trends in overseas sales of Japanese companies■ Overseas sales ratio of Japanese companies continues to growAccording to calculations drawn up by JETRO based on the financial results and securities reports of Japanese companies for the period from the fiscal year ended
December 2015 to the fiscal year ended March 2016 (aggregation of results from 186 companies), the overseas sales ratio of Japanese companies (*not including
exports from Japan) was 58.3%, indicating a continued growing trend. By region, the Americas have continued their upward trend from 18.6% in FY2012 to 25.9%
in FY2015, reflecting the growth in demand due to recovery of the US economy. Overseas sales ratio to the Asia Pacific and Europe has remained at the same level
as in the previous fiscal year.
■ Growth in ratio of transport equipment sales to the Americas
By industry, the high overseas sales ratio for transport equipment and electrical equipment was prominent. Overseas sales ratio of transport equipment for FY2015
was 62.5%. In this industry, the ratio for the Americas was 31.7%, making up half of all overseas sales. Overseas sales ratio to the Americas has risen from 29.0% in
the previous fiscal year. Overseas sales ratio for electrical equipment was 58.5%. In this industry, sales to the Asia Pacific made up 22.3% of the total. Furthermore,
the percentage for Europe in the electrical equipment sector made up 15.7%; this was relatively higher than for the other industries. The ratio of domestic sales
exceeded overseas sales in the materials/material processed goods and the non-manufacturing industries. The ratio of sales to the Asia Pacific region in thematerials/material processed goods sector occupied about 30%.

Figure I-35: Japanese companies’ sales share by region

Figure I-36: Share of Japanese firms’ sales by industry and region (FY2015)(Unit: %)Fiscal year
Domestic Overseas(number ofAmericascompanies)
2000
(547)
71.4
28.6
13.4
2001
(581)
68.5
31.5
14.7
2002
(592)
67.2
32.8
14.9
2003
(624)
66.5
33.5
14.1
2004
(669)
65.4
34.6
13.6
2005
(724)
64.9
35.1
13.8
2006
(751)
62.3
37.7
14.5
2007
(781)
60.8
39.2
14.2
2008
(817)
62.6
37.4
12.7
2009
(844)
63.3
36.7
12.4
2010
(320)
54.0
46.0
18.1
2011
(236)
53.1
46.9
17.7
2012
(221)
51.3
48.7
18.6
2013
(211)
45.6
54.4
21.5
2014
(212)
43.1
56.9
23.5
2015
(186)
41.7
58.3
25.9

EuropeAsiaPacific

5.6
6.1
6.6
7.0
7.4
6.9
7.7
9.1
8.6
7.5
8.1
8.9
7.8
9.2
9.2
8.9

5.8
6.3
6.8
7.7
8.5
9.5
10.3
10.7
10.8
11.3
15.2
15.0
17.2
18.2
18.7
18.4

Other

3.8
4.4
4.5
4.8
5.1
4.9
5.1
5.2
5.3
5.4
4.7
5.3
5.1
5.5
5.5
5.0

Note: 1) Companies surveyed: The fiscal term is from December to March, and segment information isbased on location. 2) Figures for FY2015 totaled companies with financial statements available by May
31, 2016. However, for companies that have both their financial statements and securities reports
publicized by the above day and have their information on securities reports in database SPEEDA,
sales data of the report was used. 3) Percentage = sales of each region/total sales. 4) Surveyed
companies include listed subsidiaries, which were double-counted. 5) Companies which combine
multiple regional sales such as “Americas and Europe” and “Europe and Africa”, were excluded.
Source: Data from SPEEDA

Copyright (C) 2016 JETRO. All rights reserved.

Industry(number of companies)

Domestic

Overseas

(151)

40.8

Transport equipment(47)

Machinery & electric appliances

Americas

EuropeAsia
Pacific

59.2

26.6

9.1

18.5

4.9

37.5

62.5

31.7

7.9

17.2

5.6

(58)

46.4

53.6

15.6

14.0

20.5

3.6

Industrial machinery

(33)

60.3

39.7

12.9

9.4

14.6

2.8

Electrical equipment

(23)

41.5

58.5

16.7

15.7

22.3

3.8

Materials/material processed goods (31)

54.1

45.9

9.3

5.9

27.7

3.0

63.7

36.3

10.0

3.5

15.2

7.6

ManufacturingNon-manufacturing

(35)

Other

Notes: 1) Based on broad categories in the SPEEDA database, the manufacturing industry comprises the following areas: Transportmachinery, machinery and electric appliances, materials/material processed goods, pharmaceuticals and biotechnology, andfood and household goods. Non-manufacturing industry comprises the following broad areas in the same database:Construction and real estate, consumer services, away from home meals/home-meal replacement, advertising/infocomms
services, legal services, intermediate distribution, finance, transport services, and resources and energy. 2) Electricalequipment is categorized into the following middle categories based on the same database: Infocomm equipment
manufacturing, consumer electronics manufacturing, electronic parts/device manufacturing.
Source: Aggregated and compiled from SPEEDA

21

Chapter 1 Section 3: World FDI and Japan’s FDI

Asia boosts its presence in Japan’s inward FDI
Figure I-38: Trends in Japan’s inward FDI by type■ Asia and US sustain high levels of FDI in Japan

30.0

In 2015, the value of Japan’s inward FDI (on a balance of payment basis,flow) was $145.6 billion (gross) and negative $42 million (net). From
January to May in 2016, however, the net value shifted toward an increase
with $11.6 billion, marking an increase of 281.1% from the same period of
the previous year. By main regions, investments from Asia in 2015 shrank
somewhat as compared to the previous year, when there were large-scale
investment projects. However, its presence has grown further as a stronger
source of investment that exceeds investments from North America andEurope. At the end of 2015, the inward stock of FDI in Japan increased to¥24.4 trillion from the end of the previous year. Reflecting the rise of Asia ininward FDI to Japan in recent years, Asia’s composition ratio to theforegoing stock also rose to 17.6% from 15.5% at the end of 2014.
Figure I-37: Japan’s inward FDI by country(Unit: $ million, %)

2016
2013
2014
2015
Jan-May(P) YoY change
Asia
867
6,459
5,639
1,156
-42.7
China
140
765
554
-95
Hong Kong
172
2,253
1,273
-52
Taiwan
186
1,135
606
217
19.8
South Korea
48
559
823
179
20.4
ASEAN
317
1,746
2,366
917
-1.5
Singapore
325
1,460
1,937
755
-9.4
North America
1,414
6,844
5,220
2,911
158.7
United States
1,378
6,827
5,194
2,931
170.2
Latin America-1,363669-2,101282
26.9
Oceania
376
582
-634
-222
Europe
1,061
3,237-8,500
7,401
813.2
EU
1,401
2,701
-8,195
7,036
574.2
World
2,358
18,426-42
11,619281.1
Notes: 1) The yen-based value is converted to dollars by quarter, using the average quarterlyBank of Japan interbank rate. 2) Because the BOP related statistics have been revised, there is
no strict continuity in the data before 2013 and after 2014. 3) The cumulative total for 2016 is apreliminary figure.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Copyright (C) 2016 JETRO. All rights reserved.

($ billion)

25.0
20.0

Debt instruments
Reinvestment of earnings
Equity capital
Net

15.0
10.0
5.0
0.0
-5.0

-10.0
-15.0

Note: 1) Yen-based values are converted to dollar-based values by JETRO.
2) Figures are based on BPM6. 3) Cumulative total for 2016 is preliminary.
Source: "Balance of Payments" (MOF, BOJ)

Figure I-39: Share of inward FDI stock in Japan by regionEndof 2000

Endof 2010Endof 2011Endof 2012Endof 2013Endof 2014(Unit: %)Endof 2015

World

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Asia

7.8

10.8

11.8

13.5

14.4

15.5

17.6

North America

32.3

34.4

32.2

30.8

31.6

29.8

28.8

Europe

51.6

42.9

45.1

46.1

46.3

46.6

46.0

Latin

7.0

11.0

10.0

8.6

6.7

5.9

6.0

Oceania

1.1

0.6

0.6

0.8

0.9

1.8

1.3

Middle East & Africa

0.2

0.2

0.3

0.1

0.1

0.4

0.3

Inward FDI stock /
GDP

1.2

3.9

4.0

4.0

4.1

4.9

4.9

Inward FDI stock
60,958187,353
188,238
192,273
195,510
237,480
243,843(100 million yen)
Note: 1) Because the BOP-related statistics have been revised, there is no strict continuity in the data
before the end of 2013 and after the end of 2014. 2) Both inward FDI stock and inward FDI stock/GDP
are based on BPM6 over the entire period.
Source: "International Investment Position" (MOF, BOJ), data from the Cabinet Office22

Chapter 1 Section 3: World FDI and Japan’s FDI

Aiming for overseas expansion through collaboration with Japanese companies■ Entering the diversifying service sector
Looking at the trends for foreign corporations in recent years, there has been an increasing number of cases in which conglomerates in
Asia and global companies collaborate with Japanese companies with the aim to expand their markets. In addition to the conventional
philosophy of “earning in Japan” by breaking into the Japanese market, there is now an added perspective of applying the experience
gained in the Japanese market to expanding the business in other regions, or of “earning with Japan” alongside with Japanesecompanies expanding their businesses in other regions. Furthermore, there is also growing diversification in the service sector that thesecompanies are breaking into, including targeting the inbound market and corporate services sector for clinical trial support and welfare.
M&A deals in Japan in 2015 fell by 27.0% to $7.6 billion as a result of the small number of large-scale deals, but increased
significantly in the first half of 2016 to $22.2 billion.
Figure I-41: Recent trends of foreign-affiliated firms in Japan（No. of deals）
250($ million)

35,000
Value

Number of Deals (right axis)

30,000200

25,000150

20,00015,000100

Collaboration with global companies

Figure I-40: Changes in the value of M&As in Japan

Company

OutlineCheung Kong (Holdings) Limited(Hong Kong)

Cheung Kong is a large scale conglomerate and leading enterprise in Hong Kong. It established a joint venture with M CAP, a
M itsubishi Corporation-affiliated aircraft leasing company in M arch 2015. By taking advantage of 15 airplanes possessed by
M CAP, it aims at entering the market of the aircraft leasing industry in Asia, which is widely required by LLC.

Freudenberg Group (Germany)

Mahindra & Mahindra (M&M)(India)Autoliv (Sweden)

10,000Freudenberg is the world's largest company in manufacturing nonwoven fabric. It jointly acquired Japan Vilene, a major
Japanese nonwoven fabric maker, with Toray in September 2015. While it had been working together closely with Japan
Vilene in establishing a joint venture in Asia, Freudenberg Group decided to accelerate the speed of global business expansion
by taking a management initiative.
M &M is a dominant conglomerate company in India, and formed a capital tie-up with M itsubishi Agricultural M achinery, aM itsubishi Heavy Industry-affiliated company, in October 2015. It is aiming at jointly strengthening business mainly in Asia,
where the demand for food is growing, by combining technology possessed by M itsubishi Agricultural M achinery andcapabilities in procurement and sales possessed by M &M .
Autoliv is the world's largest air-bag company. It established a joint venture with Nissin Kogyo, a major Japanese brakecomponents maker, in M arch 2016. It has plans to jointly develop a self-driving system, a field which is expected to grow in
the future.

0

0
95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

Source: Thomson Reuters (Data as of July 4, 2016)

11

12

13

14

15

15 16
1-6 1-6

Entering diversified service fields

50
5,000

VINCI Airports S.A.S (France)

A consortium mainly made up of VINCI Airports and Orix Corporation acquired a concession of the Kansai and Osaka
International Airports. (The total transaction value: $17.9 billion) Both airports have been privatized from April 2016.

Almac Group (UK)

Almac Group is a UK-based company that provides distribution services for clinical test drugs (packaging and chilled
distribution) and offers solutions for analyzing and developing agents for drug discovery and drug development. In order toenhance support for its existing customers in Japan which are engaged in clinical tests in Asian Pacific region, it hasestablished a corporation

Edenred (France)

Edenred has been providing the Ticket Restaurant® meal voucher service as employee benefit services for companies, and isalso listed on NYSE as well as Euronext Paris. It has expanded operations by developing a digitized version of its mealvoucher services since 2016.

Founder Group (China)

Founder Group is a Chinese state company affiliated with Peking University and has been conducting medical matching
services since 2015 to connect Chinese tourists with advanced Japanese medical services, including cancer treatment. It isaiming at incorporating a wide range of needs of Chinese tourists in Japan.

Source: Thomson Reuters, press release announced by each company, and other publications of media

Copyright (C) 2016 JETRO. All rights reserved.

23

Chapter 2

Trends in development of world trade rules

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

282 FTAs in force around the world; Asia’s FTA network expands in 2015
■ 282 FTAs in force around the world; 14 FTAs entering into force after 2015
The number of free trade agreements (FTA) in force around the world is 282 as of the end of June 2016 (based on JETRO surveys, including the Customs
Union). A total of 14 new FTAs entered into force, with 11 new FTAs in 2015 and 3 from January to June in 2016. The number of FTAs entering into force
has recorded double digits for 13 consecutive years since 2003.
■ Japan, China, and Korea expand their respective FTA networks in Asia
Of the FTAs that entered into force after 2015, six were within the Asia Pacific region, and Asian countries were parties in three of the four cross-regional
FTAs that came into force. Japan’s FTA with Australia came into force in January 2015. This was a large-scale FTA between Japan and its 9th largest
exporting partner and 3rd largest importing partner after China and the US. In June 2016, Japan’s FTA with Mongolia entered into force. This was the firstbilateral FTA that Mongolia had concluded. In December 2015, the China-Korea FTA entered into force, while Korea’s bilateral FTAs with Vietnam and
New Zealand respectively, and China’s bilateral FTA with Australia, entered into force.

Figure II-1: Number of FTAs which are in force by region and year
(as of end of June 2016)(Unit: Number)
AsiaPacific1955-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
Apr-00
Sep-0520102010
2011
2012
2013
2014
2015
2016
Total

2
2

Americas

EuropeMiddleEast/
Africa

1

1
1

1
1

1

1

3
2
5
1

1
3
1
7
7
8
13
1
1
6
2
1
1
1

56

42

4
9
20
19
5
3

5
3
5
4
8
6

1
1
9
8
4

5
14
2
2
2

1

1

1
25

25

Source: WTO, data from each government and organization

Copyright (C) 2016 JETRO. All rights reserved.

Total

2
1
6
19
37
38
1
10
6
7
10
3
1

2
3
0
4
3
3
6
17
39
50
75
80
13
14
14
12
13
11
3

106

282

2
1

1

28

Russia/ CrossCIS
regional

Figure II-2: FTAs which came into force since 2015
Country/region
Japan - Australia
China - Australia
China - South Korea
Asia/PacificSouth Korea - Vietnam
South Korea - New Zealand
Japan - Mongolia
Mexico - Panama
Americas
Pacific Alliance
Europe/EFTA - Bosnia and Herzegovina
Russia/CIS Eurasian Economic Union (EEU)
South Korea - Canada
Malaysia - Turkey
CrossThailand - Chileregional
Mercosur - Southern African Customs
Union (SACU)
RegionEffective date
Jan 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
June 2016
July 2015
May 2016
Jan 2015
Jan 2015
Jan 2015
Aug 2015
Nov 2015
Apr 2016

Note: 1) The FTA between M ercosur and SACU is a preferential trade agreement.
2) The member countries of each regional agreement are as follows.
Pacific Alliance: M exico, Columbia, Peru, Chile
EEU: Russia, Kazakhstan, Belarus, Armenia, Kirghiz
M ercosur: Brazil, Argentina, Uruguay, Paraguay, Venezuela
SACU: South Africa, Botswana, Namibia, Swaziland, Lesotho
Source: WTO, data from each government, regional government and organization

25

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Japan’s FTA coverage ratio at 22.7%; to rise to 39.5% if the TPP enters into force■ FTA coverage ratio continues to improve: Korea’s FTA coverage ratio rises from 41.1% to 67.3%
According to trade statistics for 2015, FTA coverage ratio for the principal countries (ratio of trade with countries that the subject country has established FTAs
with, as a proportion of total trade of the subject country) showed that Korea had achieved its highest coverage ratio at 67.3% after the FTA with China, its largest
trading partner, entered into force. Australia’s coverage ratio also rose from 44.1% in 2014 to 70.6% as a result of the entering into force of its FTA with China.
Coverage ratios for other principal countries and regions were as follows: Japan 22.7%, US 39.6%, EU (extraterritorial trade) 28.5%, and China 29.0%. If the TPP
were to enter into force, Japan’s FTA coverage ratio would increase 16.8 points (to 39.5%), while that for the US would increase 7.8 points (to 47.4%), in figures of2015.
■ Japan’s FTA coverage ratio to rise to 77.0% if the TPP, Japan-EU FTA, and RCEP enter into force
If the TPP, Regional Comprehensive Economic Partnership (RCEP), Japan-EU Economic Partnership Agreement (Japan-EU FTA), and Transatlantic Trade andInvestment Partnership (TTIP) all enter into force, FTA coverage ratio would be 77.0% for Japan, 66.1% for the US, 49.2% for EU, and 38.1% for China. With theaim of making progress in TTIP negotiations within the year, and to reach a basic agreement on the Japan-EU FTA as soon as possible, the frequency of thesenegotiations is gaining pace (as of July 2016). The EU has established the negotiations for both FTAs as a priority issue of its trade strategy.

Figure II-3: FTA coverage ratio of major countries/regions (2015)

Figure II-4: Mega-FTA coverage ratio by major country/region (2015)(Unit: %)FTA coverage ratio
T woway
trade

Japan
US
CanadaMexicoChile
PeruTotal trade
EU28

Extra-regional trade

China
South Korea
ASEAN
Singapore
Malaysia
VietnamThailandIndonesia
India
Australia
New Zealand

22.7
39.6
70.9
80.2
92.1
90.4
73.8
28.5
29.0
67.3
60.3
77.7
63.3
61.5
59.5
64.3
18.3
70.6
48.2

21.1
47.3
79.5
93.5
90.6
92.1
74.8
31.6
22.4
71.1
56.5
73.1
63.2
43.1
56.0
60.0
19.9
74.6
48.0

FTA partner countries/regions
1st

2nd

3rd

24.2 ASEAN
34.4 NAFTA
63.3 NAFTA
67.3 NAFTA
93.8 China
88.9 China
72.9 EU
25.3 Switzerland
38.5 ASEAN
62.7 China
64.1 ASEAN
80.4 ASEAN
63.5 ASEAN
75.5 China
63.2 ASEAN
68.8 ASEAN
17.2 ASEAN
66.9 China
48.5 China

15.2 Australia
29.5 S. Korea
67.8 S. Korea
66.5 EU
24.6 US22.4 US63.1 Switzerland
7.2 Turkey
12.0 S. Korea
23.6 ASEAN
23.6 China
24.1 China
27.4 China
25.2 ASEAN
23.0 China
24.8 China
10.3 S. Korea
27.6 ASEAN
18.9 Australia

3.7 Mexico
3.1 DR-CAFTA
1.2 EFTA
8.0 Japan
16.0 EU
18.1 EU
2.7 Turkey
4.0 EEA
7.1 Taiwan
12.4 US
17.6 Japan
13.6 US15.7 Japan14.1 S. Korea
15.6 Japan15.2 Japan
2.6 Japan
13.6 Japan13.8 ASEAN

Export Import

1.2
1.4
0.9
2.6
14.5
13.7
1.5
3.3
4.9
11.8
8.4
9.7
8.7
10.4
12.3
10.7
2.2
11.5
12.5

Note: 1) The subject countries include countries and regions which have established an FTA as of the end ofJune 2016. The figures are based on trade values in 2015.
2) Abbreviations: The Central America-Dominican Republic Free Trade Agreement (DR-CAFTA), the European
Free Trade Association (EFTA) and the European Economic Area (EEA).
3) China’s figures exclude those of Hong Kong (8.8%) and Macau (0.1%).
4) ASEAN’s figures were based on the total trade value with each member country although some have not yet
issued FTAs.
5) Figures for Canada, Singapore and New Zealand were calculated by export statistics, which exclude reexported trade.
Source: Materials and trade statistics from each country’s government, “DOT, May 2016” (IMF)

Copyright (C) 2016 JETRO. All rights reserved.

TTIP

(%)
90
80
70

77.0

Japan-EU

7.4

49.2

26.8
7.8

40
16.8

38.1

17.4

67.3

9.0
3.3

20
10

Existing FTAs

66.1
10.8

18.7

30

TPP

74.7

60
50

RCEP

39.6
22.7

28.5

29.0

EU

China

0

Japan

South Korea

US

Note: Ratios are based on two-way trade as of the end of 2015. The EU’s figures exclude those of its inter-regional
trade. China’s figures exclude those of Hong Kong and Macau. Japan’s total figures exclude numbers double-counted
under the TPP and RCEP. The China-Japan-South Korea FTA is not categorized but included in RCEP.
Source: Trade statistics of each country

26

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Japan’s FTA utilization rate rises steadily■ Amount of imports achieved through the utilization of FTA increases to 3.1 trillion yen
In 2015, the ratio of the amount of FTA utilized to the total amount of imports from Japan’s 16 FTA partner countries was 16.3%. The total amount of tradegained from FTA utilization increased significantly from 2.6 trillion yen in 2014 to 3.1 trillion yen. The countries recording the highest utilization rates wereVietnam (33.0%), Thailand (27.9%), and India (27.6%). Utilization rate as a ratio of the overall imports from ASEAN reached a record high at 19.3%.
Tariffs have been eliminated by phases based on the number of years after each FTA entered into force, causing the range of utilization to expand.
■ Japan’s FTAs utilized across a wide range of products
Looking at the utilization amount by product category according to two-digit HS numbers, the largest amount of utilization was in the category of plastics
and articles thereof. This was followed by agricultural products/food products, clothing, footwear, etc.
Figure II-6: Top product categories for FTA utilization among
Japanese imports(Unit: million yen, %)Figure II-5: Status of Japan’s FTA utilization (based on import value)
Value of utilized FTAs
(100 million yen)

FTA counterparty
2013

ASEAN

Latin America

Total

2013

2015

2014

2015

HS

Product

39
02
03
16

Plastics and articles thereofMeat and edible meat offal
Fish and crustaceans, molluscs and other aquatic invertebrates
Preparations of meat, of fish or of crustaceans, molluscs or other aquatic
invertebrates
Wood and articles of wood; wood charcoal
Articles of apparel and clothing accessories, knitted or crocheted
Articles of apparel and clothing accessories, not knitted or crocheted
Edible fruit and nuts; peel of citrus fruit or melons
Organic chemicals
Footwear, gaiters and the like; parts of such articles
Animal or vegetable fats and oils and their cleavage products; prepared edible fats;animal or vegetable waxes
Articles of leather; saddlery and harness; travel goods, handbags and similar
containers; articles of animal gut (other than silk-worm gut)
Other made up textile articles; sets; worn clothing and worn textile articles; rags
Miscellaneous chemical products
Beverages, spirits and vinegar
Preparations of vegetables, fruit, nuts or other parts of plants
Inorganic chemicals; organic or inorganic compounds of precious metals, of rareearth metals, of radioactive elements or of isotopes
Furniture; bedding, mattresses, mattress supports, cushions and similar stuffedfurnishings; lamps and lighting fittings, not elsewhere specified or included;
illuminated signs, illuminated name-plates and the like; prefabricated buildings
Edible vegetables and certain roots and tubers
Toys, games and sports requisites; parts and accessories thereof

Thailand

5,615

6,247

6,889

26.1

27.2

27.9

Indonesia

3,125

3,414

3,730

11.1

12.6

15.6

Singapore

476

474

463

6.5

5.7

4.8

Vietnam

3,854

4,847

6,054

27.7

29.7

33.0

Malaysia

2,635

2,998

2,961

9.1

9.7

11.4

Philippines

2,192

2,418

2,574

24.3

22.5

24.0

Myanmar

11

33

45

1.4

3.7

4.3

Cambodia

42

105

132

7.4

12.9

11.2

Laos

10

9

12

9.2

7.7

10.6

Brunei

0

1

0

0.0

0.0

0.0

AJCEP

4,130

5,207

6,437

4.8

5.5

6.8

Total for ASEAN

17,95920,54622,859

15.6

16.8

19.3

1,367

1,565

1,623

19.8

21.2

27.6

-

-

2,848

-

-

6.8

63
38
22
20
28

Switzerland

401

476

540

5.6

6.2

6.0

94

Mexico

834

1,052

1,227

20.3

23.2

21.3

Other Asia Pacific India
countries
Australia
Europe2014

Utilization rate (%)

Peru

116

134

130

4.6

7.2

8.7

Chile

1,567

1,851

1,734

20.2

21.5

23.9

22,24425,62430,961

15.5

16.8

16.3

Notes: 1) The total amount of imports for the utilization of AJCEP (ASEAN-Japan FTA) does not include the amount for Indonesia,
for which the FTA has not entered into force. 2) Close to 80% of the amount of imports for Japan is estimated to be tax-free.
Source: “Trade Statistics” (MOF)

Copyright (C) 2016 JETRO. All rights reserved.

44
61
62
08
29
64
15
42

07
95

Averagetariff
rate

Value

Share

3.2
10.0
5.9
12.4

361,582
293,781
287,778
246,871

11.7
9.5
9.3
8.0

3.4
9.0
9.3
8.7
2.0
18.2
3.5

205,291
193,233
174,481
132,647
117,719
102,136
89,215

6.6
6.2
5.6
4.3
3.8
3.3
2.9

10.6

63,747

2.1

6.0
2.0
5.7
16.0
2.3

53,93153,45245,491
38,11335,950

1.7
1.7
1.5
1.2
1.2

0.7

35,724

1.2

6.1
1.3

33,95931,877
3,096,071

1.1
1.0
100

Total
Notes: Average tariff rate is the simple average tariff rate for the tariff line basis of each category (MFN).
Source:Minstry of Finance Trade Statistics, WTO

27

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

FTAs of note in 2015: China-Korea, EU-Vietnam■ Of the FTAs of note in 2015, China-Korea FTA enters into force, while negotiations are completed for EU-Vietnam FTA
In the China-Korea FTA, which entered into force in December 2015, many of the products that were considered sensitive to both parties, such as industrial products
including passenger vehicles and construction machinery for China, and agriculture and fishery products for Korea, were excluded from the scope of tariff elimination. Manyare of the view that the China-Korea FTA has not reached the high level of the FTAs achieved in recent years. Also in December 2015, negotiations were completed for the
EU-Vietnam FTA. Vietnam is a signatory country of the TPP, and a connection can be seen between the contents of the agreement for the EU-Vietnam FTA and theagreement standards of the TPP.
■ The entering into force of the China-Korea FTA to have limited impact on Japan’s exports to China in the immediate future
The top export products from Japan to China and products to which the MFN tariff rate is applied and which will have their tariffs eliminated immediately under the ChinaKorea FTA include electrical circuit control equipment parts such as cathode copper and switches. This is followed by liquid crystal panels, propylene, and engine parts thatwill have their tariffs eliminated in 10 years. While there may be medium- to long-term impact, many products are excluded or are subject to elimination of tariffs in thelong-term (15 years, 20 years). Hence, the impact on Japan’s exports to China is considered to be limited for the immediate future.

Figure II-7: Trends and contents of FTAs of note in 2015
Countries/regions(Phases)

Key points/Characteristics❍ The percentage of products for which tariffs will be eliminated within 10
years was 71.3% for China and 79.2% for Korea.
❍ China has promised to open up the service sector to a certain degree. In theentertainment and cultural services sector, Korean corporations are permitted toenter the performance business through mergers as long as they are minority
China - Korea
investors, while the sale of books by large-scale distribution corporations with 30(Entered into force instores or more is permitted in the distribution sector.
December 2015)❍ With regard to government procurement, the chapter on "Economic
Cooperation" affirms ensuring the transparency of laws and regulations, and thesharing of information between governments.
❍ Additional negotiations will take place in the services/investment sectors
through the negative list method within two years from the entering into force of
the FTA.
❍ Tariffs will be eliminated for 99% of products and the amount of trade
between the two parties.
❍ In the services sector, the "economic needs test", which has become acriteria for establishing plural stores in the retail distribution industry in Vietnam,
will be abolished five years after the FTA enters into force, similarly as for the
EU - Vietnam
TPP.
(Completed negotiations in❍ The base amount of government procurement in scope of the agreement will
December 2015)
be set at the same or lower level than for the TPP (expansion in the scope foropen procurement), and procurement by local governments which are nottargeted under the TPP was also included in the commitment.
❍ A permanent investment tribunal and permanent appeal institution will beestablished under the investor-state dispute settlement system (ISDS).
Source: "BIZ NEWS" (JETRO), governmental and institutional materials from the respective countries/regions

Copyright (C) 2016 JETRO. All rights reserved.

Figure II-8: Top exports from Japan to China (taxable products
only)(US$ million, %)Amount ofAmount ofimports from Best rate
Tariff schedule based on
imports fromJapan
(2012)
China-Korea FTA
Korea(2015)(2015)
90138030 Liquid crystal display panels
4,463
5 10 years (maintain for 8 years)
15,91487084091 Automatic transmission and parts thereof
2,141
10 80% of existing in 5th year
1,12329024300 Paraxylene
1,866
2 Excluded
4,493
38249099 Chemical products and preparations
1,683
6.5 15 years
1,12787032362 Cross-country vehicles (>2500cc - 3000cc)
1,495
25 Excluded
074031111 Cathode copper
1,458
2 To be eliminated immediately
876
87084099 Other gearboxes and parts thereof
1,374
10 Excluded
480
84571010 Vertical machining center
1,197
9.7 70% of existing in 5th year7687032412 Cross-country vehicles (>3000cc - 4000cc)
1,105
25 90% of existing in 5th year
2296190010 Diapers, napkins
1,077
7.5 Excluded
153
87032343 Vans (>1500cc)
1,043
25 90% of existing in 5th year300
90012000 Sheets and plates of polarizing materials
927
8 (①) 10 years
849
87032352 Cross-country vehicles (>2000cc - 2500cc)
844
25 90% of existing in 5th year34
39206200 Polyethylene sheets, plates, films, etc.
827
6.5 15 years
51290139020 Parts and accessories of liquid crystal devices
781
8 15 years
622
90328990 Other automatic regulating equipment780
7 15 years
409
39199090 Other acrylic sheets, plates, films, etc.
755 6.5 (②) 15 years
630
85389000 Electrical circuit control equipment parts such as switches
725
7 To be eliminated immediately
301
84073410 Automotive engines (>1000cc - 3000cc)
717
10 20 years
8829012100 Ethylene715
2 10 years
65085489000 Primary cells and accumulators
715 12 (②) 20 years
14129012200 Propylene
701
2 10 years
1,016
90318090 Testing instruments of optimal communications/optical fibers
667
5 (①) 10 years
388
84099199 Engine parts647
5 10 years
381
90019090 Other optical supplies
644
8 (①) 10 years
749
87032351 Sedans (>2000cc - 2500cc)
635
25 90% of existing in 5th year
685299049 TV, video and other digital product parts604
12 15 years
16885076000 Lithium-ion batteries
581
12 80% of existing in 5th year
1,042
74040000 Copper scrap
545
1.5 To be eliminated immediately
13029025000 Styrene496
2 20 years
1,382
35069190 Rubber or polymer adhesives
482
10 10 years
222
HS codeProduct (Overview)Notes: 1) As these are target products under the expanded ITA, tariffs will be eliminated earlier than the China-Korea FTA based on the commitments
under this agreement.
2) Similarly, target products under the ITA. However, note that they will be subjected to tariff elimination based on the commitments under thisagreement only in the case of specific applications.
Source: Trade statistics of each country, contents of China-Korea FTA agreement28Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Majority votes to leave the EU in UK referendum■ Uncertainty in the direction of upcoming negotiations on
leaving the EU
In June 2016, a UK referendum determined the decision of the
British people to leave the EU. This result stunned the world. Goingforward, negotiations on the withdrawal will commence between
UK and the EU. Despite uncertainty in the direction of negotiations,they will cover many of the issues that have an impact on corporate
activities.

Figure II-10: Major trade issues related to UK’s withdrawal from EU
Withdrawal of UK from EU:
Trade issues
TariffProduct
standards/Various
regulations■ 43.9% of UK’s total exports are bound for EU
43.9% of UK’s total exports are bound for the EU, indicating its
strong reliance on trade with the EU. The EU imposes a maximumof 22% of external tariffs on transport equipment, including 10% on
passenger vehicles, a maximum of 13 of external tariffs on chemical
products, and a maximum of 5% of external tariffs on mineral fuels.

Figure II-9: UK’s exports to EU as a ratio of its major exports(Unit: Million USD, %)Amount ofexports to theworld

General machinery
Electrical equipment
Precision equipment
Transportation equipment
Passenger vehicles
Automobile parts
Chemicals
Pharmaceuticals
Mineral fuels
Food
Textiles and textile products
Steel
Total

Amount ofexports to EU

64,72429,327
19,51071,61039,087
8,538
85,97136,14632,36528,521
12,725
13,420468,058

Source: UK trade statistics

Copyright (C) 2016 JETRO. All rights reserved.

22,797
14,5397,562
32,801
15,682
5,490
42,552
15,40523,533
17,1158,591
6,469
205,267

Share(against world)

35.2
49.6
38.8
45.8
40.1
64.3
49.5
42.6
72.7
60.0
67.5
48.2
43.9

Services/Finance

Negotiations
between EU
and UK

Free Movement of
persons

Investment/Tax
systems

Overview

Point

After Brexit, import tariffs may be levied on trade
between EU and UK.
The EU's principle of a single market, which allows forthe distribution of products that are permitted in amember state to be legitimately distributed in all
member states, will no longer be applicable.

Can a free trade agreement or customs
union be concluded?
Will UK join the European Economic
Area (EEA), and the single market
principle of be applied?

The provision of financial services is
There is a possibility that the freedom of financethe greatest issue for concern. Theretransactions or service provision based on the principle
will be no changes if UK joins theof the single market may become limited.
EEA.
One of the central issues of interest
Restrictions may be imposed on the freedom of theamong the breakaway faction has
movement of EU citizens, which had been one of thegrown as a result of the national
four freedoms established under the EU framework,
referendum. The establishment ofalong with freedom of goods, services, and capital.
unique rules is expected.
Imposition of the tax is possible
Treatment of withholding tax between corporations in
depending on the contents of the tax
UK and EU, which is exempted under the EU Parenttreaty. May have impacts on UK's
Subsidiary Directive and Interest Royalty Directive.
headquarter function.

Need for the review of the harmonized patent system in Need for adjustments throughIntellectual property
Europe that is under preparation, and the trademark and legislative proceedings for the various
rightsdesign system of the European community.
rights established at the EU level.

Competition
laws/State aid

Cartels under the jurisdiction of the European
If UK joins the European Economic
Commission and M&A reviews will come under the
Area (EEA), the EU competition law
jurisdiction of the UK authorities. EU rules on subsidies
will become applicable.
by the government may no longer be applicable.

There may be an impact on TTIP negotiations between Negotiations for FTAs may become
FTAs in negotiations
US and EU, and future FTA negotiations such as those prolonged due to the need for thewith EU
between EU and ASEAN countries.
review of conditions.
With regard to the withdrawal of UK
There may be an impact on the ratification processes of
FTAs concluded
from EU, will the parliament of theFTAs that have already been concluded, such as thewith EU
partner countries ratify the FTA in
EU-Canada FTA and the EU-Vietnam FTA.
question?
External trade
After Brexit, tariffs may be imposed on trade between
relations
New FTAs between
UK and third countries. As such, UK intends toUK and a third
proceed with the conclusion of FTAs as soon as
country
possible.
UK's WTO
negotiations

The standpoint that negotiations with
UK would be difficult if the contents ofagreements between EU and UK are
not made clear for each country.

There is a need for renegotiations with WTO member
Need for the consent of all WTO
countries as UK's liberalization of services and WTO
members in liberalization commitments.
tariffs were based upon common concessions with EU.

Source: "BIZ NEWS" (JETRO), various reports

29

Chapter 2 Section 1: Present status and outlook of FTAs for the world and Japan

Utilization rate of US-Korea FTA rises at the start of 2016
■ Establishment of ASEAN Economic Community (AEC)
ASEAN has officially declared the establishment of three communities, including the ASEAN Economic Community (AEC) at the end of 2015. The AEC Blueprint
2025 was adopted as a framework for future economic integration. While continuing with the various measures for economic integration that have been put in place
to date, initiatives will be put forth to strengthen institutional enforcement capability and the roles of the industry.
■ Impact of the elimination of passenger vehicle tariffs by the US on Korea
With respect to the import FTA utilization rate of the US, the utilization rate for the US-Korea FTA was observed to have risen significantly at the start of 2016,
from 23.4% in 2015 to 40.3% in January-April 2016. Tariffs on passenger vehicles, which were maintained at 2.5% for the four years since the FTA entered into
force, were eliminated in January 2016. The increase in utilization rate corresponded almost fully with the utilization rate for the value of passenger vehicle imports.
Passenger vehicle imports from Korea to US for January to April 2016 increased year-on-year by 10.8% to $6.28 billion.
Figure II-11: Comparison of the contents of the old and new AEC Blueprint(Reference)
Former AEC Blueprint

AEC Blueprint 2025
A. A highly integrated and cohesive economy
A1. Trade in goods
A2. Trade in services
A3. Investment environment
A4. Financial integration, financial inclusion, and financial stability
A5. Facilitating movement of skilled labour and business visitors
A6. Enhancing participation in global value chains

A. Single market and production base
A1. Free flow of goods
A2. Free flow of services
A3. Free flow of investment
A4. Freer flow of capital
A5. Free flow of skilled labor
A6. Priority integration sectors
A7. Food, agriculture and forestry
B. Competitive economic region
B1. Competition policy
B2. Consumer protection
B3. Intellectual property rights (IPR)
B4. Infrastructure development

B. A competitive, innovative and dynamic ASEAN
B1. Effective competition policy
B2. Consumer protection
B3. Strengthening intellectual property rights cooperation
B4. Productivity-driven growth, innovation, research and development, andtechnology commercialisation
B5. Taxation cooperation
B5. Taxation
B6. Good governance
B6. E-commerce
B7. Effective, efficient, coherent and responsive regulations, and good regulatory practice
B8. Sustainable economic development
B9. Global megatrends and emerging trade-related issues
C. Enhanced connectivity and sectoral cooperation
C1. Transport
C2. Information and communications technology
C3. E-commerce
C4. Energy
C5. Food, agriculture and forestry
C6. Tourism
C7. Healthcare
C8. M inerals
C9. Science and technology
D. A resilient, inclusive, people-oriented and people-centred ASEAN
C. Equitable economic development
D1. Strengthening the role of micro, small, and medium enterprises
C1. SM E development
D2. Strengthening the role of the industry
C2. Initiative for ASEAN integration (IAI)
D3. Public-private partnership
D4. Narrowing the development gap
D5. Contribution of stakeholders on regional integration efforts
E. A global ASEAN
D. Integration into the global economy
D1. Coherent approach towards external
economic relations
D2. Enhanced participation in global supply
networks

Notes: The items in shaded cells refer to newly established pillars of the AEC Blueprint 2025.
Source: AEC Blueprint and AEC Blueprint 2025 (ASEAN Secretariat)

Copyright (C) 2016 JETRO. All rights reserved.

Figure II-12: FTA utilization rate for US imports
Partnercountries/regions

Year of entry into
force

(Unit: %)Utilization rate against total amount of imports

IsraelAug-85

13.3

13.0

12.7

2016
Jan-Apr11.8
13.8

Canada (NAFTA)

Jan-94

52.1

51.9

49.1

46.8

47.5

Mexico (NAFTA)

Jan-94

50.9

51.6

54.7

55.8

55.5

JordanDec-01

87.6

89.2

85.7

89.6

87.4

SingaporeJan-04

4.8

9.1

8.7

8.4

8.6

Chile

Jan-04

60.3

59.0

51.9

54.5

50.1

Australia

Jan-05

34.9

36.8

42.6

46.1

38.5

Morocco

2012

2013

2014

2015

Jan-06

17.7

19.1

24.3

25.4

18.7

From March 2006
till January 2009
(in serial order)

40.4

38.8

42.6

53.4

55.2

BahrainAug-06

60.6

65.7

56.0

58.2

60.0

Oman

Jan-09

40.7

57.0

62.4

66.1

52.1

Peru

Feb-09

37.6

31.5

48.6

49.9

49.5

South Korea

Mar-12

24.3

24.1

23.0

23.5

40.3

Colombia

May-12

25.5

22.8

19.6

16.1

22.8

PanamaOct-12

6.0

7.5

8.1

11.8

14.7

Total

-

46.5

46.0

46.2

45.9

47.8 30

Dominican Republic/
Central Americancountries (DR-CAFTA)

Source: International Trade Commission (ITC)Chapter 2 Section 2: New trends in the trade rules for the non-merchandise trade sector

Liberalization in manufacturing-related services■ Services inject much added value into the value-chain of the
manufacturing industry
Services have a significant impact on economic activities. For
example, of the merchandise exported by Japan’s manufacturingindustry, more than 30% are contributed by the service industry. A
diverse range of services are injected into the value-chain of the
manufacturing industry, from research and development toaftersales services, and generate added value. According to thecase studies on 22 companies (including machinery manufacturing
and plants) in 12 countries/regions in the APEC region,
implemented by APEC from 2014 to 2015, there were even casesthat involved more than 70 types of services. Many of the services
are introduced into the back-office, manufacture, and premanufacture phase.

Figure II-13: Examples of services injected into the manufacturing production stage(1) Establishment (4%)
･Consulting
・Land development
・Construction, etc.

(4) Post-manufacture (15%)
・Packaging
・Transportation
・Equipment installation
・Advertising, marketing
・Distribution (wholesale, retail)・Quality management, etc.

(2) Pre-manufacture (22%)(3) Manufacture (23%)

・Research and development
・Production management
・Design・Engineering
・Procurement and transportation of ・Storage of intermediate goods, etc.
raw materials
・Technology, safety inspections
・Customs clearance of raw
materials, etc.
(5) Post-sales (5%)
･Warranty, repair, maintenance・Storage of products
・Cargo insurance for products, etc.

Back-office (31%)
・Accounting
・Legal services
・Human resources
・Insurance, etc.

Notes: Figures in parentheses indicate the breakdown of the phase as a proportion of all services injected into the
manufacturing processes (100%). Source: "Services in Global Value Chains: Manufacturing-Related Services"(APEC Policy
Support Unit) and the Ministry of Economy, Trade and Industry.

■ Stringent regulations for the service industry
Figure II-14: FDI Regulatory Restrictiveness Index for Principal Countries (2015)
According to OECD’s index, regulations on the service industry 0.5
generally tend to be more stringent than that on the manufacturing
Other restrictions
Key foreign personnel
industry. Regulations on investment ratio form a significant part
0.4
Screening & Approvalof the regulations. Although the distribution industry in countries
Equity restriction
such as Vietnam and Indonesia became partially opened after
2015, the barriers to entering the service sector remain high in 0.3
Asia as compared to other regions.
■ Liberalization of manufacturing-related services
0.2
APEC will cooperate on liberalization of services essential to thevalue-chain of the manufacturing industry, as well as capacitybuilding. At the APEC Summit held in 2015, the members agreed 0.1
on an action plan for the liberalization of manufacturing-related
services. APEC will analyze the current situation based on thisaction plan, and conduct an interim review in 2018 and a final 0.0AllService industry
All
Service industry
All
Service industry
All
Service industry
China
Indonesia
Malaysia
Mexicoreview in 2020.
Copyright (C) 2016 JETRO. All rights reserved.

Notes: 1) The regulations are increasingly stringent as the index approaches 1. 2) "Tertiary industry" in the OECD database is applied tothis graph as "Service industry." 3) "Key foreign personnel" refers to regulations on the recruitment of foreigners in key positions.
"Other regulations" refers to regulations on the opening of branches and the repatriation of capital, and includes regulations pertaining
to land ownership by foreign corporations, etc. Source: "FDI Regulatory Restrictiveness Index" (OECD)

31

Chapter 2 Section 2: New trends in the trade rules for the non-merchandise trade sector

Service trade and the movement of natural persons■ Consideration to regulations on the movement of natural persons
One of the elements of service trade is the movement of natural persons. In the granting of work permits and visas to foreigners, for example, in thecase of engineers who are sent on business trips for the maintenance and repair of facilities, or in case that Japanese corporations increase the numberof expatriates or employ foreign workers at their factories and offices, regulations can become a business issue.
■ Liberalization of the movement of natural persons through international rules
There are some examples of the liberalization of the movement of natural persons through an FTA, such as US FTAs establishing special visa quotas
for citizens from partner countries and the ASEAN Agreement on Movement of Natural Persons.

Figure II-15: Working visa systems of key emerging economies, and the impact on businesses
Overview of work visa systems

Singapore

Indonesia

Thailand

Malaysia

Impact on businesses❍The main work visas are the EP (employment pass for foreigners at the management and professional level), S Pass (for foreigners ❍The S Pass and WP regulate the employment quota for foreigners corresponding to the number of Singaporeans/permanent residents
with an intermediate level of skills), and WP (working pass for low-skilled workers such as construction laborers and factory laborers.
employed by the company. Foreign Worker Levies are imposed on the employer. These levies have been raised gradually since 2010
❍The minimum basic monthly salary for EP and S Pass eligibility have been increased gradually in recent years, and criteria forand will additionally be imposed on a wide range of industries with effect from July 2016.
academic qualifications have also been tightened. Since September 2015, the minimum basic monthly salary that serves as a standard for ❍Since July 2013, the employment quota for foreigners in the service sector was reduced from 45% of all employees to 40% for WP
issuing visas to accompanying family members has also been raised.
holders and from 20% to 15% for S Pass holders. It has become even more difficult to secure human resources in the service sector.
❍After August 2014, it has become compulsory for companies to publish recruitment advertisements for the domestic job market in the ❍Reviews have also been tightened not only when processing a new application for a foreigner's work visa but also when renewing a
job bank managed by the government, with some exceptions. After October 2015, companies with few registered local employees invisa. There are cases where S Pass renewal applications are rejected or where existing EP have been downgraded to the S Pass.
managerial executive positions are subjected to tighter reviews in EP applications.
❍Work visas are termed "IMTA." Employment quota for foreigners is based on the Foreign Manpower Utilization Plan and determined ❍In recent years, the requirements for the issuance of IMTA have been strengthened. In 2012, appointment of foreigners to specificin consideration of factors such as capital and scale of business.
jobs became prohibited, while academic and job qualifications for obtaining a work visa were tightened in 2013.
❍There is a requirement to pay a foreign worker employment compensation of $100 per month for each foreign employee.
❍Cases such as short-term business trips for technological guidance and maintenance are also treated as "employment." Even if the job
requires a stay lasting only a few days, employees sent on such business trips have to stay for a minimum of approximately two weeks.
❍Foreign employees are required to obtain a Non-immigrant Visa (B Visa) and a Work Permit.
❍In principle, more than four Thai employees must be employed for one foreign employee, the company must have 2 million Baht in
paid-up capital for each foreign employee, and other criteria are imposed. However, based on the response from the Department of
Employment, Ministry of Labor, in July 2015, it is now clear that the criteria pertaining to the number of employees does not have to be
fulfilled.
❍Based on Alien Occupation Law, there are 39 occupations that foreigners are not permitted to take up employment in.
❍While short-term employment lasting up to a maximum of 15 days is permitted, it is necessary to submit a notification.

❍For the application for a B Visa in Japan, a letter of invitation in English (original) issued by the company in Thailand must be
submitted as part of the application documents. In cases where an employee is to be dispatched as an expatriate in the establishment of
a new subsidiary in Thailand, it is difficult to secure a Thai corporation that can issue the letter.
❍There are cases where a certificate for the prior application of a Work Permit in Thailand is required as one of the application
documents for the B Visa. In the case of a newly established corporation, there are no agents in Thailand who are able to procure aprior application for the Work Permit, making it impossible to prepare the application documents.

❍The main work visas include the Employment Pass, Professional Pass, and Work Permit for foreign workers.
❍The minimum monthly salary is 5,000 ringgit or more. In addition, corresponding with the classification of whether the company is alocal or foreign capital (standards also differ depending on the foreign investment ratio), it is necessary to have a minimum paid-up
capital ranging from 250,000 ringgit to 1 million ringgit.

❍When applying for an employment pass for dispatch of expatriates to a newly established company, there are cases where it may takeseveral months to obtain a visa. Under the online registration system introduced by the Immigration Department in April 2014, theworkflow initially failed to proceed smoothly. However, there have been recent signs of improvement.
❍In March 2016, it was decided to suspend acceptance of new foreign workers, making it more difficult than before to secure humanresources.

Vietnam❍It is necessary to obtain a work permit. There is a total of 16 categories of exemptions, including investors, lawyers, and internal❍A non-criminal certificate, which is submitted when applying for a work permit, is required for the period that the foreigner had stayedtransfers within companies in the service sector, which Vietnam opened up when it became a WTO member.
in Vietnam for in the past, and imposes a heavy burden on the applicant.
❍Companies employing foreigners are required to submit documentation explaining the need to do so, and an Employment Authorization ❍It is possible to stay in the country for 15 days without a visa. However, if the traveler returns to Vietnam within 30 days, starting
Letter will be issued upon the granting of approval.
from the day after departing from Vietnam, it then becomes necessary to obtain a visa.
❍The documents required for a work permit differ for applications for company president/manager, professional, and engineer. Some of
the requirements were eased in April 2016, and the target scope for engineers was also expanded.

Mexico❍Business travelers from Japan are required to obtain residency status of "Visitor" while expatriates are required to obtain residency❍Till now, the requirement for employing 9 Mexicans for every one foreign employee has rarely been applied in reality. However,status of "Temporary Resident."
based on the enforcement regulation for the immigration law in 2012, it has become mandatory to register a list of employed persons and❍Under the labor law, employers are required in principle to employ nine Mexicans for one foreign employee. In addition, foreigners are their nationalities. This may be used by the authorities as justification for conducting an inspection.
prohibited from taking up employment in special industries.
❍With the revision of the labor law in 2012, the responsibility of employers toward dispatched employees has become more stringent
than before.

Source: Reports from the JETRO offices overseas and "J-FILE" (JETRO)

Copyright (C) 2016 JETRO. All rights reserved.

32

Chapter 2 Section 2: New trends in the trade rules for the non-merchandise trade sector

Growing momentum for the review of investment rules■ Emerging controversy on reviews to resolve disputes between investors and states
Bilateral Investment Treaties (BIT) and multilateral investment agreements, which have been on a steady rise since the 1990s with the aim of protecting
foreign investment in host states, have entered a turning point. After the second half of the 2000s, in addition to protecting investors, a greater focus has beenplaced on these treaties and agreements from the perspective of the implementation of public policies for legitimate purposes by host state governments, aswell as regulatory rights. In particular, there has been greater use of the investor-state dispute settlement (ISDS) system included in investment rules. Taking
TTIP negotiations as an opportunity, controversy about this system is now emerging.
■ Issues pertaining to the review of the ISDS system
The following are the key issues pertaining to the ISDS system: (1) Criticism that investors’ rights are too dominant; (2) Poor predictability on decisions,lack of consistency between arbitration awards, and doubts about the validity of decisions arising as a result of these problems; (3) Criticism on the problem
of consistency between judicial decisions, including the relationship with the domestic judicial system. As part of concrete review measures put in place,reviews on the introduction of appeal proceedings as well as adjustment clauses with the domestic judicial system have already been incorporated into recent
FTAs, including the TPP. Furthermore, while the EU has undertaken its own reviews and announced the establishment of a permanent investment arbitral
tribunal as a pillar of its proposals, it has not arrived at the formation of an international agreement.

Figure II-16: No. of ISDS disputes by agreement/industry
Agreement
Energy Charter Treaty
North American Free Trade
Agreement (NAFTA)
Argentina - United States
Ecuador - United States
Netherlands - Venezuela
Argentina - Spain
Argentina - France
Dominican Republic-Central
America FTA(CAFTA-DR)
Czech Republic - Germany
Czech Republic Netherlands
Czech Republic-United
Kingdom
Russia - Ukraine
Kazakhstan - United States

No. ofcases

IndustryPrimary industry

87

Agriculture, forestry and fisheries
Oil and natural gas

56

Mineral resources

Manufacturing

20
15
13
10
9

Food and beverages, tobacco
Chemicals, petroleum products
Pharmaceuticals
Metal processing
Machinery, electrical equipment, transport
equipment
Other manufacturing

Service industry
Electricity and gas
Water supply and sewerage, waste disposal

9Construction and engineering
Wholesale and retail

8

Transportation (land, water, air, pipelines, etc.)

7

Audio-visual, information

Hotels, restaurants, tourism
Telecommunications
Finance and insurance

7

Real estate, rental and leasing
Expertise, business

7
7Notes: Agreements indicated only by thename of the country are bilateral investment
Source: UNCTAD database

Entertainment and sports
Other services

Unknown
Total

Figure II-17: Issues pertaining to ISDS rules by major agreements
No. of
cases

138
26
57
56
104
33
18
8
12
12
22
485
139
45
63
16
39
11
12
35
65
40
19
9
7
8
696

Notes: There are cases that span more than one industry, so the totals do
not correspond.
Source: UNCTAD database

Copyright (C) 2016 JETRO. All rights reserved.

Consultations
Mediation

Submission to arbitration

Deadline for submission
No. of arbitrators
Term of office ofarbitrators

TPP
Japan-Switzerland
Japan-Mongolia
EU-CanadaFirst, attempt to resolve the Where possible, resolve the Where possible, resolve the Consulation procedure
dispute through consultations dispute through amicabledispute through amicablestipulated
and negotiations
consulations
consulations
Raised as one of the forms Equivalent treatment as
Mediation procedureof negotiations
arbitration
stipulated
In the case where theIn the case where theIn the case where theA minimum of more thandispute is not resolved within dispute is not resolved within dispute is not resolved within 180 days from the request
six months from the request six months from the request 120 days from the request for consultation
for consultation
for consultation
for consultation
Within 3 years and 6 months Within 5 years from thefrom the alleged breachalleged breach
3 persons
Follows the regulations forselection
Up till the final award
Up till the final award

Within 3 years from thealleged breach
3 persons
Up till the final award

In the event that an appeal mechanism is developed
under other institutional
Appeal proceedings
arrangements in the future,
consider if the same systemshould be abided by.
・To relinquish the rights to ・Domestic court
・To relinquish the rights todomestic proceedings
proceedings shall not have domestic proceedings(excluding provisional
begun(excluding provisional
measures)
・ ISDS proceedings shall be measures)
Relationship with domestic
・Submission for arbitration withdrawn if domestic court ・Proceedings undercourts, other disputeis not permitted in cases
proceedings have begun
Bilateral investment
resolution proceedings
where domestic proceedings
agreement have not yet
have commenced
begun(reservation provisions)

Permanent

EU-Vietnam
Consulation procedure
stipulated
Mediation procedure
stipulated
・More than 6 months fromthe request for consultation
・ More than 3 months fromthe notification of intention
for submission to arbitration
Permanent

3 persons from 15
3 persons from 9 permanent
permanent arbitrators
arbitrators
5 years per term (maximum 4 years per term (maximumof 2 terms)of 2 terms)
Establish an Appellate
Establish a permanent
Tribunal. Review the details Appeal Tribunal comprisingthrough the joint committee 6 members (4-year term,
after the agreement enters maximum of 2 terms).
into force.
・To withdraw domestic
proceedings that areunderway (excluding
provisional measures)
・Define measures in cases
where there is a possibilityof overlap with proceedings
based on other international
agreements

Notes: This summarizes the characteristics of the ISDS systems under each agreement. Refer to the agreement texts for details.
Source: Based on the respective agreements

・To withdraw domestic
proceedings that areunderway (excluding
provisional measures), etc.,
and define details for the
relationship with otherdispute resolution
proceedings

33

Chapter 2 Section 2: New trends in the trade rules for the non-merchandise trade sector

Move to establish CSR rules accompanying supply chain expansion■ Establishing rules for corporate social responsibility (CSR) through international frameworks and the national laws
Amidst increasing overseas business expansion, corporate social responsibility (CSR) is attracting global interests. Along withinternational frameworks by the United Nations or OECD, individual countries are establishing CSR rules as part of their domestic
laws. According to JETRO’s overseas business survey, as many as 34.7% of Japanese corporations have formulated CSR plans.
■ Increase in the number of FTAs that include labor-related provisions
There have been increasing trends, particularly among advanced economies, to incorporate labor-related provisions into FTAs.
According to the ILO, the number of FTAs that includes labor-related provisions has increased from four in 1995 to 47 in 2011.
Figure II-18: CSR-related laws and regulations of each country/region Figure II-19: Examples of FTAs with labor-related provisions
Laws and regulations
United Federal Acquisition
States Regulation

Contents of provisions
Mandates the disclosure of human rights information to business operators
involved in government procurement.

Partnercountries
NAFTA(Canada,Mexico)Contents of provisions

・Clearly sets forth the creation of new employment opportunities, improvements in working
conditions and standards of living, and protection, strengthening, and implementation of basic
Financial Regulatory
Mandates the issuance of conflict minerals report.
labor rights as the objectives of the agreement.
Reform Bill・Among the labor agreements that entered into force concurrently with NAFTA, thisLacey Act
Prohibits illegal timber trade.
provides for the realization of labor principles, establishment of a cooperative committee, andTrade Facilitation and
The pillar of this Act is the strengthening of the implementation of trading
full establishment of dispute settlement proceedings.
Trade Enforcement Act of rights. It strengthens the prohibition of the import of products manufactured by
JordanFirst FTA to set forth labor provisions in the text of the agreement. Became the template for2015
forced labor and the like.
future FTAs.
Foreign Corrupt Practices Prohibits bribery of foreign public officials.
Singapore,・Affirms the duties of both countries as ILO member states.
Act
Australia,
・Mandates efforts to guarantee international basic labor rights under domestic laws.
California Transparency Mandates efforts to disclose information on measures that have been
Korea, etc.
・Strengthening of labor supervision departments.
in Supply Chains Act
implemented to prevent slave labor and human trafficking.
・Establishment of a bilateral cooperative mechanism, capacity building.
Modernization of
Mandates the disclosure of non-financial information such as information on
EU・Provision of opportunities for bilateral talks in cases where there are alleged violations.
Accounts Directive
environment, human resources, employees, etc.
Tunisia
Creates opportunities for regular dialogues between two countries/regions on social problems
Timber Regulation
Regulates the inflow of illegal timber.
Jordansuch as the movement of workers, working environments, and elimination of discrimination.
[UK] Modern Slavery
Mandates the issuance of human trafficking report.
Egypt
If there are requests from the partner country, a dialogue on working conditions for workers,
Act
etc. will be held.
[UK] Bribery Act
Prohibits and penalizes acts of bribery, including acts that take place overseas. EU
Korea,
The chapter on "Trade and Sustainable Development" reaffirms the duty of both parties as
Basic law on environmental protection. Provides for the strengthening ofChina New Environmental
Protection Law
administrative responsibility, clarification of inspection rights, publication ofVietnam, etc. ILO member states, and sets forth provisions on establishing domestic advisory bodies,
environmental assessment results, disclosure of information, etc.
building mechanisms for dialogues with civil society, and resolving disputes independently.
Provisions on the bribery Prohibits bribery of foreign public officials and employees of international
Japan
Philippines
The investment chapter establishes provisions on labor. Requests for talks may be made inof foreign officials
organizations.
cases where measures to promote investments are implemented in violation of the duty to
Provisions on the bribery Prohibits bribery of domestic officials, etc.
comply with international labor standards.
of domestic officials
TPP・Affirms the duty as an ILO member state.
Mandates the establishment of a CSR committee, expenditure on CSR activities,
India Companies Act
・Effective enforcement of domestic labor laws.
election of female directors, etc.
・Recommends refraining from importing products produced by forced labor.
Environment Protection Establishes emission standards for pollutants, conditions and regulations for・Recommends voluntary corporate social responsibility (CSR) activities by companies.
Act
activities in specific industries/regions, etc.
・Promotes raising awareness on labor laws, and the building of a framework for civic
Swachh Bharat Cess
0.5% tax on target services aimed at improving public health, etc.
participation.
Source: "Research report on international strategies of CSR towards strengthening Japanese companies’
competitiveness" (Business Policy Forum, Japan) and materials from the respective governments
Source: US Trade Representative,
European Commission,
M inistryof Economy,
Trade
and Industry,
and M inistry of Health,
Labor
and Welfare
・Establishmentof a laborcouncilby senior
government
representatives
such asMinisters.

Copyright (C) 2016 JETRO. All rights reserved.

UnitedStates34

Chapter 2 Section 3: Present status and issues in developing multilateral trade rules

Divided views on the direction of the WTO Doha Round■ Issues pertaining to plurilateral negotiations, and China
Negotiations on the liberalization of services among interested countries and theelimination of tariffs for environment-related merchandise are moving forward on aplurilateral basis (between countries participating on a voluntary basis). The spotlight isalso being placed on WTO-related issues relating to China.
■ Whether to continue the Doha negotiations, or to adopt a new approach?
At the Ministerial Conference in Nairobi, there was growing interest in the future directionof the Doha Round as it entered its 15th year. However, there were divided views amongdeveloping economies calling for the continuation of the former framework, and advanced
countries that asserted the need to move toward a new approach.

Figure II-21: Major issues of recent negotiations on multilateral trade
IssuesOutlines

Environmental Goods
Agreement

Regarding goods required for the environment measures and eco-friendly products, all
WTO member countries are likely to benefit from the results of the Agreement based on
the principle of most-favored-nation treatment. 17 countries and regions, including China,
the EU, the US and Japan, have been engaged in negotiations.

TiSA: Trade in Services
Agreement

23 countries and regions, which account for approx. 70% of the global service market, areproceeding with liberalization of trade in services and creating rules which exceed
coverage of the General Agreement on Trade in Services (GATS). This is a regional trade
agreement outside the scope of WTO, that is to say, FTA negotiations in the service field.
Article 15 (a)ii of the accession protocol of China to the WTO, which allows WTO member

Expiring article of "noncountries to use special methods regarding anti-dumping investigations towards China,
market economy" for China will expire in December of 2016. This has been a point of controversy within political andbusiness circles in the US and EU.

Negotiation on China's
accession to "WTO
Agreement on Government
Procurement (GPA)"
UK's re-negotiation with
WTO member countries inline with exit from EU

While China has been negotiating accession to the TWO Agreement on Government
Procurement, talks have been prolonged. If China accedes to this agreement, a twohundred-billion-dollar procurement market will be created. Hence, industry circles of WTO
member countries have particularly large expectations for it.
As a result of the referendum to leave the EU, it is foreseen that the UK must re-negotiatewith other WTO member countries on matters such as general tariff rates (concession tariff
rates) and agreement on liberalization of trade in services.

Source: Documents of WTO, government data of each country, press information

Copyright (C) 2016 JETRO. All rights reserved.

FieldsPointsAgreement
Evaluation & issues
Commit to eliminate the export subsidy for
Successful in reaching a binding agreement.
agriculture.
Export subsidies
Effectinve in preventing an increase of future export
Agreeing to set limitation on public support based on
subsidies.
export such as export credit.
Acknowledging the right for a special safeguard by
A result of considering requests from an agricultural
Safeguarddeveloping countries.
group of developing countries (G33).
mechanism forCommit to establishing a system for such safeguard It is predictable that negotiations for requirements for
agriculture
mechanism.
implementation will proceed with difficulty.
Confirming the Bali ministerial agreement that public
Not being able to find permanent solutions in the
Public stockholding stockholding for the purpose of food security shall not
Nairobi Ministerial Meeting.
for food security
be a subject for dispute settlement.
Reaffirming this agenda as a high priority issue in the
purposes
Agree to make all efforts on finding permanent
agriculture field.
solution until the next ministerial meeting.
Imposing on developed countries the obligation to
Reaching a degree of agreement on one of the
grant LDCs to export cotton tariff-free/quota-free.
symbolic issues of the Doha Development Agenda.
CottonConfirming that the agreement to eliminate the export Not being able to reach an agreement to eliminate
subsidy for agriculture covers the export of cotton.
domestic subsidies.
Reaching a degree of agreement in the development
Preferential
Setting a certain degree of rules regarding the rules offield.
treatment towards origin to give LDCs preferential treatment.
Aiming at harmonizing the rules of origin to give
least developed
Extending preferential treatment for LDCs' access
LDCs preferential access, but in the form ofcountries (LDCs) the service market.
guidelines.
Source: Documents of WTO

Agriculture

The 10th WTO Ministerial Conference was held in December 2015 at Nairobi, Kenya, andan agreement was reached for some of the fields of the Doha round. Negotiations were also
concluded on expanding the scope of items on the Information Technology Agreement(ITA), which seeks to eliminate tariffs for IT-related products.

Figure II-20: Summary of WTO Nairobi Package

Development■ Agreement reached on some fields of negotiations at the WTO Ministerial
Conference held at Nairobi in December 2015

Figure II-22: Position of major countries/regions on WTO negotiations
Countries/regions

Stance on WTO negotiations
According to the Nairobi Declaration, "WTO members have an opportunity toundertake new approaches to longstanding issues and take up new issues without
United States
being constrained by the strictures of the Doha Round architecture"; a standpoint that
focuses on results for each theme through plurilateral negotiations.
Close to the US' stance in the aspects of adopting a new approach and need to tackle
new issues including e-commerce. However, the EU stands on a viewpoint thatagreements between bilateral and plurilateral countries should contribute to theEUrevitalization of multilateral trading systems centered on the WTO. It takes the
position that the results of plurilateral negotiations should in principle be provided to all
WTO member states.
In addition to supporting the continuation of Doha Round negotiations, China takes
part in plurilateral negotiations such as ITA expansion and negotiations for
China
environmental goods tariffs, and make strong assertions to maintain its interests. The
results of plurilateral agreements indicate concern for permitting "free rides" by nonparticipants.
Indicates support for the continuation of Doha Round negotiations, and a cautious
attitude toward initiatives in new areas. Establishes support for public stockholding
India
policy in agricultural negotiations and the establishment of special agriculturalsafeguards as the top priority issue.
Source: WTO documentation and materials from the respective governments

35

Chapter 2 Section 3: Present status and issues in developing multilateral trade rules

ITA expansion expected to contribute to trade growth; world ITA trade reaches $3 trillion
FigureII-23 Major products subject to ITA
ExamplesCurrent ITA

List-Computers and peripheral equipment: personal computers, printers,
List A
monitors, scanners(144 items) -Communication equipment: cellphones, fax machines-Semiconductors: memory chips, wafers, CPUs
Amplifiers, flat panel displays, monitors, optical disk storage, set-top
List B(13 items) boxes, etc.

Expanded ITA■ ITA products revised for the first time in 20 years; growing amount of ITA exports
reaches $1.8 trillion
Negotiations to expand the products under the Information Technology Agreement (ITA)
were concluded in December 2015. The 53 WTO members that participated in thenegotiation will eliminate tariffs for an additional 201 items. The growing amount ofworld ITA trade (exports basis) reached $1.8 trillion, making up 11.0% of global trade.
The total trade value of the current and expanded ITA is estimated to reach $3.0 trillion.
■ All tariffs to be eliminated by 2023; advantageous situations for Japanese exports
A comparatively higher amount of tariffs is imposed by Japan’s key partner countries,
China (6.1%) and Korea (6.0%). Members of the expanded ITA, including the twocountries, will eliminate tariffs for 65.3% of the items at their first tariff cuts, and all items
will be free of duty by 2023. According to the Ministry of Economy, Trade and Industry,
Japan will be able to spare approximately 170 billion yen as a result of the tariff cuts.

-Digital AV equipment: digital video cameras, DVD players, BD players-Communication equipment: car navigation systems, ETCs, GPSreceivers
List A-Parts and materials: photoresist for semiconductors, polarizing sheets(191 items) for liquid crystal display panels-Medical equipment: MRI, CT-Others: semiconductor manufacturing equipment, multifunctional
New type semiconductor including multi-component IC, LED back light,
List B(10 items) touch panel, ink cartridge, electric educational device, etc.

Source: Information Technology Agreement and WT/L/956(WTO)

FigureII-24: Global trade value of ITA products (2015)

Figure II-25: Tariff rates for Japanese products in each country/region(Unit: US$ million, %)

(%)

(%)

10.0

16.0

22.6
17.9
14.0
3.8 0.0
100.0

Participants to the
ITA expansion

2,737,584

85.0

2.1

2.4
4.0

3.3

3.1

1.2

1.8
5.0

2.1
3.7

2.9

10.0

2.7
2.4

8.5

5.0

2.5
0.6

7.0
1.3
0.5

10.0

1.6
4.6

5.0

0.9
0.1

0.8
0.1

0.0

Notes: 1) Tax rates are simple average applied tarriff rates. For countries that have FTAs with Japan (excluding Australia, due tostatistical limitations), the tax rate reflects the respective preferntial rate. 2) Tax rates are accurate as of 2013 - 2015. 3) Of thecountries/regions participating in the ITA expansion, the 15 countries with the top amount of export from Japan have been
extracted. Of these, Hong Kong, Singapore, and Switzerland have been omitted as all product items are tax-free. 4) Figures inparentheses indicate the number of products in ITA expansion with tax rate of 5% or higher. Source: WTO

World (57)726,173576,292
449,380
120,9933,219,732

8.0

15.0

14.0

Average of ITA
expansion members(2)

14.0

2.0

Note: 1) Both current and expanded ITA includes same products within 6-digit HS code. The values of each "current ITA"
and "expanded ITA" include these duplicated value and therefore the sum of both does not correspond to the ITA total. 2)
While the current and expanded ITA contains some products of 6-digit HS code, of which uses are specified by adding
technical terms, this specification is not reflected on these values. 3) Trade values of M ontenegro and M auritius are notincluded due to statistical constraints. Source: Trade statistics of respective countries and regions

Copyright (C) 2016 JETRO. All rights reserved.

20.0
4.6

4.8

Malaysia (0)

93.4

6.0

Thailand (1)2,833,126

25.0

6.0

12.0

EU
China
US
Japan
World

30.0

Highest tax rates among products in ITA expansion(right axis)

6.6

Philippines (2)Participants to the
ITA expansion(Reference)

8.7
6.1

Canada (4)

25.4
21.8
9.3
4.8
100.0

85.3

35.0

35.0

New Zealand (55)769,380
662,709280,899
146,134
3,034,718

1,678,564

100.0
40.0
90.0

Products in ITA expansion(left axis)

Australia (43)

China
EU
US
Japan
World

Participants to the
ITA expansion

Industrial products total (left axis)

35.0

United States (5)

93.9

21.2
19.2 8.0
13.6
3.7
100.0
6.0
21.0
20.1
11.7
3.6 4.0
100.0Israel (30)

1,699,969

585,841
528,265
374,945
101,957
2,757,636
412,626
395,835
231,217
71,035
1,968,564

EU (20)Participants to the
ITA expansion

EU
China
US
Japan
World
China
EU
US
Japan
World

Taiwan (27)

27.4
18.7
8.2
4.5
100.0
22.6
18.6
10.2
6.1
100.0

Share

South Korea (123)707,184
483,460
210,606
116,413
2,581,088
409,119336,265
184,800
109,893
1,810,877

Current ITA

China
EU
US
Japan
World
EU
China
US
Japan
World

Value

China (96)

ImportShare

Expanded ITAValue

ITA total

ITA total

Expanded ITA

Current ITA

Export99.0

36

Chapter 3

Broad economic zones and the growth strategies
of Japanese corporations

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

TPP positioned as a “21st century FTA”
■ A “21st century FTA” that encompasses a massive economic zone and the formation of new rules
The first characteristic of the TPP is the large scale of the economic zone. The TPP covers 37.4% of the world’s GDP (2015) and 11.1%
of its population (2015), and if it enters into force, it will create a massive regional economic zone. Secondly, in addition to promising ahigh level of liberalization, it is also positioned as a “21st century FTA” that encompasses the formation of new rules across a wide rangeof sectors.
Figure III-1: Broad comparison of the key contents of the TPP agreement and the WTO
Categories

Contents

National
treatment/market
access for goods

Provides for the elimination of tariffs, etc. according to the schedule of tariff concessions for eachcountry. Establishes rules for elements such as national treatment, restrictions on imports and exports,
treatment of remanufactured goods, transparency of procedures on import and export licensing,administrative fees and procedures, and export tariffs.
Provides for the conditions, certification procedures, etc. on primary products that are eligible forpreferential tariff treatment. Incorporates elements such as the application of standardized rules of origin
for 12 countries, introduction of a full accumulation system, and introduction of a system for selfcertification of origin completed by the exporters/producers/importers.
Provides for rules of origin/safeguard mechanism, etc. for textiles/apparel.

Rules oforigin/Origin
procedures
Textiles/Apparel

Presence/Absence of WTO
agreement

Present

Present

Categories

Contents

Temporary entry
for businesspersons

Provides for the permission for temporary short-term entry for business persons between countries thatare party to the agreement, and facilitating improvements in speed and transparency for the conditions andapplication procedures thereof.

Telecommunicatio Provides for rules related to the access and use of public telecommunications services, safeguards fornssecuring conditions of competition, mutual connectivity between primary service providers, etc.

Electroniccommerce
Present

Customs
Provides for the predictable, consistent, and transparent application of customs procedures, etc., withadministration/Trad elements such as swift customs clearance (within 48 hours), express shipments (unloading within 6e facilitation
hours), and advance ruling systems (response within 150 days).
Trade remedies

To prevent serious injury to domestic industries as a result of the rapid increase in imports, this enables
the implementation of provisional measures (transitional safeguard measures), other anti-dumping
measures, and countervailing tariffs.

Sanitary andProvisions to prevent unjustifiable barriers to trade caused by the sanitary and phytosanitary (SPS)
Phytosanitary (SPS) measures imposed by the respective countries that are party to the agreement.
measures

Technical barriers
to trade (TBT)

Investment

Present

Present

Provisions to ensure transparency and enable procedures to prevent unnecessary barriers to trade causedby technical regulations, standards, and conformity assessment procedures. When technical regulations,standards, and conformity assessment procedures are introduced, the time-frame when other countries
that are party to the agreement and other stakeholders in these countries may submit their views istypically set as 60 days, while the "reasonable interval" between the publication and implementation of
conditions is typically set as 6 months or more.

Present

Provides for national treatment/most-favoured-nation treatment during and after the establishment ofinvestment assets, fair and equitable treatment/adequate protection/assurance for investment assets, inprinciple prohibition of performance requirements (local procurement, technology transfer, etc.),prohibition of expropriation not accompanied by reasonable compensation, investor-state disputesettlement systems (ISDS), etc.

AbsentCross-border trade Provides for cross-border transactions, provision of services overseas, provision of services through thein services
movement of natural persons, national treatment, most-favoured-nation treatment, market access, etc.
Adopts the negative listing method (method that lists the measures and areas for which the stipulations are
not applicable in the Annexes).
Financial services

Present

Provides for rules pertaining to the cross-boarder provision, etc. of financial services, such as national
treatment, most-favoured-nation treatment, prohibition of market access restrictions, prohibition ofnationality/residency requirements on senior management and Boards of Directors, etc., and authority toaccess payment/settlement systems.

Government(Trade facilitation agreements adopted in procurement
November 2014 are targeted. However, notentered into force as of June 2016.)

Provides for rules on the procurement of goods and services equivalent to or exceeding the relevant
threshold by designated procurement organizations, with elements such as the principle of public tender,and national treatment/non-discrimination principle during the tender.

Competition
policyProvides for the adoption/maintenance of competition laws, maintenance of competition regulatory
authorities, fair implementation of procedures in the enforcement of competition laws, cooperation
between the relevant authorities, etc.

State-owned
enterprises anddesignatedmonopolies

Provides for elements such as conduct that is in accordance with commercial considerations in thebuying and selling of goods and services by state-owned enterprises and designated monopolies, ensuringthat countries that are party to the agreement give non-discriminatory treatment to corporations fromother parties to the agreement, preventing the adverse effect of non-commercial aid offered to stateowned enterprises on the interests of other countries that are party to the agreement.

Intellectual
property

Provisions on the protection of intellectual property. Provides for the protection of trademarks,
geographical indications, patents, designs, copyrights, etc. and the exercise of intellectual property rights(procedures on the exercise of rights, border measures, etc.).

Labour(Partially covered under TRIM agreement)

Environment
Present

Anti-corruption
Present

Provides for various rules to prohibit the introduction of excessive regulations that pose as a barrier to ecommerce. Provides for elements such as prohibition of the imposition of tariffs on electronictransmissions between countries that are party to the agreement, prohibition of disadvantageous treatment
for the digital products of other countries that are party to the agreement in comparison with the treatment
toward other like products, and prohibition of requests for corporations, etc. to locate computing
facilities as a condition for conducting business within the domain of the country.

Provides for elements such as the enforcement of laws, etc. of countries party to the agreement that are
directly related to internationally recognized labour rights, the adoption/maintenance of rights described in
the International Labor Organization (ILO) under the laws of the country (such as the abolition of forced
labour, prohibition of child labour, elimination of discrimination in employment/professions) etc.
Provides for elements such as confirmation on the importance of the respective Multilateral Environmental
Agreements, measures to protect the ozone layer, protection of the marine environment from ship
pollution, illegal harvesting of wild flora and fauna and response to such acts, preservation and sustainable
management of fisheries, cooperation between member countries for the implementation of initiatives toprotect the environment.
Provides for the adoption/maintenance of the necessary measures to eliminate corruption, etc. related tomatters that have an impact on international trade and investment.

Presence/Absence of WTO
agreement

Present

Present

AbsentPresent(Limited to member countries of WTO
Government Procurement Agreement)

AbsentAbsent(However, rules on subsidies, and State
Trading Enterprises exist)

Present

AbsentAbsentAbsentNotes: "Present" refers to areas that are covered under the scope of the WTO agreements (areas that benefited from the TPP in the aspects of significant liberalization, clarification of rules, and expansion of scope), while "Absent" refers to areas that are not currently regulated under WTO rules (including areas that are partially covered under WTO). TRIM refers to trade-related investment measures.
Source: "Overview of TPP agreement," "Overview of all the chapters of TPP agreement" (TPP Taskforce, Cabinet Secretariat), TPP agreement, WTO agreements

Copyright (C) 2016 JETRO. All rights reserved.

38

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Creation of new FTAs in Asia and the Americas■ Relationship between TPP parties and existing FTAs
Among the countries that are party to the TPP, trade is expected to take place between countries that already have bilateral/regional FTAs in force,and countries that are anticipated to establish FTAs for the first time as a result of the TPP. After the TPP enters into force, countries that already have
FTAs in force may make use of either existing FTAs or the TPP, whichever is easier to use. Among countries that are concluding FTAs for the firsttime, new FTAs will be established, including the following: (1) From the perspective of Japan’s trade, an FTA will be concluded for the first time
between US, Canada, and New Zealand; (2) A new FTA will be concluded between Vietnam and Malaysia, where there is a concentration ofJapanese corporations, and US, Canada, Mexico, and Peru; (3) A new FTA will be concluded between Australia and New Zealand, and US, Canada,
Mexico, and Peru. (However, this excludes US and Australia, which already have a bilateral FTA in force.)

Figure III-2: Simple average applied tariff rates within
TPP member countries(Unit: %)Figure III-3: Relations between existing FTA and TPP
member countries(Unit: %)Ratio of export toward TPP member countries (value of export to each country/total export value)

US

Canada Mexico Peru

Chile

Australia

New
Singapore Malaysia Vietnam Brunei Japan
ZealandUS

By product

3.5

4.2

7.5

3.4

6.0

2.7

2.0

0.2

6.1

9.5

1.2

4.2

Agriculture
product

5.1

15.9

17.6

4.1

6.0

1.2

1.4

1.1

9.3

16.3

0.1

14.3

Industrial products(Non-agriculture
products)

3.2

2.2

5.9

3.3

6.0

3.0

2.2

0.0

5.5

8.4

1.3

2.5

Electricalmachinery

1.7

1.1

3.5

2.1

6.0

2.9

2.6

0.0

4.3

7.9

5.1

0.1

Transport
equipment

3.1

5.8

8.5

1.0

5.4

5.0

3.2

0.0

11.1

17.5

2.4

0.0

Non-electricalmachinery

1.2

0.4

2.8

0.5

6.0

2.9

3.0

0.0

3.5

3.3

2.6

0.0

Chemicals

2.8

0.8

2.4

2.0

6.0

1.8

0.8

0.0

2.7

3.1

0.5

2.2

Textiles

7.9

2.6

9.8

8.4

6.0

4.3

1.9

0.0

8.8

9.6

0.8

5.4

Apparel

12.0

16.5

21.1

11.0

6.0

Source: "World Tariff Profiles 2015" (WTO, ITC, UNCTAD)

8.8

9.7

0.0

0.2

19.8

0.0

9.0

US

Exporter

Simple average applied
tariff rates

Total export
value
Total forTotal for (Unit: $100 m)
TPP
new FTA

Australia

New
ZealandSingapore

1.0

1.7

0.2

1.9

0.8

0.5

0.0

4.2

45.2

5.7

15,026

0.2

0.2

0.4

0.1

0.3

0.2

0.1

0.0

1.9

81.2

2.9

4,101

0.4

0.5

0.3

0.0

0.1

0.0

0.0

0.0

0.8

86.1

0.5

3,808

3.2

0.3

0.1

0.0

0.1

0.2

0.0

3.3

31.0

0.7

335

0.8

0.1

0.1

0.1

0.4

0.0

8.9

30.5

0.0

620

3.3

2.7

1.8

1.4

0.0

15.9

31.6

0.9

1,877

2.2

1.9

1.1

0.0

6.0

42.6

20.2

344

10.9

3.5

0.2

4.4

29.7

0.6

3,467

2.2

0.3

9.5

40.9

10.7

2,000

0.0

9.8

38.9

21.3

1,502

35.6

52.2

0.4

60

33.0

21.7

6,251

CanadaMexico

Peru

18.7

15.7

0.6

1.3

Chile

Malaysia Vietnam

Canada76.8

Mexico

81.1

2.8

Peru

15.1

7.0

1.6

Chile

13.4

2.1

2.1

2.5

Australia

5.4

0.6

0.2

0.0

0.1

New
Zealand

11.8

1.4

0.7

0.3

0.3

16.9

Singapore

6.3

0.2

0.4

0.0

0.0

3.3

0.5

Malaysia

9.4

0.4

0.8

0.0

0.1

3.6

0.5

13.9

Vietnam

19.1

1.4

0.7

0.1

0.3

2.7

0.2

2.0

2.6

Brunei

0.3

0.1

0.0

0.0

0.0

5.0

5.5

2.1

1.7

1.9

Japan

20.1

1.2

1.7

0.1

0.3

2.1

0.3

3.2

1.9

2.0

Brunei0.0

Japan

Note: Cells in light color indicate countries where bilateral or regional FTAs have already entered into force. Cells in darker color indicate countries which are
expected to conclude new FTAs for the first time through the TPP. The figures of Vietnam are calculated with data of 2014. Those of others from export statistics in2015. Only Brunei's statistics are based on DOT. Others were based on trade statistics of respective countries. As for the Global System of Trade Preferences(GSTP) among developing countries, countries where this agreement has already become effective are defined as countries where FTAs have not come into effectyet. Source: Trade statistics of respective countries, "DOT May 2016" (IMF)

39

Copyright (C) 2016 JETRO. All rights reserved.

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

High-level provisions for investments, services, intellectual property, etc.
■ Investments
When the TPP enters into force, the percentage of countries which have investment agreements (including investment chapters of FTAs) as a proportion ofJapan’s outward FDI stock will rise from the current 35.1% to 69.9%. The key points to the investment chapter are as follows: (1) Secure protection of
investment in all member countries, including countries that have had no agreements to date (US, Canada, and New Zealand); (2) TPP strengthens theprohibition of performance requirements, such as the prohibition of government intervention in licensing agreements concluded by investors; (3) Adoption of
ISDS (including provisions to suppress the abuse of petition by investors); (4) Introduction of a consultation mechanism for measures by local governments.
■ Services
With regard to cross-border services, the TPP provides national treatment, most-favored-nation treatment, and market access. Through the adoption of thenegative list and the ratchet clause, there is increased predictability for regulations in the future. On the other hand, the members have excluded areas with thepotential for the adoption/strengthening of regulations in future from the target scope for liberalization.
■ Intellectual property
TPP provides protection and enforcement of intellectual property rights at a level exceeding the Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Provisions which might affect corporate activities include (1) facilitation of the acquisition of trademark rights; (2) strengthening of the protection of patentrights; and (3) protection of Geographical Indication. Regarding enforcement, strong countermeasures against counterfeit and pirated products areincorporated. These include granting the customs office with the authority to withhold counterfeit goods, and making it mandatory to impose criminal
penalties against the use of labels that infringe trademark rights and the secret filming of movies, etc.
Figure III-4: Japan’s outward FDI stock(end of 2015) and
Figure III-5: Domestic laws and the accession status to treaties with respect
investment agreements/FTA(US$ million, %) to intellectual property

United States
EU418,794
288,656

33.3
22.9

ASEAN
China
Australia
ThailandSingapore
South Korea
Hong Kong
Indonesia

166,998
108,847
67,78651,32050,46031,344
24,73324,434

13.3
8.6
5.4
4.1
4.0
2.5
2.0
1.9

Note (3)BrazilCanadaIndia

23,591
16,341
14,104

1.9
1.3
1.1

SignedMalaysia

13,642

1.1

Signedundernegotiation

a
a
a
a
a
a
a

Share

VietnamPhilippines

13,072
12,3291.0
1.0aTaiwanMexicoSouth Africa
Switzerland
Saudi Arabia
NZ
RussiaUAE

11,984
7,367
7,159
6,388
4,924
3,094
1,800
596

1.0
0.6
0.6
0.5
0.4
0.2
0.1
0.0

a
a

6
1,259,050
441,350

0.0
100.0
35.1

Iran
World

a

Countries/regionswith agreementsa

TPP total

590,556-aPatent term
adjustment

SignedSignedaundernegotiation

UnitedStatesCanadaMexico

Chile

Peru

Australia

NZ

to filing a patent application, the provision prevents thedenial of novelty of the invention within a certain period
from the date of disclosure (12 months under the TPP).

6 months

a

a

a

a

a

a

a

a

A system that permits the patent term adjustment for
unreasonable delays exceeding a certain period, andwhich arise from the point of filing or request forassessment (five years and three years respectively
under the TPP) until rights are granted for the patent
filed.

-

a

-

-

a

Effortobligation

-

-

a

a

-

-

a

-

a

5 years;
12 years
8 yearsfor
8 years
biopharma
ceuticals

5 years

5 years

5 years

a

a

a

a

-

a
a
a
a
a
a

a
a
a
a
a
a

-

a

-

-

a
a
a
a

a

Singapore Malaysia

Vietnam

Bruneia

6 months

a

a

-

-

a

-

a

-

-

a

5 years

5 years

5 years

5 years

5 years

Unknown

-

a

-

a

-

-

-

-

-

a
a

-

-

-

-

a

a
a
a
a

a
a
a
a
a
a

a

-

a
a
a
a
a
a

-

-

-

-

a

-

a

-

-

-

Intellectual property of pharmaceutical products
A system that permits the extension of the patent period
in order to compensate the patent owner, with respect
to the unreasonable shortening of the effective patentterm based on the results of the procedures for
authorizing sales.
Period of data Provides explicit indication of the fixed period after theauthorization of pharmaceutical products containing
protection of
new active ingredients, when data that is submitted bypharmaceuticalthe corporation that had developed the new drug is notproducts
used for the approval of generic drugs (five years under
the TPP, eight years for biopharmaceuticals).

Patent term
extension

Patent linkage

Signed

46.9

Japan

Overview

Patents in general
In cases such as the disclosure of one's invention priorGrace periodaNotes: 1) Investment agreements include FTA investment chapters. 2) Some of the countries that already haveagreements with Japan are not included in the coverage ratio as figures are not available. 3) The FTA investment chapter
with ASEAN reached an agreement in December 2013. Bilateral agreements with ASEAN countries are already in force.
Source: M inistry of Finance, Bank of Japan, and M inistry of Economy, Trade and Industry

Copyright (C) 2016 JETRO. All rights reserved.

System/Framework

Investment
agreement

Balance

Domestic laws

Share

Madrid Protocol

Treaties that mandate
membership in the TPP

Investment
Countries/regions
agreement

BalanceCountries/regions

A system that mandates confirmation to the authority,
on whether patent rights are infringed during theapplication for approval by a generic drug manufacturer,
through the notification to the patent owner.
Madrid Protocol concerning the international
registration of marks.
Singapore Treaty on the trademark law. It is acceptable

Singapore Treaty to accede to either the Madrid Protocol or this Treaty.

Budapest Treaty concerning the internationalrecognition of the deposit of microorganisms for patent
procedures.
International convention concerning the protection of
UPOV Convention (1991)
new plant species.

Budapest Treaty

WIPO Copyright Treaty

WIPO treaty concerning copyrights.

a
a

a
a

-

a
a

Performances and WIPO treaty concerning performances and records.
Phonograms
Notes: Based on information as of June 2016. "a" indicates countries that have already established domestic laws/joined treaties, blank indicates countries that have no domestic laws/have not joined any treaties. Under
the TPP, it is mandatory to be members of the Patent Cooperation Treaty, the Paris Convention, and the Berne Convention. However, all 12 countries have already joined these three treaties.
Source: Japan Patent Office, World Intellectual Property Organization (WIPO), and materials from the governments of each country

40Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Significant effect of tariff cuts in the US■ US tariffs on TPP partners estimated to reach $6 billion (2015)
With respect to utilization of the TPP from the aspect of tariffs, as the US boasts the largest economy in the TPP region, and due to thelarge number of countries entering into an FTA agreement for the first time, the effect of tariff cuts in the US is believed to be significant.
According to the United States International Trade Commission (ITC), US tariffs on TPP partners is estimated to reach $6 billion (2015).
■ Benefits of tariff elimination/cuts in many industrial sectors
The amount of tariffs by the US on Japanese imports (2015) is estimated to be $2.3 billion, with taxes imposed on a wide range of items
including transport equipment and parts, general machinery, and electrical equipment.
Figure III-7: Estimated US tariffs on Japanese imports (2015)
Figure III-6: Calculated duties applied to TPP member(US$ million, %)countries by US (2015)(Unit: $1 million, %)HS codeCalculated duties

Dutiable value

Calculated duties /dutiable value

Vietnam

2,805

19,556

14.3

Japan

2,276

77,2542.9

Mexico339

13,074

2.6

Malaysia

229

4,707

4.9

Canada198

34,187

0.6

Singapore

44

1,179

3.7

New Zealand

40

2,601

1.5

Australia

17

657

2.5

Peru

5

298

1.8

Chile

4

181

2.3

Brunei

1

12

10.3

153,706

3.9

Total of TPP member
5,958
countries
Note: Calculated duties are estimeted by the US ITC.
Source: United States International Trade Commission

Copyright (C) 2016 JETRO. All rights reserved.

Classification
Transport equipment
and parts thereof
General machinery
Electrical equipment
Plastic products
Rubber products
Precision equipment
ClocksOrganic chemicals
Base metals products
Other basemetals/cermet and the
products thereof

Importvalue

Dutiablevalue

Calculated duties
Value
Share

48,12344,907

1,129

29,95815,966
2,205
2,486
6,604
935
2,388
790

9,165
7,171
1,932
2,025
2,822
902
1,157
679

311
195
99
72
68
63
62
31

13.7
8.6
4.3
3.2
3.0
2.8
2.7
1.3

266

199

28

1.2

Others
24,504
6,295
218
Total
134,226
77,254 2,276
Notes: Tariffs are estimates by the United States International Trade
Commission.
Source: Materials from the United States International Trade
Commission

9.6
100.0

87
84
85
39
40
90
91
29
82
81

49.6

41

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Utilization of TPP for trade between third countries■ Review on the utilization of TPP for trade with a third country such as US or Vietnam
When the TPP enters into force, Japan will have new FTAs with three countries: US, Canada, and New Zealand. Firms in various
industries such as automotive parts, textile products, general machinery, and pottery, already anticipate the effects of US’s tariff cuts.
In trade among 11 countries excluding Japan, the combination of export source to export destination that many firms consider utilizing
the TPP is exports from Vietnam to US (82 responses). This is followed by exports from Malaysia to US (26 responses). Many firms are
considering utilizing TPP between Vietnam/Malaysia and the US, between which there is no FTA in force at the moment.
FigureIII-8: Prospects of TPP utilization by
Japanese companies
Firm A

Firm B

Firm C
Firm DBusiness types

Prospects

Auto components

Currently, a 2.5% tariff is imposed on export of car parts fromJapan to the US. It is expected that the TPP will contribute to
reducing the tariff value by approx. 300 million yen. We aregoing to utilize the TPP in export to Canada.
We are now paying several tens of millions of yen for exports to
the US per year. We will be able to save on tax through the
TPP.
We are exporting high-class jeans to the US. We anticipate thatthe abolition of tariffs by the TPP will expand export.
We have been already increasing sales of our products throughan affiliated firm by expanding production in Vietnam. We are
expecting that the textile and apparel market in Vietnam will befurther expanded by the TPP.
Currently, duty of approximately 3% is imposed by the US on
large equipment for business use. This duty will be eliminatedimmediately after the TPP takes effect.
A 3% tariff is imposed on export of general machines fromJapan to the US. It is expected that the TPP will save tax byseveral tens of millions to several hundred million yen per year.
We are paying around 6-20.8% tariffs for exporting tableware
including mugs, napkin rings, and salt and pepper shakers toward
the US. The TPP will eliminate this tariff instantly or in 10 years.
The competitiveness of Japanese products in the US market will
increase if the up-to-28% tariff imposed at exporting to the US isabolished.
The TPP's self-certification system will be convenient if it
successfully works.

Auto components

Apparel(SME)
Textile related

Firm E

MeasuringmachineFirm F

General machine

Firm G

Pottery andporcelain(SME)
Pottery andporcelain(SME)
Pottery andporcelain(SME)

Firm H

Firm I

Source: Interview servey

Copyright (C) 2016 JETRO. All rights reserved.

Figure III-9: Export sources and export destinations that corporations are
considering utilizing the TPP in trade between third countries(Multiple response, no. of responses)

Exportdestinations United
ExportsourceStatesUnitedStatesCanada Mexico Chile

11

Peru

Singapore Malaysia

Vietnam Australia

New
Zealand

Total

17

1

1

8

6

10

4

1

60

-

-

-

5

3

1

2

-

14

-

-

-

-

1

-

-

18

-

1

1

1

-

-

9

1

1

-

-

1

5

6

6

2

2

31

8

5

2

57

12

4

161

1

27

Canada3

Mexico

15

2

Chile

6

-

-

Peru

1

1

-

-

Singapore

10

4

-

-

-

Malaysia

26

4

3

2

2

5

Vietnam

82

15

8

2

1

22

15

Australia

9

4

-

-

-

5

3

5

New
Zealand

3

2

1

-

-

3

2

-

2

Total

155

43

29

5

4

50

37

32

27

13
11

395

Notes: The number of responses with the combination of export sources and export destinations for which
corporations are considering utilizing the TPP for among 11 countries, excluding Japan. Brunei is not shown
due to the small number of responses. Source: "FY2015 Survey on the International Operations of JapaneseFirms" (JETRO)

42

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Automobiles/Automotive parts: Benefits through exports from Japan, etc.
■ Potential for wide utilization in exports from Japan to US, Canada
In the automobile/automotive parts sector, the TPP is expected to be utilized for exports from the strongly competitive Japan to TPP partner countries.
In particular, FTAs are expected to be established between Japan and the US and Canada as a result of the TPP. Trade values between these countries
are high, and tariffs will be levied widely on Japanese automobiles/automotive parts. As such, it is believed that the TPP will be utilized.
■ Potential for utilization also in exports to Mexico that uses a wide cumulative basis
There is also a possibility that the TPP may be utilized for exports from Japan to Mexico. In recent years, the automobile production sector has been
expanding in Mexico, and automobiles/automotive parts produced in Mexico are characterized by the fact that they are exported to the US. Under the
TPP, a cumulative provision will be applied to the 12 countries as a whole, making it possible for parts procured from Japan to also be covered under
the cumulative scope.

Figure III-10: Import values of cars and auto components into US
and Canada from world (2015), and TPP base rate

Figure III-11: Potential for cumulative utilization in Mexico(Unit: $100 million)

US
Import values($100 m)Passenger vehicles

Commercial vehicles

Auto components

TPP parties
such as US

CanadaBase rate (%)

1,672

234

754

2.5%

25%
4%
No tariff

4%
2.5%
No tariff

Import values($100 m)Base rate (%)

264

119

237

6.1%
No tariff

6.1%
No tariff

8.5%
6.0%
3.5%
No tariff

Note: HS code: passenger vehicle 8703; commercial vehicle 8704; and auto components from 8707 to 8708 and from 840731 to
840734
Source: Trade statistics of respective countries, letter of agreement of the TPP

Copyright (C) 2016 JETRO. All rights reserved.

TPP parties
such as Japan

Export of finishedproducts using TPP

Accumulation
possible

MexicoNon-TPPpartiesAccumulation
not possible

Note: The “accumulation” is applied to parts produced in TPP
party countries such as Japan.

43Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Textiles/Sewn products：Anticipation for expansion in trade within the region■ Amount of imports for textiles/sewn products for TPP parties (10 countries excluding Brunei and Vietnam) is $197 billion; US is the largest
import market at $115.1 billion
Among the countries that are party to the TPP, the simple average tariff rates applied to the textiles/sewn products sector is high, and there are countries withsignificant tariff reduction/elimination. The amount of imports for TPP parties (10 countries excluding Brunei and Vietnam) (2015) reaches $161.5 billion forsewn products and $35.5 billion for textiles, totaling $197 billion. Of these, the value of textile/sewn product imports for the US is $115.1 billion (of which
sewn products makes up $100.3 billion), forming an overwhelmingly large market.
■ Potential for the expansion of exports from production regions in Japan; Vietnam’s strength in the production of sewn products
In the textiles/sewn products sector, there are high expectations for the expansion of exports for these products from Japan mainly to the US. There are also
expectations for the growth of the sewn product export sector from Vietnam, which is expanding its exports of these products against a backdrop of low laborcosts, to countries such as the US. Furthermore, if the production of textiles and sewn products within the TPP region, such as in Vietnam, expands going
forward, it is anticipated to contribute to growth in the export of sewing machines and textile-related products as well as in sales in the local markets.

Figure III-12: Scale of import market in TPP member
countries for textiles and sewn products
Sewn products

Figure III-13: Import destinations for textiles from Vietnam(US$ million, %)(US$ million)

Import value
2010

2010

2014

2015

2010

2014

83,72496,230100,283

11,731

14,556

14,838Japan

28,40033,08930,306

4,507

5,558

5,078

Canada8,691

10,604

10,307

3,157

3,380

3,227

Australia

5,478

7,309

7,429

1,388

1,527

1,459

Mexico

2,486

3,897

4,040

5,604

6,437

6,469

Singapore

2,051

2,668

2,522

888

864

759

Chile

1,589

2,567

2,417

589

641

491

1,267

2,195

1,267

1,019

1,322

1,281

Peru

363

795

Vietnam

315

537

New ZealandTotal

134,607

2013

2014

2010

2013

2014

2015

US

Malaysia

Share

TPP

TextilesChina

Non-party

2,701

4,771

5,794

33.1

38.6

41.4

South Korea

Non-party

1,454

2,190

2,340

17.8

17.7

16.7

Other Asian region Non-party

1,445

1,794

1,933

17.7

14.5

13.8

Japan

Party

512

749

771

6.3

6.1

5.5

United States

Party

295

532

578

3.6

4.3

4.1

India

Non-party

220

341

416

2.7

2.8

3.0

ThailandNon-party

316

431

403

3.9

3.5

2.9

607

Hong Kong

Non-party

423

453

358

5.2

3.7

2.6

1,518

1,613

Indonesia

Non-party

121

130

170

1.5

1.1

1.2

349

439

406

Australia

Party

19

94

159

0.2

0.8

1.1

754

884

1,128

1,037

BrazilNon-party

37

87

137

0.5

0.7

1.0

n.a.

8,154

13,986n.a.

Malaysia

Party

95

116

113

1.2

0.9

0.8

160,283 161,534[Note2]

38,51950,03435,493[Note2]

8,154

12,356

13,986

100.0

100.0

100.0

Note: 1) Textiles belong to HS50-60, and sewn products HS61-63. 2) Due to statistics constraints, Brunei's data andVietnam's data for 2015 are excluded. Source: Trade statistics of respective countries

Copyright (C) 2016 JETRO. All rights reserved.

Total import value

Notes: Textiles falls under the categories of HS50 - 60.
Source: Vietnam's trade statistics

44

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Elimination of tariffs for general machinery greatly anticipated by corporations■ Tariff cuts to have a significant effect on the generalmachinery sector
General machinery (defined as HS84) is a primary export categoryof Japan, making up as much as 18.8% of the country’s totalexports. Among countries that are party to the TPP, this figure
reaches 34.0%. 67.8% of Japan’s exports to TPP countries arebound for the US. For tariffs on general machinery in the US, 40%of the tariff line are taxable items, and more than $0.3 billion oftariffs is paid per year on exports from Japan.
In addition to the US, there are also commitments on the immediate
elimination of tariffs for many of the taxable general machinery
items for Canada and New Zealand, which do not have FTAs withJapan. Exporting companies can benefit from tariff reduction effectimmediately after the agreement enters into force.
■ US eliminates tariffs immediately for ¾ of taxable items
According to the schedule for tariff cuts in the US under the TPP,
tariffs will be eliminated immediately for 76% of the taxable items
once the agreement enters into force. Among exceptions with tariffs
that will be eliminated after 10 years or more, 15 products are fromJapan, most of which are bearings (4.4% - 9.9%).
■ High expectations from corporations
Machine tools are mainly produced domestically, with the
exception of some leading manufactures. As such, there are highexpectations that exports may expand as a result of the TPP.
For general machinery manufacturer, Company F, approximately
3% of tariffs are imposed on its general machinery exports fromJapan to the US. However, if the TPP enters into force, it isexpected to generate savings ranging from several tens to several
hundreds of millions of yen per year.

Copyright (C) 2016 JETRO. All rights reserved.

Figure III-14: Breakdown of tariffs for HS84 products by the US on Japan
under the TPP agreement(Unit: Items, %)General tariff rates
Tax-freeTaxedLess than 5%

5% or more

Other (Composite tax rate)
Total

To be eliminated immediately
5th year
10th year
12th year
15th year
To be eliminated immediately
5th year
10th year
12th year
To be eliminated immediately

Product
471
305
217
47
8
2
1
14
3
0
12
1
776

Share
60.7
39.3
28.0
6.1
1.0
0.3
0.1
1.8
0.4
0.0
1.5
0.1
100

Source: TPP agreement

Figure III-15: Top-ranking taxable imports from Japan to the US (HS84 products)
HS number

Overview of items

8409915085
8479899899
8481809005
8407344800
8411999085
8458110030
8415908085
8483905000
8458110010
8407341800
8466939585
8413309030
8457100015
8457100055
8483101030
8483308090
8481200020
8481809050
8457100060
8481809015
8409999190
8456101010

Piston engine parts
Other machinery
Solenoid valves
Piston engines (>2,000cc)
Gas turbine parts
Numerically controlled lathe
Air-conditioning parts
Gearbox parts
Numerically controlled lathe
Piston engines (>1,000cc - 2,000cc)
Other machine tool parts
Piston engine pumps
Machining centers
Machining centers
Cam, crank shafts (for engines)
Bearing housing
Hydraulic or pneumatic power transmission apparatus for valves
Other valves/cocks
Machining centers
Other valves/cocks
Automotive engine parts
Laser processing machines

2015

906
482
316
307
279
194
191
180
175
164
163
156
152
150
142
139
133
128
127
125
105
102

Base
rate

(US$ million, %)Year ofelimination

2.5 Immediate
2.5 Immediate
2 Immediate
2.5 5th year
2.4 Immediate
4.4 Immediate
1.4 Immediate
2.5 10th year
4.4 Immediate
2.5 Immediate
4.7 Immediate
2.5 Immediate
4.2 Immediate
4.2 Immediate
2.5 Immediate
4.5 10th year
2 Immediate
2 Immediate
4.2 Immediate
2 Immediate
2.5 Immediate
3.5 5th year

Notes: Taxable items are items with import value exceeding $0.1 billion in 2015 and with a base rate.
Source: US trade statistics, TPP agreement

45Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Electrical equipment: US eliminates tariffs immediately for most products■ High-tariff electrical equipment remain in US
Japan’s exports of electrical equipment to TPP
partner countries are $25.9 billion (2015), andmake up 27.1% of its total exports for the sector.
The US, which is the largest export destination,
imposes tariffs of approximately 0.1% - 5% on key
export items from Japan. Tariff reductions/
exemptions may be realized for the first time under
the TPP, for items that were not covered by the
ITA expansion such as lithium-ion batteries.
On the effective date of the TPP, the US will
eliminate tariffs for 98.0% of the items currently
subject to duty.

Figure III-17: Examples of base rate and tariff elimination schedule for Japanin electrical equipment
United States
Highest Tariff elimination
Product
Product
tariff rateschedule<Top ranking export items from Japan (taxable items only, based on 2015 results)>
TV cameras, digital cameras, etc.
2.1 Immediate (2016-19) Nickel-hydrogen batteries
Lithium-ion rechargeable batteries
3.4 Immediate
Lithium primary batteries
Stick converters
1.5 Immediate (2016-19) Heating equipment
Power generators
2.5 Immediate
Switchboards (<1,000V)
Switchboards (<1,000V)
2.7 Immediate/10th year Electrical conductors＜Other high-tariff items＞
Color television sets
15.0 Immediate
Coffee-makers
Flashlights
12.5 Immediate
Magnetic cards
Handset parts
8.5 Immediate (2016-19) Vacuum cleaners
Electric motors
6.7 Immediate
Food mixers
Toasters
5.3 Immediate
Regenerative radiators

CanadaHighesttariff rate

(Unit: %)Tariff elimination
schedule

7.0 Immediate
7.0 Immediate
7.0 Immediate
2.5 Immediate
6.5 Immediate
9.0 Immediate
8.5 Immediate (2019)
8.0 Immediate
8.0 Immediate
8.0 Immediate

Notes: 1)"Immediate" means the tariff will be eliminated upon the effective date of TPP. 2) "Highest tariff rate" shows the highest rates on thebasis of 6-digit HS code. There may be tax-free items on and after 7-digit. 3) Shaded cells show target products under the ITA expansion, while
figures in parentheses show the year of elimination under the ITA expansion.
Source: TPP agreement, WTO documentation, trade statistics from the Ministry of Finance

Figure III-16: Electrical equipment trade matrix within the TPP (2015)(US$ million, %)Export destination→

United States

CanadaExport source↓<Average tariff rates>

Mexico

Peru

Chile

Australia

New ZealandSingapore

Malaysia

Vietnam

BruneiJapan

TPP total

1.7
1.1
3.5
2.1
6.0
2.9
2.6
0.0
4.3
7.9
5.1
0.1
3.1
United States
25,091
41,112
813
1,007
2,051
177
3,954
6,001
865
15
5,217
86,303
Canada
9,806
235
24
29
101
15
99
55
12
0
101
10,478Mexico71,696
1,803
446
474
107
17
186
63
15
1
254
75,064
Peru
24
1
2
16
0
0
0
0
0
0
43
Chile
108
1
8
54
0
0
0
0
1
172
Australia
397
19
11
5
11
516
130
68
16
1
32
1,205
New Zealand
161
15
8
0
2
218
22
7
2
0
34
469
Singapore
7,402
164
633
4
12
968
136
11,387
3,788
87
5,706
30,287
Malaysia
9,021
236
970
30
106
686
88
9,972
772
22
4,078
25,983
Vietnam
8,303
807
2,194
127
147
989
139
989
1,971
2,473
18,138Brunei
0
0
0
0
0
3
0
4
Japan
14,670
537
1,562
23
21
374
35
3,310
2,823
2,579
5
25,937
TPP total
121,588
28,673
46,734
1,528
1,824
5,493
1,125
18,666
22,3778,050
132
17,895
274,084
Notes: 1) Of the exports to TPP parties from each country, countries with share exceeding 10% are shown in the shaded cells. 2) Average tariff rates are simple average MFN tariff rates forelectrical equipment as defined by WTO. 3) Figures for Vietnam and Brunei are estimates. Source: Trade statistics of each country, "World Tariff Profiles 2015" (WTO)
46

Copyright (C) 2016 JETRO. All rights reserved.

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Services: Easing and clarification of foreign investment restrictions■ Easing of restrictions for retail sector, etc. contributes to overseas expansion success
For the services sector, TPP includes rise in the threshold of investment value requiring government approval as well as raising of
foreign investment ratio. One of the examples is the easing of restrictions on foreign investment for the retail sector in Vietnam. In
Vietnam, the Economic Needs Test (ENT) that companies are required to undergo when opening two or more stores after the five-year
transition period after the TPP enters into force. Predictability of restrictions on the rental and sublease of real estate will rise, and this is
in turn likely to drive the entrance of retail sector into the market, along with the abolishment of the ENT.
Figure III-18: Examples of TPP member’s commitments on liberalization in the services sector
Countries

Sectors
Distribution

Regulated items

Commitments under existing agreements⇒

Commitments under TPP

Economic needs test

Economic needs test (ENT) is required for foreign distribution firms to open a second or subsequent location..
⇒After the five-year transition period after the TPP entered into force, ENT will be eliminated. Designated commercial areas do not need ENT even in the transition period.
Shipping related services
Restrictions on foreign Customs clearance services are only permitted through merger with a Vietnamese corporation or capital contribution in a Vietnamese corporation in the same sector.
investment⇒This restriction will be abolished.
Maritime transportation
Limitations of sector Foreign firms are not permitted to provide some services.
⇒These restrictions will be removed, excluding cabotage.
Vietnam Advertising
Merger requests
Foreign investors have to form commercial agreements or joint ventures with local companies active in the same field.
⇒This rule will be abolished.
Telecommunications
Restrictions on foreign The provision of fixed/mobile terrestrial services by foreign service providers is permitted only when it is carried out through a commercial contract with a Vietnamese corporation, under a license forinvestors
international telecommunications services.
⇒This restriction will be abolished.
Rental and sublease of real Limitations on foreign No liberalization commitment.
estateownership⇒Rental and sublease of real estate will be liberalized. (E.g. Department stores will be able to lease their space to other companies.)
Distribution
Limitations on foreign Distribution services by foreign investors are not allowed, and there is the possibility of additional restrictions.
ownership⇒Foreign investors can invest in supermarkets and hypermarkets by up to 70%. Foreign investors, excluding licensors, will be able to invest in convenience stores by up to 30%.
Finance
Restrictions on foreign (1) Foreign banks can only have up to eight branches. In addition, ATMs cannot be set up outside a bank.
investment⇒Banks will be able to have up to 16 branches. The restriction on ATMs will be abolished.
Malaysia(2) Ratio of investment in credit rating companies by foreign capital is limited to 49%. ⇒This rule will be abolished by the end of 2016.
Non-life insurance
Restrictions on foreign Requirement for the repurchase of reinsurance from state-owned reinsurance businesses: Uniform rate of 30%.
investment⇒Eased to 2.5%.
Leasing/rental of
Restrictions on foreign Investment is permitted only through mergers. Investment ratio is capped at 51%.
machinery/equipment
investment⇒This restiction will be abolished.
Australia All sectors
Investment amount
AUD$248 million
requiring approval⇒ Raised to AUD$1.94 billion.
All sectors
Nationality
Private companies are required to have at least one director and one secretary residing in Australia; for public companies, there is a requirement for at least two directors and one secretary.
requirements⇒This restriction will be abolished.
NZ
All sectors
Investment amount
Approval is required for the following: A foreign company obtaining more than 25% share and control of a company, and the transaction value is over 100 million NZ dollars; or arequiring approvalcompany has to pay more than 100 million NZ dollars in accordance with a new project or acquisition of business property.
⇒In both cases, the standard amount will increase to 200 million NZ dollars.
CanadaAll sectors
Investment amount
CAD$369 million
requiring approval⇒Raised to $1.5 billion Canadian dollars.
Culture businessRestrictions on foreign Restrictions may be introduced in the future for culture-related services.
investment⇒It is clarified that no restrictions will be set on any foreign audio and video content provided via Internet.
MexicoAll sectors
Investment amountPeso-denominated investment equivalent to $150 million.
requiring approval⇒ Raised to the equivalent of $1 billion.
Chile
All services
Nationality(1) More than 85% of the workers under the same employer are required to be Chileans. ⇒In addition to Chileans, foreigners who have resided for 5 years or more are also permitted.
requirements(2) Employers have to be representatives or mandataries in Chile, and residing in Chile.
⇒This requirement will be abolished.
Source: TPP agreement and the Cabinet Secretariat

Copyright (C) 2016 JETRO. All rights reserved.

47

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Comparison of macro indicators among TPP parties■ US leads the TPP market; emerging economies experience significant growth
Among the TPP parties, the scale of the US economy is massive. Nominal GDP of the US in 2015 was $17.9 trillion, making up 24.5%of the world’s GDP. Emerging economies such as Vietnam and Mexico have experienced dramatic economic growth, and imports tothese countries have risen in recent years. According to IMF forecasts, real GDP growth rate for Vietnam from 2015 to 2020 is the only
one among the TPP parties that is expected to remain at a level of about 6%. GDP per capita is expected to increase for Malaysia inparticular (average growth rate from 2015 to 2020: 8.2%).
■ Emerging economies to enter a period of demographic dividend in earnest
Looking at the population trends for TPP parties, we can see that many of the emerging economies are currently entering a period of
demographic dividend, or are likely to enter it in the near future. The demographic dividend is expected to continue up till 2036 forVietnam, 2038 for Mexico, and 2049 for Malaysia.
Figure III-19: Macro indicators for TPP parties (2015)
NominalGDP

Advanced
economies

Emerging
anddeveloping
economies
TPP total

United States
CanadaAustralia
New ZealandSingaporeJapan
BruneiMalaysia
VietnamMexicoChile
Peru

Population($1 billion)(1 million
people)17,947
1,552
1,224
172
293
4,123
12
296
191
1,144
240
192
27,388

321.8
35.9
24.0
4.5
5.6
126.6
0.4
30.3
93.4
127.0
17.9
31.4
818.9

NominalGDP per
capita($)

55,80543,33250,96237,04552,88832,48628,237
9,557
2,088
9,009
13,341
6,021-

Figure III-20: Period of demographic dividend for TPP parties

(%)

2.4
1.2
2.5
3.4
2.0
0.5
-0.2
5.0
6.7
2.5
2.1
3.3
-

1990

2000

2010

2020

2030

2040

2050

(2010 2015, %)

3.3
1.4
0.7
3.7
-0.9
-1.3
1.3
14.3
5.6
1.6
4.7
2.4

Notes: 1) Average growth rate for the amount of imports in the TPP total does not include Brunei
due to statistical limitations. 2) Definitions of advanced, emerging, and developing
economies are based on IMF definitions.
Source: "WEO,April 2016" (IMF), "World Population Prospects: The 2015 Revision" (United
Natioins)

Copyright (C) 2016 JETRO. All rights reserved.

Period of demographic dividend

AverageReal GDP growth rate
growth rate for imports

Period ofPeriod ofdemographic continuous risein working-age
dividend
population ratio

Period whenratio of workingPeriod whenage population
working-age
rises + workingpopulation/depen
agedent population
population/depen
is 2 or moredent populationis 2 or more

Malaysia

1.46

1.69

2.11

2.34

2.17

2.15

1.97

1965～2049

1965～2007

2008～20192020～2049

Brunei

1.69

2.04

2.47

2.62

2.34

1.96

1.57

1966～2039

1966～1999

2000～20182019～2039

Mexico

1.31

1.54

1.79

2.02

2.08

1.97

1.79

1967～2038

1967～20182019～2029

2030～2038

Vietnam

1.32

1.63

2.31

2.23

2.07

1.90

1.61

1969～2036

1969～2005

2006～20132014～2036

Peru

1.35

1.55

1.81

1.92

1.97

1.93

1.79

1968～2031

1968～2031

-

-

Chile

1.79

1.91

2.17

2.15

1.89

1.64

1.47

1967～2026

1967～2002

2003～20152016～2026

Singapore

2.70

2.47

2.79

2.40

1.77

1.40

1.23

1964～2026

1964～1978

1979～20102011～2026

Canada

2.13

2.15

2.27

1.90

1.56

1.49

1.42

1963～2017

1963～1977

1978～20082009～2017

United States

1.93

1.98

2.05

1.83

1.57

1.53

1.52

1963～2013

1963～2000

2001～20082009～2013

Australia

2.02

2.01

2.08

1.81

1.63

1.59

1.52

1962～2013

1962～1987

1988～20082009～2013

New Zealand

1.91

1.90

1.98

1.75

1.54

1.43

1.45

1962～2008

1962～2008

-

-

Japan

2.30

2.14

1.76

1.44

1.34

1.16

1.05

1951～2004

1951～1963

1964～1992

1993～2004

Notes: 1) Median estimates. 2) Light grey: Period when ratio of working-age population/total population rises mostly consistently. Grey: Period when ratio of working-age
population/total population rises mostly consistently, and working-age population/(youth population + senior population) is mostly 2 or more. Shaded: Period when working-age
population/(youth population + senior populaton) is 2 or more. 3) Time-series data figures show working-age population/dependent population (youth population + senior population).
Source: "World Population Prospects: The 2015 Revision" (United Nations)48

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Re-evaluation of US market and concentration of industries of note
■ TPP’s largest market draws attention
According to JETRO’s 2015 Survey on the International Operations of Japanese Firms (March 2016), with respect to countries/regions for the future
expansion of international operations, the US (33.7%) rose from fifth place in FY2013 to third place after China (53.7%) and Thailand (41.7%).
Response rates were higher than average for the textiles/textile products and apparel sectors (57.7%) and precision equipment (57.1%), and higher
than figures for 2013, suggesting anticipation of the effects of tax elimination/reduction through the TPP.

■ Expansion based on industrial concentration over a wide area
One of the characteristics of the US economy is the fact that the concentration of key industries is spread out over the vast expanse of the country.
Looking at the overall industry, while California, Texas and New York, which have large populations, take up the top ranks, categorization byindustry shows the manufacturing industry scattered across a region spanning from the Midwest to the South. As such, active marketing efforts in theareas of expansion will take on greater importance.

Figure III-21: Gross operating surplus in the US by state (Top 10 states in 2014)

49
Copyright (C) 2016 JETRO. All rights reserved.

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Key factors for opening up and expanding sales channels in the US market■ Focus on areas with a large number of high-income households
Even in the US, where there is a large number of high-income households, a comparison bystate and urban area shows that there are areas with incomes that are significantly higher than
the national average (22.9%). These areas have a stronger appeal as consumer markets.

Figure III-22: States and urban areas with a high proportion ofhigh-income households (2014)(Unit: %)Ratio of householdincome of$100,000 or higher

Urban area
(state/administrative district)Ratio of householdincome of$100,000 or higher

Maryland

36.1

San Jose, Sunnyvale, Santa Clara
areas (California)

46.9

Washington, D.C.

36.0

Washington, Arlington, Alexandria
areas (around Washington DC)

46.0

The EC market has sustained a double-digit annual growth rate, and makes up 7.8% of theretail market, valued at $92.8 billion, in the first quarter of 2016. In addition to high usage rates
among the millennials (consumers born between 1980 – 2000), usage rates among those aged
55 and above also reached the same level as the overall average.

New Jersey

35.6

Figure III-23: Comments about sales strategies from corporations
expanding into the US market

Notes: Refer to data on five-year estimates (2009 - 2014)
Source: 2014 American Community Survey■ Build appropriate sales channels that fit the business strategy

Building appropriate sales channels from several options, such as expanding the own company
or using distributors, is important from the perspective of minimizing operating costs.

State (including
administrative district)■ E-commerce (EC) markets that are increasingly drawing attention

Expansion method

Implementation/Management of businessstrategies

Own-company
expansion

Easy to implement the strategy on
Easy management of products,
the company's own basis. (Fashion, food prices, distribution, etc. (Fashion, foodproducts, etc.)
products, etc.)

Marketing

Easily subjected to restrictions inEasily subjected to restrictions
Distributor
the implementation of the own's company with regard to products, prices,(importer/sales agent) strategy. (General machinery, food
distribution, etc. (Medical equipment,
products, etc.)
food products, etc.)

Business cost

Connecticut
Massachusetts

Acquisition of local
corporation（M&A）

aspects such as products, prices,
distribution, etc. (IT, general machinery,etc.)

Source: Corporate interviews, BIZ NEWS, etc.

Copyright (C) 2016 JETRO. All rights reserved.

42.2
40.8

Speed of business expansion

Local human resources

Business costs are likely toincrease (particularly fixed costs).
(Precision equipment, fashion, etc.)

Sales area tends to be restricted.
(Food products, automotive parts, etc.)

Tends to take time to expand thebusiness. (Automotive parts, foodproducts, etc.)

Recruitment and retention ofhuman resources tends to incur time andcost. (Food products, automotive parts,
etc.)

Easy to keep business costs low(particularly fixed costs). (Generalmachinery, food products, etc.)

Sales area is easily expanded
Cooperation from import/sales
through the designation of dealer stores agents is necessary in order to expand
for each area. (Medical equipment, food the business. (Medical equipment,
products, etc.)
general machinery, etc.)

Recruitment and retention ofhuman resources does not incur time andcost. (General machinery, food products,
etc.)

Easily subjected to restrictions.
Able to execute and manage theEasy to keep business costs low
However, if the mutual benefits areown company's strategy if there is(particularly fixed costs). (Generalshared between the partners,
adequate coordination during themachinery, food products, etc.)
management would be possible. (Pottery,
partnership. (Pottery, etc.)
general machinery, etc.)
If conditions for differentiation,
Easy to execute and manage the etc. with products of acquisition are
own company's strategy. (IT, hotels, etc.) fulfilled, it would be easy to manage

42.6

Sales area

While it is easier to keep business
Relatively easy to implement theRelatively easy to manage
Sales area is easily expanded
costs low as compared with ownown company's strategy. (Health, design, products, prices, distribution, etc. (Health, company expansion (particularly fixed
through the designation of sales
food products, etc.)
Sales representative etc.)
costs), there is a possibility for increase representative for each area. (Foodproducts, health, etc.)
depending on sales commissions andincentives. (Everyday merchandise,
health, etc.)

Sales alliance

Bridgeport, Stanford, Norwalk
areas (Connecticut)
California, Lexington Park areas
33.9(Maryland)
San Francisco, Oakland, Hayward
33.2
areas (California)

Sales area is easily expanded
through the mutual use of management
resources. (Pottery, general machinery,etc.)

Depending on the acquisition price,
Sales area is easily expanded
comprehensive business costs may rise. through the use of existing management
Time and costs are easily incurred on
resources (IT, general machinery, etc.)
business integration after the acquisition.
(Hotels, automotive parts, etc.)

Takes relatively little time toRelatively easy to secure human
expand the business. (Medical equipment, resources. However, tends to take time
health, etc.)
and cost to secure and retain outstanding
human resources. (Health, etc.)

Depending on the contents of the
Little impact on the recruitment
partnership, cooperation from theand retention of human resources. (Foodpartners is necessary in order to expand
products)
the business. (Pottery, food products,
etc.)
Speedy business expansion
possible. (IT, industrial gas, etc.)

Relatively easy to secure humanresources. However, there are cases
where it may incur time and cost to retain
outstanding human resources. (Medical
equipment, IT, etc.)50

Chapter 3 Section 1: Broad economic zones and the growth strategies of Japanese corporations

Lack of human resources is the most serious issue in opening up overseas markets■ Increasing use of foreign human resources alongside nurturing of Japanese employees
In attempts by Japanese corporations to open up overseas markets through the utilization of TPP and other means, the lack of existing human resources inthese companies has become the most serious management issue. According to JETRO’s Survey on the International Operations of Japanese Firms, thelargest proportion of corporations (52.8% of all respondents) selected “human resources to take charge of overseas businesses” as their response to thequestion about issues when engaging in international operations (export/overseas expansion). With regard to the human resources that are vital in opening up
overseas markets, Japanese corporations are interested in utilizing foreign human resources after the first option of fostering Japanese employees. Thissurvey also polled respondents on the benefits for corporations that have employed foreign employees, or that are considering employing them in the future.
In response, more than 40% of the corporations answered “expansion of sales channels” and “improvement in negotiation capability with foreign countries.”
Of these, the percentage of companies that selected “expansion of sales channels” increased by 5.1% points as compared to the previous year, indicatingheightened expectations among Japanese corporations toward the use of foreign human resources. On the other hand, foreign companies established in Japan
point to improvements in negotiation capability with foreign countries as a benefit of having a multinational workforce.

Figure III-24: Issues regarding overseas business(Unit: %, percent point)
Change from FY2013 survey

FY2015 survey
Total
Large-scaleSMEs(n=3,005) firms (n=638) (n=2,367)
Human resources for overseas
operations
Information on overseas
systems (tariff rate, regulations,permissions,etc.)
Local business
partners (alliancepartners)
Information on local markets(consumers’ preferences, needs,
etc.)
Expansion of local sales
networks
Cost competitiveness
Goods for local markets
Raising of necessary funds
Other
Nothing in particular

Large-scale
firms

Total

SMEs

52.8

68.8

48.5

11.6

16.2

10.1

51.1

59.2

48.9

11.0

10.5

10.9

48.5

45.1

49.3

0.7

-1.2

1.2

47.1

48.9

46.6

7.7

6.8

7.8

38.8

39.8

38.5

6.3

6.0

6.3

Figure III-25: Examples of benefits and issues in the utilization of foreign
human resources by Japanese and foreign corporations
Industry

Benefits

Transportation

Expanding sales channels

Japanese General machinery
Expanding sales channels
companies
Trading
Expanding sales channels,
companies/wholesale improving international negotiation
ability
Chemicals
Improving international negotiation
ability
Real estate
Improving international negotiation
Foreignabilitycompanies
in Japan
Other services
Improving international negotiation
ability
Industry
Chemicals

32.5

46.6

28.8

5.5

10.6

4.0

27.5

31.7

26.3

6.1

5.4

6.1

18.4

9.1

20.9

2.2

1.0

2.7

1.9

1.1

2.1

0.8

-0.5

1.1

4.5

4.4

4.6

1.0

1.8

0.9

Note: 1) Percentage to the total number of respondent firms. 2) Multiple answers
Source: FY2015, FY2013"Survey on the International Operations of Japanese Firms"(JETRO)

Copyright (C) 2016 JETRO. All rights reserved.

IssuesDifficult to share the organizational
visionOverview
While it is also important to understand the foreign language and business practices, it is mostimportant to have personal connections. Existing overseas business partners are mostly
acquaintances of foreign employees.
After foreign employees are trained at the head office, there are cases where they becomesales dealers or suppliers in the home country.
Efforts to establish sales channels and export routes to China. The utilization of foreign
personnel is effective in the aspect of communication. Business negotiations can take placewith few misunderstandings.
Effective in overcoming language and cultural barriers, and in building strong and extensive
relationships with external stakeholders.
In order for facilitating communication with external parties, it is highly effective to hire
foreign employees who are well-versed in the business practices of the country of businessexpansion.
Local employees are indispensable in the aspect of building relationships with local business
partners. It is beneficial to have human resources of various nationalities in order for theJapanese branch office to oversee the Asia region.
Overview
Monthly interviews are conducted during the probationary period, efforts are made toachieve mutual understanding such as the sharing of company vision, etc., and cultural gaps
are eliminated as far as possible.

Trading
There are many people who wish to
Whether or not the foreign employee wishes to return to the home country in future appears
Japanese companies/wholesale return to the home country/switch jobs to be undecided. It would be possible to assign more important work to the employee oncein the future; resignation rate is highverify his or her intent to stay for the long-term.
companies
Electronic
components
Chemicals
ForeignReal estatecompanies
in Japan
ICT/software

Source: Interview survey

No (or few) applications even if a call In the recruitment of foreign employee, the inability to find desirable persons is an issue. A
for recruitment is put out
concern would be whether the foreign employee would settle down in a locality where wage
levels are relatively low.
Difficult to share the organizational
Much cost and time is injected into reducing cultural gap and sharing organizational culture.
vision. Many barriers to communication
between employees.
Many barriers to communication
It takes time to foster a common understanding. Unnecessary communication would be
between employees.
required if there were only employees of the same nationality.
Many barriers to communication
Confrontation arising due to differences in way of thinking and views, and language issues in
between employees.
work. However, it is fairly possible to resolve the abovementioned problems throughemployee education where employees are taught mutual respect.

51

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Strong presence of rapidly increasing foreign tourists in the domestic tourism market■ Number of foreign tourists to Japan in 2015 reaches historical high for third year running at 19.74 million (47.1% increase year-on-year)
The number of foreign tourists to Japan reached a new historical high for the third year running, doubling from the number in 2012 (8.36 million) (according
to JNTO). Looking at tourist numbers by region of origin, the number of tourists from Asia grew by 53.9%, surpassing the average growth rate as in last year,
and making up 84.3% of all tourists. In terms of nationality, the number of tourists from China (4.99 million, 107.3% increase year-on-year) rose dramaticallyand surpassed the number of Korean tourists (4 million, 64.6% increase year-on-year) to reach the top place for the first time. In 2016, the number of visitors
to Japan continued to grow, increasing by 39.3% year-on-year during the first quarter (estimated).
■ Heightened presence in the domestic accommodations market
The total number of foreign lodgers increased by 48.1% year-on-year to 66.37 million nights of stay. Looking at the trends by prefecture, we see that Tokyo,
Osaka, and Hokkaido rank at the top, while significant increases were recorded for Okinawa in 5th place (64.0% increase year-on-year), Fukuoka in 7th place(75.2% increase year-on-year), and Shizuoka in 9th place (123.8% year-on-year). As a result, the ratio of foreigners to the total number of lodgers overall rose
to a double-digit figure for the first time at 13.1%. The breakdown of percentages by prefecture puts Osaka in the lead (30.2%), followed by Tokyo (29.9%)
and Kyoto (25.7%). However, the percentages all fall below 5% for the prefectures in the lowest 20 positions, showing a widening gap with the prefectures
ranked at the top.

Figure III-26: Changes in the number of foreign tourists to Japan(10,000 people)
2,000

China
United States

1,800
1,600

South Korea
ASEAN

TaiwanOthersHong Kong

1,400
1,200

1,000
800
600
400

200
0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Notes: 1) Figures for 2015 are provisional. 2) Figures for ASEAN are totals for the six countriesof Thailand, Singapore, Malaysia, Indonesia, Philippines, and Vietnam.
Source: Japan National Tourism Organization (JNTO)

Copyright (C) 2016 JETRO. All rights reserved.

2015(Year)

Figure III-27: Ratio of foreigners to the total number of lodgers(Unit: %)Rank Prefectures
2012
2013
2014
2015
National
6.0
7.2
9.5
13.1
1
Osaka
13.1
18.1
21.9
30.2
2
Tokyo
16.9
18.6
24.3
29.9
3
Kyoto
14.2
13.1
19.4
25.7
4 Okinawa
5.0
7.2
11.9
18.8
5 Hokkaido
7.0
9.9
12.6
17.0
6
Chiba
9.3
10.0
12.6
15.5
7 Yamanashi
5.5
7.1
12.5
15.4
8 Fukuoka
5.5
6.4
8.9
14.7
9
Gifu
4.5
6.9
9.8
13.8
10
Aichi
7.0
7.8
9.7
13.5
43
Akita
0.8
1.0
1.1
1.7
44
Fukui
0.8
0.9
0.8
1.4
45 Yamagata
0.6
0.7
0.8
1.3
46 Shimane
0.7
0.6
0.9
1.2
47 Fukushima
0.4
0.4
0.4
0.5
Source: Statistical Survey on Accommodations (Japan Tourism Agency)

52

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Significant gap with advanced tourism countries in both the aspects of people and money■ Trade surplus of 1.1 trillion yen ($9 billion) for tourism revenue in 2015, marking first surplus in 53 years
Looking at the balance of payments by country/region, Asian countries/regions such as China (874.4 billon yen), Taiwan (357.8 billion yen), andHong Kong (169.8 billion yen) have contributed to the surplus, while North America and Europe have continued to register a deficit. The ratio of
tourism revenue (receipts) to nominal GDP (2015) increased from 0.4% in the previous year to 0.6%. As the number of foreign tourists to Japan is
expected to continue increasing going forward, there are expectations that this will contribute to a surplus in the balance of payments.
■ Issues that have emerged in comparison with advanced tourism countries
Japan’s share in the number of international tourist arrivals worldwide (1.13 billion people, 2014), as published by the World Tourism Organization,
was 1.2%, and its rank improved from 27th place in the previous year to 22nd. Similarly, comparing international tourism revenue (Note), we see thatJapan’s share, at 1.5%, had risen in ranking from 20th place last year to 17th place. In 2015, its ranking is expected to improve further to 13th place.
In comparison with the main advanced countries, a significant gap remains in both the aspects of arrival numbers and revenue. While revenue per
tourist exceeds the average, the GDP ratio for international tourism revenue is relatively lower than that for other advanced economies.
Note: Fare revenue from overseas to airlines companies of the country and advanced payments to travel companies of the country are added to theamount of receipts in the tourism-related balance of payments.

Figure III-28: Changes in Japan’s tourism balance of payments Figure III-29: Number of international tourist arrivals, international
and tourist numbers
tourism revenue, international tourism revenue to GDP (2014)
3,000

4

万

Revenue of international tourism (Unit: $1 billion)(10,000 people)(Trillion yen)
5

200
180

2,000

3

160

2

1,000

US
1.0

140

1
(Year)

00120

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

100

-1
-1,000-2

France2.080-3-2,000

-4

Japan
0.4

-3,000Receipts

Expenditures

Revenue

No. of visitors to Japan (right axis)

20

Italy
2.1

Germany
1.1

40

-5

China
0.5

UK
1.5

60

Mexico
1.3

Spain
4.7

Turkey3.7
Russia0.6

Number of international visitors (Unit: million persons)

Source: Balance of Payment Statistics (Bank of Japan)0

Copyright (C) 2016 JETRO. All rights reserved.

Source: "UNWTO Tourism Highlights, 2015 Edition" (UNWTO), World Bank

10

20

30

40

50

60

70

80

90

53

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Key issues in promoting tourism to Japan and reference cases■ Numerous challenges including transportation infrastructure, accommodations facilities, etc.
There are many challenges that should be resolved, including securing transportation infrastructure, insufficient accommodations facilities, developing
financial services, increasing the number of interpretation guides, undeveloped secondary transportation, tourist information in foreign languages, and thedevelopment of reservation systems compatible with foreign languages. On the other hand, progresses are being made in various areas in the efforts aimed at
overcoming the challenges. In cases where the problems cannot be solved through the efforts of a single party, efforts are often made through cooperationand collaboration between regions, public and private sectors, and corporations.

Figure III-30: Key issues and precedents in promoting tourism to Japan
IssuesSecuring transport infrastructure

Current situation
Reference cases
Congestion on the runways and airspaces accompanying the increase in Active initiatives by Shizuoka Airport, Saga Airport, etc. to attract directflights at major airports, and prolonged waiting time for customs
flights from Asian countries.
clearance, are increasingly becoming issues. Expansion in the use of
local airports is anticipated, including attracting international flights.

Shortage of accommodation
facilities

A tight demand and supply situation has continued, such as utilization
Efforts are underway by the governments of Osaka and Ota City inrate of hotels mainly in the urban areas such as Tokyo, Osaka, andTokyo, etc. to establish unique rules and enact a Private
Kyoto exceeding 80% on average. By 2020, a shortage of guestrooms Accommodations Ordinance.
in the tens of thousands is estimated.

Development of financial services There are few money exchange businesses, which are concentrated in In Hakuba, Nagano Prefecture, local corporations are contributing forsuch as currency exchanges and financial institutions. In addition, there are cases where credit cards
installing ATMs in tourism offices that allow for the use of credit cards
credit cards, etc.
issued overseas are not accepted at domestic ATM or payment
issued overseas.
terminals.
Easing of conditions for becoming Those who receive compensation for providing tourist guidance inIntroduction of area-limited tour guides in places such as Tottori
Japanese licensed tour guideforeign languages have to be licensed Japanese tour guides. The level of Prefecture, Shimane Prefecture, Yamanashi Prefecture, and Takayama
difficulty of the examination for obtaining the license is high, regardless of City in Gifu Prefecture.
the guide's foreign language proficiency and specialized knowledge.
Undeveloped secondarytransportation

Compared to domestic tourists, there is inadequate development of
secondary transportation that gives consideration to inbound tourists
with limitations in their travel itineraries.

In Hakuba, Nagano Prefecture, regular buses to Shiga Kogen,
Matsumoto, Zenkoji, and other spots are operated by local
corporations.

Tourism information in foreign
languages

Inadequate explanations and information in foreign languages withrespect to the history, culture, etc. of sightseeing spots.

In Tanabe City of Wakayama Prefecture, tourism information for thecity, such as bus schedules, are translated into five languages: English,
French, Spanish, Chinese, and Korean.

Reservation system compatible
with foreign languages

Inbound tourists cannot use services and facilities as reservations formeans of transportation, accommodation facilities, and sightseeing
facilities cannot be made in foreign languages.

At the Nakagomi Farm in the Minami Alps of Yamanashi Prefecture, it
is possible to make reservations for fruit-picking trips through thewebsite in English and Chinese.

Source: Based on various materials and interviews with the relevant parties

Copyright (C) 2016 JETRO. All rights reserved.

54

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

The value-chain of the inbound tourism business, and types of businesses■ Value-chain of the inbound tourism business characterized by its broad range and complementary relationshipThe value-chain of the inbound tourism business has a broad range, and there is a mutually complementary relationship between the businesses. In thecontext of revitalization of the regional economy, the businesses can be organized as follows from upstream to downstream: tourism infrastructure (e.g.
means of transportation, accommodations facilities), businesses that fulfill inbound tourism demand (e.g. food and beverage/entertainment, shopping),
development and export of regional products (e.g. tourist experiences). Other businesses that enhance the brand value of the region through attracting
inbound tourists, and which contribute to the development of the regional economy, may be described as regional brand creation businesses.

Figure III-31: Value-chain of inbound tourism industry
Tourism infrastructure

Cruise service

Travel supplies(travel bags, etc.)

Aviation service

Production of
buses and special
vehiclesReal estatedevelopment

Construction andengineering

Finance, online
settlement

Construction
materials andequipment

Toll roads
Construction ofaccommodation

Accommodation
facilities

Means oftransportation

Travel plans

Development and export ofregional products

Inbound tourism demandMarketingTour operators

Vehicle rental

Travelcompanies

Local
transportation

Taxis

Source: "FDI in Tourism" (UNCTAD), etc.

Copyright (C) 2016 JETRO. All rights reserved.

Export/sale ofJapanese products
Related facilities

Agricultural andfishery
products/processedfood products

F&B/
Entertainment

Operation ofaccommodation
facilities
Restaurants

Managementbusiness services

Maintenance andsafety services

Communications
services

Reservation
systems

Local productionof Japanese
products
Consumables

Local/traditional
products

Shopping

Experiencesof travelers

RetailRetailEntertainment
services

Restaurants

Catering
services

Events55

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Advanced tourism businesses and initiatives by public institutions■ Advanced initiatives put in place by regions with an increasing number of inbound tourists
The inbound tourism business brings a new business perspective. There are cases where the demands of inbound tourists differ from the demands ofconventional domestic tourists, and efforts to meet these demands can produce new business models. For example, in the tourism infrastructure sector, there
has been a continued trend to establish hotels and attract international airlines for the purpose of targeting Japan-bound visitors as their customers, and an
example of an initiative to fulfill the demands of inbound tourists has been the expansion of new domestic production bases by manufacturers brought about
by the demand for “made-in-Japan souvenirs” among inbound tourists.
■ Cases where public institutions such as the government plays an important role
From the perspective of branding for a region, there are many cases where public institutions such as local governments plays an important role. In places suchas Takayama City (Gifu Prefecture) and Tanabe City (Wakayama Prefecture) that are popular among inbound tourists, public institutions in the region haveplayed a central role in the aspect of promoting the region. In addition, wide-area collaboration is important in efficiently and effectively attracting inboundtourists. In regions that have produced a successful track record, public institutions often promote and engage actively in collaboration.

Figure III-32: Cases of advanced tourism business
ThemesCategories

Areas

Outlines

Inviting international flights
including low-cost carriers

As a result of continuing inviting international flights into the Shizuoka airport, the number ofInfrastructure
flights from local cities in China drastically increased in 2015. The number of visitors using thisShizuokaoriented
airport doubled from the year earlier. The total number of lodgers in hotels within Shizuoka also
increased by 3.5 times.

Establishing hotel targeting
foreign tourists

InfrastructureOsakaoriented

Freeplus Inc opened a hotel in Osaka targeting foreign tourists. The number of single rooms issmaller than that in a conventional hotel in order to respond to demand by these tourists.

Investing in production
increase responding to
demand by foreign tourists

Responding to
inboundHyogo
demandLion Corporation invests in its factory in Akashi for the first time in 10 years, which is the only
one domestic plant for this company, to increase production. This company's tooth brushes are
popular among foreign tourists.

Strengthening supply chains
Responding toand responding to demand byGunma
inbound
Saitamaforeign tourists by developing
demanddomestic production sites

Kose, a cosmetic company, expands the scale of production in its two domestic factories,
including its group companies. It aims at strengthening its supply chains and responds to demandby foreign tourists by flexibly taking advantage of each production site.

Aiming at synergetic effectthrough accepting foreign
tourists and expand businessoverseas

Developing
Yuasa Soy Sauce Ltd have been visited by around 2000 to 3000 foreign tourists per year mainlyand exporting Wakayama from Singapore, Malaysia, Thailand, and Hong Kong, in addition, from Europe and America. It is
specialties
now exporting soy sauce and "kinzanji-miso" after increasing awareness of its brand.

Providing special beef assouvenirDeveloping
and exporting Gifu
specialties

Yamatake-ya; which manages production, wholesale and retail business, and a restaurant for
local special beef, hida-gyu; is selling the beef as souvenir geared toward foreign tourists in linewith lifting a ban by Singapore allowing to bring back beef into the country as a souvenir.

Considering expanding
Developing
business overseas by increase and exporting Osakaof foreign customers
specialties"Tabio", a socks company, is now considering expanding business through export or opening
stores in Asia. Its store located in Harajuku has been visited by foreign tourists accounting forover 90% of all customers. These foreign tourists have strongly requested this company to do so.

Creating local
Naganobrand

Public and private sectors have been jointly promoting the ski industry of Hakuba area overseas.
Local companies have successfully increase the brand value of Hakuba by proactively
collaborating with the neighbouring areas. Foreigners were recruited as instructors or staff
members through the working holiday program.

Inviting foreign skier

Promoting export and inbound Creating local
Sagasales of traditional porcelain brandShin'emon Inc, an Aritayaki Porcelain pottery, has been exporting its products to the Asianmarket and promoting its sales geared toward inbound tourists since 2011. Many sightseeing
buses have brought many Chinese tourists to this pottery. The export toward the Asian market
has also steadily increased.

Source: Each company's website, media, field interview

Copyright (C) 2016 JETRO. All rights reserved.

Figure III-33: Advanced initiatives by public institutions such as governments
Theme

Regions

Overview

After the declaration as an international tourism city in 1986, initiatives to attract inbound tourists to Japan will be
Advanced implementation of Takayama City, Gifu implemented continuously. While gradually expanding the promotion destinations from Europe and the US toinbound tourism initiatives
Prefecture
Taiwan, Thailand, and other areas, initiatives have also been put in place from an early stage to develop awelcoming environment, such as through multilingual signs, etc., and to establish the Takayama brand.
Santiago de Compostela City in Spain and Tanabe City, which have the pilgrimage route of the Santiago deCompostela and the Kumano ancient path respectively, have cooperated on introducing a common pilgrimage
Collaboration with influential Tanabe City,"passport." As a result, there has been an increase in the number of tourists from Europe. The Kumano Tourism
foreign tourist spots overseas Wakayama Prefecture
Bureau in Tanabe City has recruited foreign staff, and is also taking steps to provide information in multiple
languages.
With the Kyushu Tourism Promotion Organization at the core of the initiatives, tourism promotion efforts areStrengthening of wide-areabeing put in place across a wide area. In addition to joint exhibitions in overseas trade fairs, various discountcollaboration triggered by the Kyushu region
tickets are also sold to meet the needs of inbound tourists to Japan. A number of trekking spots in the region are
opening of Shinkansen lines
also introduced as part of the Kyushu OLLE.
Promotion activities for inbound tourism are promoted in cooperation with nine prefectures in the Chubu Hokuriku
Shoryudo Project
Chubu Hokuriku region region (Aichi, Gifu, Shizuoka, Mie, Ishikawa, Toyama, Fukui, Nagano, Shiga). Multiple tourism routes areproposed corresponding to themes.
Saga Prefecture and JETRO Saga are promoting business creation through exchanges with stakeholders in the
Design tourism
design sector in cooperation with Singapore. This has brought about the acceptance of tourism training students
Saga Prefecture(industrial tourism)at the National University of Singapore, export of prefectural products (Japanese tea) using uniquely designed tea
caddies exported to Singapore, etc.
In Pittsburgh City, which has put in place initiatives for industrial structural reform from before in tandem with the
Examples of urban
decline of the steel industry, efforts are put into the promotion of the tourism industry aimed at revitalizing therevitalization using promotion Pittsburgh City (US)local economy. This has enhanced the presence of the city as a tourism city, such as its high rating in the 2016of the tourism industry
tourism area ranking in the professional magazine, Travel+Leisure.
Establishment of models that
Brittany district
benefit tourism revenue for(France)the whole region

Through efforts such as providing route information corresponding to the seasons and modernization of services,a strategy has been adopted to raise awareness about tourism promotion across a wide area, and a model
established to benefit the entire region.

"Cittaslow" (Slow City in English) is a movement that began in 1999, the Cittaslow Organization is managed by
local governments with the focus on slow life, healthy lifestyles, tradition, and quality food. The number of tourists
visiting local governments for the Cittaslow event in the summer of 2014 was approximately 3.4 million, and isestimated to reach about 4 million people in the summer of 2015.
Vancouver City succeeded in stimulating demand for restaurants and hotels during the off-peak seasons, by
Promotion of inbound tourism Vancouver City
providing meals at low prices, such as at well reputed restaurants in the local area. The same event, which was
during off-peak periods(Canada)launched after a proposal by tourism industry organizations, saw close to 300 restaurants participate in 2016, andwelcomed 100,000 visitors from Canada and overseas during the 17-day event period.
Source: Websites of the respective companies, reports, interviews, etc.

"Cittaslow" (Slow City)
initiatives

Italy

56

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Increase in direct investment into the tourism sector■ Rapid increase in the number of cases of support and success after 2014
Looking at the trends for the number of foreign corporations in the tourism
sector that JETRO has provided inward FDI support for after 1997, we see thestart of a gradual increase from the early half of the 2000s, and the number ofcases of support and success also increased significantly after 2014. Direct
investment into the tourism sector is expected to bring about an increase in thenumber of inbound tourists and creation of employment, as well as contributein aspects such as building up management knowhow.
■ Transportation sector such as airline companies, as well as travelcompanies, are prominent
Looking at the respective sectors, the transportation industry that encompasses
airline companies and ferry companies, as well as travel companies that
handle domestic itineraries, have made aggressive forays into the market.
Looking at the regions of their business expansion, urban areas such as Tokyo
and Osaka make up more than half. However, there are also cases of businessexpansion targeted at inbound tourists who wish to visit the local regions.
Repeat visitors with a high frequency of visiting local regions make up
approximately 60% of all inbound tourists, and investment in the localities is
expected to continue increasing going forward.

Figure III-34: Cases of FDI into Japan in tourism
Areas

Company nameNationality

Figure III-35: Trends of JETRO’s support projects in tourism(Successful start ups)

(project)
40

12
案件数
Projects

35
10
30
8
25

20

4
10
2
5
0

0

(year)

Source: Data from JETRO
Business

Travelex JapanUK

Operating foreign exchange business

Nationwide

Laox

China

Operating large-scale duty-free shops

Hokkaido

Fuson Group

China

Making hotel reservations

Tokyo

TripAdvisor

US

Providing information on trip

Yamanashi

N/A

China

Re-establishing a hot-spring inn

NaganoHakuba Hotel Group

Australia

Possessing and managing hotels in Hakuba area

Aichi

Spring Airlines

China

Opening a hotel geared toward foreign tourists

Osaka

USJ

US

Managing an entertainment park

South Korea
South Korea

Operating regular cargo-passenger ships
Setting up new sites in line with its international flights

Copyright (C) 2016 JETRO. All rights reserved.

615

Nationwide

Tottori
DBS Cruise Ferry
Oita, Fukuoka, and others
T'way Airlines
Source: Each company's website, media, field interview

成功案件（右軸）
Successful start ups (right axis)

Contribution to local economy
Accumulating management knowledge, and creating jobs
Increasing foreign tourists, accumulating management
knowledge, and creating jobs
Increasing foreign tourists
Accumulating management knowledge, and increasing foreign
tourists
Increasing foreign tourists
Increasing foreign tourists, accumulating management
knowledge
Increasing foreign tourists
Accumulating management knowledge, creating jobs, andincreasing foreign tourists
Increasing foreign tourists
Increasing foreign tourists

57

Chapter 3 Section 2: Revitalization of regional economies through inbound tourism

Exports of agricultural, forestry and fishery products and food products reachhistorical high of 745.1 billion yen■ Export value reach new historical high
The amount of exports for agricultural, forestry and fishery products and foodproducts from Japan in 2015 increased for the third year running by 21.8%
year-on-year to 745.1 billion yen, setting a new record high. The interim goal ofreaching 700 billion yen by 2016, set forth in the government’s export strategy,
ass achieved one year ahead of schedule.
■ Exports of apples, beef, whisky, and green tea exceed the 10 billion yen
mark for the first time
Among key export items and among agricultural products that make up 60% of
the total exports, the amount of exports for apples, beef, whisky, and green tea
exceeded 10 billion yen for the first time. Apple exports registered the greatest
growth among fruit and vegetables with a 55.0% increase year-on-year. Whisky
exports grew significantly mainly on the back of exports to US, France, andNetherlands. Beef and green tea exports also registered growth of about 30%
respectively.
■ Taking local tastes to the world
JETRO launched the “One Prefecture, One Product Program” in July 2013
across all prefectures with the aim of uncovering export projects across all partsof Japan and transforming them into pioneering models for other regions tofollow. To date, it has implemented a total of 53 projects. The amount ofexports contracted through the utilization of the program has reachedapproximately 2.25 billion yen cumulatively over three years. In FY2016, theitems will be changed for 15 of the projects, and efforts will continue to bepoured into uncovering new export items.
■ Active utilization of the GI protection scheme to achieve differentiation
The Geographical Indications Act was enforced on 1 June 2015, and initiatives
were launched to protect the intellectual property rights for product names thatare connected to the production region through characteristics such as quality
and reputation in society. Through the indication of specialty products as
authentic Japanese products, which contributes to the differentiation ofJapanese food products, these initiatives are also expected to contribute tobusinesses’ efforts to expand overseas.

Copyright (C) 2016 JETRO. All rights reserved.

Figure III-36: Export value of Japan’s agricultural,(%)
forestry, fishery and food products(¥100 m)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

2011

2012

2013

2014

2015

(Year)

Agricultural products

Forestry products

Fishery productsComparison to previous year (right axis)

Note: Includes alcoholic beverages, tobacco products and pearls
Source: "Overview of Foreign Trade of Agricultural, Forestry and Fishery Products" (MAFF)

Figure III-37: Top 20 export categories of agricultural,
forestry, fishery and food products (value basis)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

(Unit: M illion yen, %)2015
Value Growth rate
59,07932.3
39,02933.0
31,90530.0
26,423
14.9
23,58821.2
19,73823.8
17,89655.4
17,702
19.8
15,13918.1
13,84038.2
13,776-12.7
13,39355.0
11,005
34.6
10,306-0.7
10,106
29.6
9,416
36.6
8,997
-22.5
8,252
15.2
8,168
17.3
7,855
5.5

Scallops (fresh, refrigerated, frozen, salt-cured, dried)
Alcoholic beverages
Pearls (natural, cultivated)
Sauces and seasonings
Tobacco productsSoft drinks
M ackerel (fresh, refrigerated, frozen)
Confectionaries (not including rice-based)
Seeds for planting
Yellowtail (fresh, refrigerated, frozen)
Types of bonito, tuna (fresh, refrigerated, frozen)
Apples
Beef
Dried sea cucumber
Green tea
Logs
Pig skin (rawhide)
Livestock feed
Fish cake products (fish sausage, etc.)
Flour

2014
Value
44,66529,351
24,54422,98819,456
15,937
11,513
14,777
12,823
10,012
15,782
8,642
8,173
10,383
7,799
6,894
11,609
7,164
6,961
7,446

Total of top ten products (A)Total of agricultural, forestry,fishery and food products (B)A/B (%)

206,066 264,338
611,706 745,100
33.7
35.5

Category

Source: "Overview of Foreign Trade of Agricultural, Forestry and Fishery Products"(M inistry of Agriculture, Forestry and Fisheries)

28.3
21.8

58

Chapter 3 section 2: Revitalization of regional economies through inbound tourism

Government and JETRO initiatives on the TPP and export promotion■ Expectations for improved market access through the TPP
As a result of the TPP negotiations, Japan has succeeded in reaching anagreement on tariffs elimination with other TPP member countries on allof Japan’s priority export products in agricultural, forestry, fishery andfood products. In exports to the US and Vietnam, which posts a high tradevalue within the TPP region, tariffs on priority export products, such as
rice, Japanese sake, beef and fishery products are expected to be removed
immediately or gradually, which will facilitate greater market access.
■ Strengthening of export support system based on the government’s
strategy to strengthen export capability
In May 2016, the government approved the strategy to strengthen export
capability for agricultural, forestry and fishery products. In light of this,
JETRO established the Taskforce for Agriculture, Forestry, Fishery andFood Export Strategy to further strengthen its export support system.
Figure III-38: Schedule of TPP tariff elimination of Japan’s priority
agricultural and food product exports
US
Item
Rice (milled)

Base rate
1.4 cents/kg

Rice
0 - 4.5%
confectionaries
Sake
3 cents/liter

Tariff elimination schedule
Eliminated in five annual stages

Item
Sake

Yams
Cut flowers

6.4%
3.2% - 6.8%

Miso

6.4%

Soy sauce

3%

Eliminated in five annual stages

Chocolate

2% - （52.8 cents/kg +
8.5%）

26.4%
TRQ (200 tons, 4.4
cents/kg)

Region/category
Hokkaido

Beef (dairy cattles,
wagy u)

Kelp
Fruit and vegetables,
rice, livestock

AomoriApplesRegion/category

Region/category

Yamanashi Fruit (mainly
peaches, grapes),
processed fruit
products
NaganoFruit (apples, grapes,
etc.)
Toy amaFishery products,
processed fisheryproducts (outside ofy ellowtail)Rice, processed rice
Ishikawa

Okay ama Fruit, processed fruit
products

Yellowtail,mackerel, pike

Base rate (FTA tariff rate)

Iwate

Fisher products, processed fishery

40% (JV: 22.5%; AJ:
20%)

20%
30% (JV: 16%; AJ:
23%)
13-25%(JV: 11- 20%; AJ: 1018%)
18%

Eliminated in five annual stages
Eliminated in six annual stages

hassaku oranges),
processed citrus
products

Gifu

Mino Shirakawa tea

KagawaOlive beef

Miy agi

Fisher products, processed fishery

Shizuoka

Tea

Ehime

LumberAgricultural and processed

Kochi

Tosa lumber

products from Sanriku region

Akita

Agricultural,
Aichi
processed goods, etc.

agricultural products centered on
Higashi-Mikawa region

Yamagata Apples, pears

Mie

Fukushima Fruit such as
persimmon
NiigataOrnamental plants

Fukui

Fishery products such Fukuoka
as cultivated
y ellowtail
Plums from Wakasa Saga

Hy ogoTamba black beans

Nagasaki

Gunma

Konjac goods

Shiga

Beef (Oumi beef)

Oita

Tochigi

Fruit (strawberries,
Japanese pears,
grapes)Fruit

Osaka/
KansaiVegetables, fruit, fishery products,

Miy azaki

Ky otoKy otanabe refined
green tea

Toky oToyosu (wholesale)fishery products,
processed fisheryproducts

Wakay ama Fruit such as/ Narapersimmon

Chiba

Japanese pears, sweet Tottori
potatoes, etc.

Saitama

Bonsai

Ibarakiperishables such as fisheryproducts

Kagoshima

Eliminated in five to seven annual
stagesDuty-free on the date of entry intoforce
Duty-free on the date of entry into
force

Fishery products,
processed fisheryproducts

Tokushima Citrus fruit (yuzu,

Eliminated in four annual stages

Duty-free on the date of entry into Salmon
15% (JV: 11%; AJ:
force - eliminated in 20 annual
15%)
stagesNote: 1) The base rates of duty reflect MFN rates of duty in effect on January 1, 2010. 2) Tariff rates within parentheses are FTA tariff rates as of April 1,
2015. "JV" stands for the Japan-Vietnam FTA, "AJ" for the ASEAN-Japan FTA.
Source: Text of TPP, MAFF, "World Tariff" (Fedex)

Copyright (C) 2016 JETRO. All rights reserved.

Yamaguchi

products from Sanriku region

Tariff elimination schedule

59% (JV: 24%; AJ:
Eliminated in three annual stages
33%)
15-31% (JV: 11%; AJ: Eliminated in three annual stages
10%)
15% (JV: 7%: AJ: 10%) Eliminated in three annual stages

Hiroshima Sake

products (including
types of alcohol)

VietnamDuty-free on the date of entry into Beef
force
Duty-free on the date of entry into Apples
force
Eliminated in 15 annual stages
Tea(Country-Specific TRQ: 3000 tons
[year 1]
→6,250 tons [year 14], free ofduty）
Eliminated in five annual stages
Miso
Duty-free on the date of entry into Soy sauce
force
Eliminated in five annual stages
Chocolate

Beef

Figure III-39: "One Prefecture, One Product Initiative" future activities

ShimaneJapanese pears,
watermelons, Fuy u
persimmon
Shimane peony

Okinawa

Ornamental plants

Tea (such as Ureshino
tea)
Dried shiitake
Dried shiitake,processed goods
Authentic Miy azaki
shochuFermented foodproducts (miso,
vinegar, black tea,etc.)
Mozuku seaweed

Source: Made by JETRO

59