2015 JETRO Global Trade and Investment Report
New efforts aimed at developing global business

Overview

August 7, 2015

Overseas Research Department, JETRO

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■ Moderate pace of recovery in both advanced and emerging/developing economies
The global economy has been moderately recovering, both in the advanced and emerging/developing economies. According to the projections madeby the IMF in July 2015, the world’s real GDP growth in 2014 was 3.4%, and since 2012 for 3 years consecutively, it has remained at the 3% level.
Even for 2015, the growth is mostly expected to remain at a similar 3.3% level. The effect of the increase in US interest rates expected later in the year
on emerging and developing economies, the trends in the European economy such as the debt problem of Greece and deflationary concerns, andstagnation in China’s economic growth, are some of the risks that will continue in the future.

Figure I-1: Trends in GDP growth rate/contribution ratio by country/region
2013

2014

(%)
2015 (forecast)2016 (forecast)

Percent change Contribution ratio Percent change Contribution ratio Percent change Contribution ratio Percent change Contribution ratio
World
3.4
100.0
3.4
100.0
3.3
100.0
3.8
100.0
Advanced economies
1.4
18.4
1.8
23.2
2.1
27.4
2.4
26.9
United States
2.2
10.7
2.4
11.5
2.5
12.2
3.0
12.6
EU
0.1
0.6
1.4
7.2
1.8
9.6
1.9
8.7
Germany
0.2
0.2
1.6
1.7
1.6
1.7
1.7
1.5
United Kingdom
1.7
1.2
2.9
2.0
2.4
1.7
2.2
1.4
France
0.7
0.5
0.2
0.1
1.2
0.9
1.5
0.9
Italy
- 1.7
- 1.1
- 0.4
- 0.2
0.7
0.4
1.2
0.6
Spain
- 1.2
- 0.5
1.4
0.6
3.1
1.4
2.5
1.0
Japan
1.6
2.2
- 0.1
- 0.1
0.8
1.1
1.2
1.4
Emerging and developing economies
5.0
81.4
4.6
76.1
4.2
72.4
4.7
71.0
United States
7.0
56.9
6.8
57.2
6.6
59.0
6.4
51.3
China
7.7
34.2
7.4
34.2
6.8
33.6
6.3
28.0
India
6.9
12.9
7.3
14.1
7.5
15.5
7.5
14.0
ASEAN 5
5.1
7.6
4.6
7.0
4.7
7.4
5.1
7.1
Latin America
2.9
7.6
1.3
3.4
0.5
1.3
1.7
3.8
Brazil
2.7
2.5
0.1
0.1
- 1.5
- 1.4
0.7
0.5
Mexico
1.4
0.8
2.1
1.2
2.4
1.4
3.0
1.6
Emerging and developing Europe
2.9
2.8
2.8
2.7
2.9
2.9
2.9
2.5
Turkey
4.1
1.7
2.9
1.2
3.1
1.3
3.6
1.3
Russia/Commonwealth of Independent States
2.2
3.1
1.0
1.4
- 2.2
- 3.1
1.2
1.4
Russia
1.3
1.3
0.6
0.6
- 3.4
- 3.4
0.2
0.2
Middle East and North Africa
2.4
5.5
2.7
6.1
2.6
6.0
3.8
7.6
Sub-Saharan Africa
5.2
4.6
5.0
4.5
4.4
4.1
5.1
4.2
South Africa
2.2
0.4
1.5
0.3
2.0
0.4
2.1
0.4
Notes: 1) The definitions of advanced/emerging and developing countries follow the World Economic Outlook (IMF). The EU has both advanced and developing/emerging economies. ASEAN 5
refers to Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. The Middle East and North Africa includes Afghanistan and Pakistan.
2) The percent changes and contribution ratios of the EU and Turkey are based on the figures released in April.
3) The contribution rate is calculated using the weighted PPP (purchasing power parity) of 2014 released in April.
Source: "WEO, April/July 2015" (IMF).

Copyright (C) 2015 JETRO. All rights reserved.

3

Chapter 1 Section 1: World Economy and Issues It Faces

Middle East, Africa, and Central and South America highly dependent on the export of resources
Figure I-2: Resource price changes(Index)■ Continuous downward trend in resource prices

250.0

The downward trend continues in the prices of natural resources such as crude oil,coal, and metals. The price of crude oil has greatly declined since September 2014.
In the first half of 2015, the WTI crude oil price fell to the $40 to $45 level, and in
July 2015 is hovering at the $40 to $50 level.

150.0■ Parts of Middle East, Africa, and Latin America are highly dependent on
the export of resources

100.0

200.0

In the GDP of some countries of the Middle East, Africa, and Latin America, theratio of export of resources comprises a large percentage of GDP. In thesecountries, the decline in resource prices is the main cause behind the economic
slowdowns. On the other hand, many of the advanced economies and Asian
countries are net importers, and it is expected that the tide will turn in the favor ofgiving a boost to their economies.
Figure I-3: The ratio of export of energy & mineral/GDP of key exporting countries

50.0

2007

2008

2009

Metals

2010

2011

2012

Coal (Australia)

2013

Natural gas (Russia)

2014

2015

Crude oil (WTI, BK Brent, Dubai average)

Note: 2010 = 100.
Source: "IFS May 2015" (IMF)

Figure I-4: The ratio of import of energy & mineral/GDP of key importing countries(%)(%)
Net Exporter

Year

Total
Crude oil

Advanced economies

Gas

Norway
2014
16.5
8.6
7.9
Australia
2014
8.0
- 0.6
1.2
Canada
2014
4.8
3.7
0.6
Middle East
Oman
2014
51.1
44.8
6.8
Africa
Qatar
2014
51.0
10.2
41.0
Kuwait
2013
47.1
45.0
2.1
Saudi Arabia
2013
40.4
39.5
1.1
Algeria
2014
22.6
11.4
11.2
Nigeria
2013
14.7
14.4
0.4
Russia/Commonwealth Kazakhstan
2014
27.8
25.2
1.4
of Independent States
Azerbaijan
2014
25.3
24.8
0.4
United States
2013
12.5
8.3
3.6
Latin America
Venezuela
2013
34.4
34.3
- 0.0
Bolivia
2014
24.9
1.7
17.5
Ecuador
2014
12.4
12.9
- 0.7
Colombia
2013
9.1
7.3
0.1
Peru
2013
5.0
- 1.4
0.8
Chile
2014
3.9
- 2.3
- 0.7
Mexico
2014
2.5
2.8
- 0.6
Brazil
2014
0.7
0.0
- 0.4
Asia
Brunei
2014
64.4
29.0
35.4
Mongolia
2014
39.1
5.3
- 0.2
Malaysia
2013
6.3
1.0
6.0
Indonesia
2013
4.4
- 0.4
1.6
Notes: The HS code of crude oil is 2709, natural gas is HS2711, coal is HS2701, and minerals are HS26.
Sources: UN Comtrade, WEO

Coal

- 0.0
2.4
0.2
- 0.0
- 0.0
- 0.0
- 0.0
- 0.0
- 0.0
0.3
- 0.0
0.5
0.0
- 0.0
- 0.0
1.7
- 0.0
- 0.3
- 0.1
- 0.1
- 0.0
7.1
- 0.6
2.5

Minerals

- 0.0
5.0
0.3
- 0.4
- 0.2
- 0.0
- 0.2
- 0.0
0.0
1.0
0.0
0.1
0.1
5.8
0.2
- 0.0
5.7
7.4
0.3
1.2
- 0.0
26.9
- 0.1
0.7

GDP
($100
Million)

5,002
14,442
17,887
778
2,100
1,758
7,443
2,141
5,218
2,123
741
20,791
2,184
344
1,008
3,784
2,024
2,580
12,82723,530
151
120
3,132
9,125

Net Importer

Year

Total
Crude oil

Advanced economies

East Europe

Asia

Middle East
AfricaGas

Coal

Minerals

GDP($100
Million)South Korea

2013- 12.6

- 7.6

- 2.8

- 1.0

- 1.3

Greece

2014

- 6.7

- 6.3

- 0.5

- 0.0

0.0

2,380

Japan

2014

- 5.7

- 2.8

- 1.8

- 0.4

- 0.7

46,163Finland

2014

- 4.6

- 3.1

- 0.5

- 0.2

- 0.8

2,712

Portugal

2014

- 4.4

- 3.5

- 1.0

- 0.1

0.2

2,300

Spain

2014

- 4.1

- 3.0

- 0.8

- 0.1

- 0.2

14,069Germany

2014

- 2.9

- 1.7

- 0.8

- 0.1

- 0.3

38,595

France

2014

- 2.1

- 1.4

- 0.6

- 0.1

- 0.1

28,469

United States

2014

- 1.3

- 1.4

0.0

0.0

0.0

174,189

United Kingdom

2014

- 0.6

- 0.2

- 0.1

- 0.1

- 0.1

29,451

Bulgaria

2014- 11.0

- 6.3

- 2.2

- 0.3

- 2.1

558

United States

2014

- 6.0

- 3.1

- 2.6

- 0.1

- 0.1

1,371

Poland

2014

- 3.6

- 3.1

- 0.2

- 0.0

- 0.2

5,466

Thailand2014- 11.0

- 8.8

- 1.8

- 0.4

- 0.0

3,738

India

2014

- 8.6

- 6.6

- 0.8

- 0.8

- 0.3

20,495

China

2014

- 3.9

- 2.2

- 0.3

- 0.2

- 1.3

103,804

Pakistan

2014

- 2.3

- 2.2

- 0.0

- 0.2

0.0

2,501

Sri Lanka

2014

- 2.2

- 1.8

- 0.3

- 0.2

0.0

746

Philippines

2014

- 1.3

- 1.9

- 0.2

- 0.1

0.9

2,849

Jordan

2014

- 7.5

- 6.5

- 0.8

- 0.2

0.0

358

Turkey

2014

n.a.

n.a.

- 0.3

- 0.1

0.0

8,061

South Africa

2014

- 0.0

- 4.6

- 0.1

1.4

3.3

3,501

Notes: The crude oil trade balance of Turkey is not mentioned because of statistical constraints. The HS code of crude oil is 2709, natural gas is
HS2711, coal is HS2701, and minerals are HS26.
Sources: UN Comtrade, WEO

13,045

4

Copyright (C) 2015 JETRO. All rights reserved.

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

Risk tolerance indicators of emerging/developing economies■ Risk tolerance uneven among emerging/developing economies
With improvements in the employment and income environment, the US is now at a stage where it is looking into increasing interest rates. In May 2015, FRB Chair
Yellen stated it will be appropriate at some point this year to take the initial step to raise the federal funds rate target if the economy continues to improve. The
degree of tolerance of emerging/developing economies against the expected increase in the US interest rates is an issue. There are also countries that need to becareful because of the increasing size of their current account deficits, with the ratio of foreign exchange reserves that are small compared to their short-term
foreign debt balances. But in general, emerging/developing economies are building foreign exchange reserves, and they are boosting their risk tolerance.

Figure I-5: Risk tolerances of emerging/developing economies

1995

Asia
(Emerging economies)

Latin America

Central and Eastern Europe

RussiaCommonwealth of Independent
StatesCentralAsia and North Africa
Middle East

Sub-Saharan Africa

China
Indonesia
Thailand
Malaysia
Philippines
Vietnam
India
Pakistan
Bangladesh
BrazilUnited States
Argentina
Colombia
Peru
PolandRomania
Hungary
RussiaKazakhstan
UkraineTurkeySaudi Arabia
Egypt
MoroccoNigeriaSouth Africa
Kenya

2005

0.2
- 2.8
- 8.1
- 9.7
- 2.4
- 12.7
- 1.6
- 2.7
- 2.0
- 2.3
- 0.5
- 1.7
- 4.2
- 8.9
0.6
- 4.4
- 3.5
2.2
- 1.3
- 3.0
- 2.4
- 3.7
0.6
- 3.2
- 2.4
- 1.6
- 3.8

2014

5.8
0.5
- 4.3
14.4
1.9
- 1.0
- 1.2
- 1.3
0.0
1.6
- 1.0
2.0
- 1.4
1.5
- 2.6
- 8.6
- 7.1
11.1
- 1.8
2.8
- 4.4
27.4
3.3
1.8
22.2
- 3.1
- 1.2

Foreign exchange reserves ÷Short term external debt balance(multiple)

Foreign exchange reserves ÷Monthly average import value(multiple)

Current account/GDP (%)
1995

2.0
- 3.0
3.8
4.6
4.4
5.4
- 1.4
- 1.2
- 0.1
- 3.9
- 2.1
- 0.9
- 5.0
- 4.1
- 1.2
- 0.5
4.2
3.1
1.6
- 4.0
- 5.7
14.1
- 0.8
- 5.8
2.2
- 5.4
- 9.2

2005

6.9
4.1
6.1
3.7
2.8
n.a.
6.4
1.9
4.3
11.1
2.7
8.7
7.2
10.7
6.1
2.0
9.3
2.6
3.8
0.8
4.2
3.8
16.7
4.4
2.2
1.2
1.4

2014

14.9
5.3
5.2
7.3
4.1
3.0
11.1
4.8
2.6
8.2
3.8
11.4
8.4
11.3
4.9
5.9
3.4
15.4
4.1
6.3
5.2
31.3
12.6
9.4
15.9
3.6
3.5

23.6
7.3
8.0
6.6
12.9
2.8
7.9
3.1
6.3 (2013)
18.2
5.7
5.4
8.7
17.2
5.2
6.1
4.8
12.1
5.1 (2013)
1.5
5.3
53.7
2.4
4.9 (2013)12.2 (2013)
5.3
4.8 (2013)

1995

2005

3.3
0.5
0.8
3.0
1.6
1.7
2.4
0.6
13.3
1.6
0.6
0.7
1.4
1.9
7.4
1.4
3.8
0.7
5.3
5.5
1.4
1.5
6.6
1.7
1.3
0.3
0.6

2014

13.4
1.9
4.6
4.5
1.6
4.3
4.2
10.1
3.2
2.0
3.4
3.9
3.8
1.8
2.6
1.9
1.3
3.9
1.2
4.4
1.4
11.3
3.6
10.3
14.8
2.5
3.5

Notes: Foreign exchange reserves include gold (the figure for Vietnam does not include gold due to statistical constraints). Part of the data of 2014 for foreign currency reserves/monthly average import value is of 2013.
Sources: "WEO April 2015" (IMF), "Key Indicators" (ADB), "International Credit Balance Statistics" (BIS), "IFS June 2015" (IMF)

Copyright (C) 2015 JETRO. All rights reserved.

4.9
1.9
7.9
3.1
6.5
2.3
2.7
5.3
3.7
3.2
3.7
3.4
4.1
2.8
3.0
2.4
3.0
7.1
4.6
1.5
1.2
15.3
1.9
6.4
3.8
2.8
3.5

5

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

Weak world trade growth■ World trade rose only slightly in 2014

World trade (merchandise trade, nominal exports basis) in 2014 slightly rose by 0.8% from the previous year, amounting to $18.7 trillion (JETRO
estimate). Actual exports (volume basis) which does not include the effect of price changes, grew by only 2.5%. World trade growth has slowed since2012. According to forecasts by WTO, world trade in 2015 is expected to increase by 3.3% (in real terms), and increase by 4.0% in 2016. This
slowdown is expected to continue.
■ Dramatic fall in resource prices since the second half of 2014
Export prices in 2014 declined by 1.7% from the previous year, and consequently reduced exports. The huge drop in export prices was largely due tochanges in resource prices. Particularly, there was a significant drop in energy prices since the second half of 2014. Prices of crude oil, iron ore andcoal fell drastically by 7.5%, 49.2% and 17.1% respectively.

Figure I-6: World trade related indicators

Figure I-7: Trends in world trade (exports basis)(Unit: US$ 100 million, %)

2010

2011

2012

2013

2014

151,249

180,524

180,993

185,896

187,461

21.7

19.4

0.3

2.7

0.8

Real growth rate

16.8

8.3

2.4

3.0

2.5

Price growth rate

4.9

11.1

-2.1

-0.3

-1.7

Material growth rate (export basis)

35.4

29.2

-0.4

-1.4

-6.3

E
Intermediate good growth rate (export basis)c
B
Processed goodsornParts and accessoriesooa Finished goods growth rate (export basis)mdiCapital goods
c

24.7

19.8

-0.4

3.5

0.3

25.9

24.7

-0.7

3.0

-0.8

22.5

11.2

0.1

4.5

2.4

15.9

14.1

1.1

3.4

3.9

19.1

14.4

1.2

1.0

2.0

13.6

13.8

1.1

5.3

5.3

World real GDP growth rate

5.4

4.2

3.4

3.4

3.4

Industrial production index growth rate (developed countries)

7.8

2.1

0.6

0.6

2.3

Crude oil

79.0

104.0

105.0

104.1

96.2

World merchandise trade (export basis)
Nominal growth rate

(

C
a
t
e
B
g
E
o
C
r
i
e
s

)

Natural gas

Consumer goods

Crude price (US$/barrel)
Natural gas price (US$/1 million BTU)

8.2
10.6
12.0
11.2
10.5
Change ratio of dollar’s nominal effective exchange rate
-2.5
-5.7
3.8
2.2
2.5
Note: 1) Trade values in 2013 and 2014 and nominal growth rate in 2014 are estimated by JETRO.
2) Real growth rate = nominal growth rate – price growth rate.
3) Real GDP growth rate is purchase power parity (PPP) basis. Data during 2010 and 2012 was announced in
April. Data during 2013 and 2014 was revised in July.
4) The classifications of advanced and emerging/developing countries follow those of the IFS.
5) The definitions of materials, intermediate goods and finished goods are based on the HS2007 version of BEC(the United Nations) and RIETITID2013 (the Research Institute of Economy, Trade and Industry).
6) Crude oil prices are the average of Dubai, Brent and WTI.
7) Natural gas prices are Russian market prices.
8) Negative figures of change of ratio of nominal effective exchange rate indicate depreciation.
Source: “IFS, May 2015” (IMF), “WEO, April 2015” (IMF), “WEO, July 2015” (IMF), data from the WTO andthe British Petroleum, Trade statistics of respective country and region

Copyright (C) 2015 JETRO. All rights reserved.

6

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

Slowdown in world trade due to weak world economy and intermediate goods and capital goods transactions■ Slowdown in world demand
The growth rate of the world economy since 2012 is at the 3% level, and the slowdown in the global demand is affecting trade. China’s import
growth rate has slowed, with a 4.4% increase in 2012, 7.3% increase in 2013, and 0.7% increase in 2014. The value of China’s imports in the firstquarter of 2015 also declined, by 21.4% from the same period of the previous year to $372.9 billion, due to the fall in prices of natural resources.
There were huge falls in the imports of resources such as mineral fuels (down 39.5%) and iron ore (down 44.3%). On the other hand, with theeconomic recovery, US imports recovered from a decrease of 0.3% in 2013 to an increase of 3.5% in 2014. However, the imports of the US in thefirst quarter of 2015 also fell, by 2.0% to $538.8 billion, due to the fall in imports of mineral fuels.
■ Slowdown in intermediate goods/capital goods transactions
Looking at trade trends by product type in recent years, growth of consumer goods (an increase of 5.3% in 2014) was strong while on the other hand,
the growth rate of intermediate goods (an increase of 0.3% in 2014) and capital goods (an increase of 2.0% in 2014) was slow. It is possible that the
expansion of local procurement and production caused a slowdown in imports of intermediate goods and capital goods. Also looking at the growthrate of the value of imports of China (which is a key importing country) by product type, growth of consumer goods (an increase of 15.0% in 2014)
was strong, while on the other hand, growth of import of materials (a decrease of 2.1% in 2014), processed goods (an increase of 4.9% in 2014) andparts (a decrease of 0.5% in 2014), and capital goods (an increase of 1.3% in 2014) were slow.
Figure I-8: Contribution rates of change to world import value
by country and region
（％）
25.0

US

China

EU15

Japan

ASEAN5

OthersFigure I-9: Growth rate of the value of China’s imports by product type
(%)

World

Share
2010

20.0

2014

2010

Percent change
2011
2012
2013

2014

15.0

Materials

25.3

27.4

52.8

39.9

4.4

3.5

-2.1

10.0

Processed
goods

25.6

24.4

29.8

20.3

-0.0

3.2

4.9

5.0
0.0

Parts

26.3

25.1

31.9

10.9

5.4

11.9

-0.5

17.1

14.8

34.4

15.8

-0.1

0.9

1.3

5.7

8.4

49.3

36.6

15.0

9.8

15.0

-5.0
-10.0

Contribution
2012 2013 2014
World（53countries）
0.1
1.3
0.5
US
0.4 -0.0
0.5
China
0.5
0.8
0.1
EU15
-1.9
0.1
0.5
Japan
0.2 -0.3 -0.1
ASEAN5
0.4 -0.0 -0.2

-15.0
-20.0
-25.0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Note:Figures are calculated based on data of 53 countries and regions that released import values.
Source:Trade statistics of respective country and region.

Copyright (C) 2015 JETRO. All rights reserved.

2013

2014
（year）

Capitalgoods
Consumergoods

Notes: Each share indicates the percentage of the total amount based on the BEC
classification. The total value of China's imports and the total value as per BEC
classification do not match.
Sources: Statistics from individual countries/regions

7

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

Trends by country in world trade■ US, Germany and China - driving world exports
The value of exports of advanced economies increased by 0.9%
from the previous year to $11.0202 trillion. The US saw
particularly large growth, with passenger cars and pharmaceuticals
leading its exports, as its value of exports increased by 2.7% fromthe previous year to $1.6205 trillion. Among destinations, exports
to NAFTA was a driving force. Crude oil to Canada and generalmachinery such as truck engines and machine parts to Mexico also
drove exports.
The value of EU exports increased only 1.4% to $6.1651 trillion,
mainly because of weakness in export to non-EU areas such as
Russia, where it banned imports from Europe and the US. Exports
in Germany, which is EU’s largest exporting country, increased by
3.8% to $1.5702 trillion, in a weak euro environment. Exports ofpassenger cars and pharmaceuticals were favorable.
The export value of emerging/developing economies increased byonly 0.8% to $7.7259 trillion. The value of China’s exports
increased by 6.0% to $2.3432 trillion, with mobile phones and steel
etc. leading it. Exports in Mexico (main growth in transport
equipment), Vietnam (main growth in mobile phones and sewn
products) and the Philippines (main growth in integrated circuits)
were strong.
■ Drastic fall in the export value of resource-rich countries
Resource-rich countries mainly pushed down world exports in2014. Due to the fall in natural resource prices, the value of exportsof Russia (5.4% decrease), Australia (5.0% decrease), and Brazil(7.1% decrease) fell drastically below that of the previous year.
Even for Thailand, which is ASEAN’s largest exporting country,
the value of exports increased by only 0.2%, because of the
weakness in automobiles which are its key product.

Figure I-10: Value of world trade by country/region (2014)(US$ million, %)Exports

2,493,532
1,620,532
475,343
397,658
6,165,079
1,507,216
671,901
582,408
528,639
513,556
471,615
324,684
177,962694,270
4,469,222
2,343,222
572,665
295,555
1,257,781
409,789234,251
225,464
176,292
150,186
61,798497,834
321,979
240,052
225,101
157,595
91,01318,746,149
11,020,222

Growth
rate
3.2
2.7
3.7
4.6
1.4
3.8
0.0
0.2
2.0
-6.2
0.6
2.2
1.6
-3.5
4.2
6.0
2.3
2.9
2.1
-0.1
2.5
0.2
-3.4
13.7
14.5
-5.4
2.2
-5.0
-7.1
3.6
6.6
0.8
0.9

7,725,928

0.8

Value
NAFTA
United States
CanadaMexicoEU-28
Germany
Netherlands
France
Italy
United Kingdom
Belgium
Spain
AustriaJapan
East Asia
China
South Korea
TaiwanASEAN 6Singapore
Malaysia
ThailandIndonesia
VietnamPhilippines
RussiaIndia
Australia
BrazilTurkeySouth Africa
World (estimate)
Advanced economies
Emerging and developing
economies

Imports

Share

Contribution

Value

13.3
8.6
2.5
2.1
32.9
8.0
3.6
3.1
2.8
2.7
2.5
1.7
0.9
3.7
23.8
12.5
3.1
1.6
6.7
2.2
1.2
1.2
0.9
0.8
0.3
2.7
1.7
1.3
1.2
0.8
0.5
100.0
58.8

0.4 3,210,855
0.2 2,347,685
0.1
463,192
0.1
399,977
0.4 6,070,453
0.3 1,215,915
0.0
587,7160.0
677,9740.1
471,968-0.2
689,782
0.0
452,749
0.0
358,4340.0
181,944-0.1
817,103
1.0 3,955,660
0.7 1,963,105
0.1
525,5150.0
272,783
0.1 1,194,257-0.0
366,268
0.0
208,9640.0
228,274-0.0
178,1790.1
148,049
0.0
64,524-0.2
286,6690.0
461,401-0.1
227,659-0.1
229,060
0.0
241,780
0.0
99,871
0.8 19,163,322
0.5 11,606,041

41.2

0.3

Growth
rate
3.2
3.5
0.3
4.9
1.9
2.0
-0.4
-0.5
-1.6
5.4
0.2
5.2
-0.8
-2.6
0.3
0.7
1.9
1.3
-1.3
-1.8
1.4
-8.6
-4.5
12.1
4.4
-9.1
-1.4
-1.9
-4.4
-4.0
-1.0
0.8
1.2

7,557,281

0.2

Share

Contribution

16.8
12.3
2.4
2.1
31.7
6.3
3.1
3.5
2.5
3.6
2.4
1.9
0.9
4.3
20.6
10.2
2.7
1.4
6.2
1.9
1.1
1.2
0.9
0.8
0.3
1.5
2.4
1.2
1.2
1.3
0.5
100.0
60.6

0.5
0.4
0.0
0.1
0.6
0.1
-0.0
-0.0
-0.0
0.2
0.0
0.1
-0.0
-0.1
0.1
0.1
0.1
0.0
-0.1
-0.0
0.0
-0.1
-0.0
0.1
0.0
-0.2
-0.0
-0.0
-0.1
-0.1
-0.0
0.8
0.7

39.4

0.1

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) Definitions for advanced economies and emerging and developing economies follow the Direction of Trade Statistics (IMF).
Sources: Statistics from individual countries/regions

Copyright (C) 2015 JETRO. All rights reserved.

8

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

Trends by product in world trade
Figure I-11: World trade by product (export basis) (2014)(US$ million, %)■ Steady rise in the export of machinery and equipment
The export value of general machinery in 2014 increased by 3.2%
from the previous year to $2.1389 trillion. Particularly, the export ofsemiconductor production equipment increased greatly by 11.0% to$46.9 billion, because of recovery in the silicon cycle. Exports fromcountries such as the US, Netherlands, South Korea, Japan, and soon, were driven. The export value of electric equipment increasedby 3.1% to $2.3661 trillion. IT related products such as mobile
phones led this product’s export. The export value of mobile phones
from countries such as China, the US and Vietnam rose by 7.8% to$243.3 billion. The export value of transport equipment increasedby 3.0% to $1.8806 trillion, driven by countries such as the US,
Germany, and Mexico.
■ Pharmaceuticals - Driving force behind chemical exports
The export value of chemicals in 2014 increased by 2.0% from theprevious year to $2.4269 trillion. The export value ofpharmaceuticals and medical supplies increased by 6.8% to $519.2
billion, pushing up exports. Products such as vaccines for humanuse and immune serums led the exports. Exports from European
countries such as Germany and Switzerland to the US wereexpanded.
■ Large drop in the export of resources (iron ore, precious
metals, coal, petroleum, etc.)
In 2014, lower natural resource prices caused the export value ofresources such as iron ore, precious metals, coal and petroleum tofall far below the previous year. The export value of iron ore
declined by 16.0% from the previous year; precious metals, coaland crude oil decreased by 31.4%, 13.1% and 6.8% respectively.

Value
Total
Machinery and equipment
General machinery
Mining and construction machines
Machine tools
Semiconductor manufacturing
equipment
Electrical equipment
IT equipment
Mobile phones
Electronic parts such as
semiconductors
Transport equipment
Automobiles
Passenger vehicles
Automobile parts
Precision equipment
Chemicals
Pharmaceuticals & medical supplies
Food
Other raw materials and products
Iron ore
Precious metals
Mineral fuels, etc.
Mineral fuels
Coal
LNG
Crude oil
Textiles and textile products
Base metals and base metal products
Steel
IT related products (Total)
Parts
Final products
Materials
Intermediate goods
Processed goods
Parts
Final goods
Capital goods
Consumer goods

Growthrate

Share

18,746,149
7,013,600
2,138,875
97,07738,896

0.8
3.0
3.2
-4.4
8.0

100.0
37.4
11.4
0.5
0.2

46,92011.0

0.3

2,366,070
516,476
243,269

3.1
5.6
7.8

12.6
2.8
1.3

620,0321.8

3.3

1,880,593
847,305
695,825
414,698
628,061
2,426,878
519,169
1,287,257
6,562,150
119,317
225,916
2,915,327
2,745,756
100,408
154,172
1,372,866
818,092
1,253,440
719,418
2,526,206
1,208,244
1,317,962
2,313,445
8,574,181
5,598,253
2,975,929
6,939,607
2,905,650
4,033,957

3.0
4.0
4.5
2.6
2.0
2.0
6.8
3.1
-2.8
-16.0
-31.4
-5.7
-5.6
-13.1
2.4
-6.8
3.9
3.2
3.9
3.1
2.4
3.6
-6.3
0.3
-0.8
2.4
3.9
2.0
5.3

10.0
4.5
3.7
2.2
3.4
12.9
2.8
6.9
35.0
0.6
1.2
15.6
14.6
0.5
0.8
7.3
4.4
6.7
3.8
13.5
6.4
7.0
12.3
45.7
29.9
15.9
37.0
15.5
21.5

Contribution

0.8
1.1
0.4
-0.0
0.0
0.0
0.4
0.1
0.1
0.1
0.3
0.2
0.2
0.1
0.1
0.3
0.2
0.2
-1.0
-0.1
-0.6
-0.9
-0.9
-0.1
0.0
-0.5
0.2
0.2
0.1
0.4
0.2
0.2
-0.8
0.1
-0.2
0.4
1.4
0.3
1.1

Notes: Total value for 2014 and total growth rate follow JETRO estimates.
Sources: Statistics from individual countries/regions.

Copyright (C) 2015 JETRO. All rights reserved.

9

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

Exports of IT related products solid■ The recovery of the silicon cycle has led to strong trade in IT
related products
The export value of IT related products in 2014 increased by 3.1% from theprevious year to $2.5262 trillion. According to World Semiconductor Trade
Statistics, with the silicon cycle picking up, semiconductor sales in 2014
increased by 9.9% from the previous year to $335.8 billion. Along with thegrowth in the sales of semiconductors due to recovery in the silicon cycle,
exports of IT related products also increased.
■ Exports of IT related products such as mobile phones was
expanded in the first quarter of 2015
For the key 22 countries/regions where data till the first quarter of 2015
was available, the export value declined by 6.8% from the same period of
the previous year to $2.6943 trillion (import value fell 12.2% to $2.6691
trillion). Due to the slowdown in emerging economies and downward trend
in natural resource prices, dollar appreciation and other factors, the export
value of many products declined. On the other hand, the export value ofmobile phones (a increase of 9.5%) and electronic parts such as
semiconductors (a increase of 3.1%) continuously expanded.

Figure I-12: Changes in semiconductor sales and IT related
products export(US$ billion)

IT related products export (Left axis)(US$ billion)

Semiconductor sales (Right axis)

190

30
28

170
26
24

150

22
130

20
18

110
16
14

90

12
70

10
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3

2008

2009

2010

2011

2012

2013

2014

2015

Notes: 1) Moving average of the latter 3 months is calculated. 2) The IT related products export is the total of 22 countries/regions wheredata is available from November 2007 till March 2015. The data on semiconductor sales is the total of he United States, Europe, Japan, andAsia Pacific.
Sources: World Semiconductor Trade Statistics, Statistics from individual countries/regions

Copyright (C) 2015 JETRO. All rights reserved.

(Month)Figure I-13: Changes in world trade by quarter of 22 key
countries/regions (by key product)(Million USD, %)Share of 22
countries/regionsin 2014

Total

2014
I

II

2015
III

IV

I

64.7

2,889,425 3,059,597 3,103,927 3,084,120 2,694,299
(0.7)
(2.4)
(3.9)
(- 0.6)(- 6.8)General machinery
75.2
382,533
405,882404,007415,640
363,052
(2.8)
(4.1)
(4.9)
(1.5)
(- 5.1)
Electrical equipment
81.9
434,865
475,983
499,830
527,835
441,758(- 1.0)
(2.3)
(4.5)
(5.4)
(1.6)
Mobile phones
75.9
38,356
39,69043,15663,54642,010
(8.7)
(2.3)
(6.0)
(27.4)(9.5)
94.0
130,929
146,519
154,340
150,947
135,025
Electronic parts
such as semiconductors(- 6.3)
(2.7)
(6.4)
(4.1)
(3.1)
Transport equipment
77.5
345,803374,705
360,656
375,970
345,086
(2.8)
(4.4)
(5.3)
(0.2)
(- 0.2)
Precision equipment
80.3
119,166
127,480
128,441
129,553
115,719(- 0.6)(3.2)(4.1)(- 0.6)(- 2.9)Chemicals
64.9
389,095
402,318
402,230
380,974
361,363
(2.1)
(3.5)
(4.8)
(- 1.3)(- 7.1)
Food
54.8
166,819
180,553
178,831
179,214
155,785
(2.2)
(7.3)
(3.9)
(- 0.9)(- 6.6)Steel
66.2
112,808
122,298
122,009
119,166
107,802(0.8)(6.6)(10.9)(6.2)(- 4.4)Iron ore (imports)
93.2
39,24436,284
31,64027,242
22,966(17.0)(- 1.5)(- 14.0)(- 30.0)(- 41.5)
Mineral fuels (imports)
76.4
549,575
521,812
520,760
448,811
322,597(- 0.3)(- 1.9)(- 3.3)(- 16.8)(- 41.3)
93.5
43,20638,172
37,91338,57634,903
LNG (imports)
(8.8)
(2.8)
(4.6)
(1.5)
(- 19.2)
Crude oil (imports)
79.6
314,309296,351
305,717
251,163
161,216(- 1.2)(- 2.2)(- 3.5)(- 18.9)(- 48.7)
Notes: 1) The above figures are based on the data available at the end of June 2015. 2) 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 Republicof South Africa. 3) Figures inside ( ) show the growth rates compared to the same period of the previous year. 4) Ironore, mineral fuels, LNG and crude oil are import basis and others are export basis. 5) The world export value that
forms the basis for calculating the share, is the total of approximately 180 countries and also 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.

(Year)

Sources: Statistics from individual countries/regions

10Chapter 1 Section 2: World Trade and Japan's Trade

Japan’s trade deficit shrinking since middle of 2014
■ Gradual increase in export volume
Japan's export volume growth rate reversed to a slight increase of 0.6% for the first time in four years. The export value declined by 3.5%
from the previous year to $694.3 billion, and imports declined by 2.6% to $817.1 billion (on a yen basis, exports increased by 4.8% to¥73.0930 trillion, and imports increased by 5.7% to ¥85.9091 trillion). The trade balance marked a deficit (of $122.8 billion) for the fourthconsecutive year, but the deficit has been shrinking since the middle of 2014. In March 2015, Japan posted a surplus for the first time in 33
months, and from April onwards, although Japan was again in the red, the deficit was small. The trade deficit in the first half of 2015 was$14.6 billion, a great reduction from the same period of the previous year (a $74.0 billion deficit).
Figure I-14: Japan’s trade (2010 － June 2015)

Yen-based

Dollar-based（Unit: Million USD, 100 million yen, ％）
2015
2010
2011
2012
2013
2014
Jan-Jun
Jan
Feb
Mar
Apr
May
Jun
Total exports
767,025
820,793
801,335
719,205
694,270
315,126
51,57350,27057,76754,63548,036
52,844(growth rate)
32.1
7.0
-2.4
-10.3
-3.5
-7.7
2.7
-10.9
-7.4
-7.8
-12.5
-9.3
Total imports
691,447
853,070888,584
838,889
817,103329,757
61,33953,96455,94755,12549,89453,486（growth rate）
25.2
23.4
4.2
-5.6
-2.6
-20.6
-20.3
-16.0
-26.9
-18.1
-21.9
-19.5
Trade balance
75,578-32,277-87,250 -119,684 -122,832-14,630-9,766-3,694
1,820-490-1,858-642(year-to-year difference)
47,043-107,854-54,973-32,435-3,14859,39417,002
4,143
16,001
7,596
7,103
7,549
Total exports
67,40065,546
637,476
697,742
730,930
378,079
61,434
59,414
69,26865,502
57,40365,057（growth rate）
24.4
-2.7
-2.7
9.5
4.8
7.9
17.0
2.5
8.5
8.0
2.4
9.5
Total imports
60,765
68,111
706,886
812,425
859,091
395,378
73,172
63,69967,042
66,09559,60965,762（growth rate）
18.0
12.1
3.8
14.9
5.7
-7.4
-9.1
-3.6
-14.4
-4.1
-8.6
-2.9
Trade balance
6,635-2,565-69,411 -114,684 -128,161-17,299 -11,738-4,2852,227-593-2,206-705(year-to-year difference)
3,963-9,199-43,763-45,273-13,477
58,983
16,213
3,777
16,728
7,663
6,967
7,636
Export volume index
100.0
96.2
91.6
90.2
90.7
89.9
86.3
85.7
98.9
94.6
82.8
91.1
（growth rate）
24.2
-3.8
-4.8
-1.5
0.6
1.6
11.1
-2.1
3.2
1.8
-3.8
0.0
Import volume index
100.0
102.6
105.0
105.3
106.0
101.9
109.0
99.8
102.9
103.6
94.9
101.1
（growth rate）
13.9
2.6
2.4
0.3
0.6
-3.4
-6.3
4.5
-10.3
0.1
-5.3
-1.4
Crude oil import price
79.2
108.7
114.8
110.5
105.1
57.9
63.4
49.5
54.8
56.2
59.4
64.0
（dollar/barrel, growth rate）
30.5
37.3
5.6
-3.7
-4.9
-47.7
-44.2
-55.4
-50.3
-48.7
-45.6
-41.8
LNG import price
10.6
14.4
16.3
15.7
15.9
11.2
14.7
13.1
12.0
10.0
8.7
8.5
（dollar/million BTU, growth rate）
20.7
35.1
13.4
-3.5
1.0
-31.1
-9.5
-19.8
-26.0
-39.4
-46.1
-46.5
Exchange rate (yen/dollar)
87.8
79.8
79.8
97.6
105.8
120.2
118.2
118.6
120.4
119.6
120.7
123.8
(yen appreciation, %)
6.6
10.0
0.0
-18.3
-7.8
-14.8
-12.1
-13.9
-15.1
-14.2
-15.7
-17.5
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.
11
Source: "Trade Statistics" (Ministry of Finance), "Foreign Exchange Rate" (Bank of Japan)
Copyright (C) 2015 JETRO. All rights reserved.

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

Reduction in current account surplus, and large drop in service balance deficit
Figure I-15: Japan’s current account■ Increase in surplus of intellectual property right royalties, and large reduction in
travel service deficit(Billion USD)

300

In 2014, Japan’s current account showed a surplus of $24.4 billion, a reduction from 2013($40.7 billion). The main reason for the reduction in surplus was the deficit in the tradebalance. The primary income balance that includes direct investment and portfolio
investment income was $172.1 billion. With this, the surplus was maintained and thecurrent account surplus was propped up. Within this, the balance on direct investment
income was $61.6 billion. The service balance has been constantly in deficit; it was $29.2
billion in 2014, a reduction from 2013 ($35.7 billion deficit). Intellectual property rightroyalties (including royalties between subsidiaries and parent companies) showed agrowth in surplus (2013: $13.7 billion  2014: $15.9 billion), and travel services saw alarge reduction in deficit ($6.8 billion deficit  $500 million deficit), due to the increasein credit from Asia.

Primary income balance
250
200
150
100

50
0
-50
-100
-150
-200
05
06
07
08
09
10
11
12
13
14
14.
15.
1-5 1-5(P)GoodsServices
Direct investment income
Portfolio investment income
Other primary income
Secondary income
Current accountSources: "Balance of Payments" (Bank of Japan, Ministry of Finance, "Foreign Exchange Rates" [Bank ofJapan])■ Profits from overseas operations increasing further

Profits from overseas operations of Japanese firms, assumed to consist of credit on direct
investment income and credit on intellectual property rights, have been increasing
recently, reaching nearly 20% of total export value.

Figure I-16: Japan’s service trade(Billion USD)

Figure I-17: Profits from overseas operation（Billion USD）

140

20
Other services
10
Others (Note 2))（％）

Credit on intellectual property right royalties

Credit on direct investment income

120

-10

11.3

100
9.3

-20

Charges for the use of
intellectual property rightroyalties
Financial

80-30

Insurance/ Pension

60

-40

Construction

15.9

16.4

Credit on Direct investment income + credit on
輸出に対する比率
intellectual property right /export rates (right axis)

0
Other business services

19.4

9.9

11.6

11.9

14.0

12.1

12.0

9.9

10.0
7.0

8.0
6.0
4.0
2.0
0.0

TravelTransportation

-60

△ 2.0
△ 4.0

20

△ 6.0

Services balance

-70

05

06

07

08

09

10

11

12

13

14

14.
1-5

15.
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 andrepairs, 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)

Copyright (C) 2015 JETRO. All rights reserved.

18.0
16.0

14.0

40
-50

20.0

△ 8.0

0
05

06

07

08

09

10

11

12

13

14

14.
1-5

15.
1-5(P)

12

Note: Charges for the use of intellectual property consists of patent royalties (including royalty trades between parent companies
and subsidiaries), franchise costs, usage fees of software, music and video, and so on. In Japan the returns are said to be mainly fromtrading between parent companies and their subsidiaries. Source: “Balance of Payments” (MOF, BOJ)

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

Trade deficit in mineral fuels shrunk■ US emerges as largest export partner country for second consecutive year
The exports by country in 2014 indicate that the US has been the largest export partner country for the past two years with $129.4 billion. In the firsthalf of 2015, while exports stagnated to main partners such as China and the EU, exports to the US remained unchanged. On the other hand, China,
which lost its position to the US as the largest export partner country in 2013, witnessed a decline of 2.1% from the previous year to $127.1 billion,
and this decline is continuing further in 2015.
■ Trade deficit shrunk due to narrowing of deficit in mineral fuels
Trade balances by product indicate that with the fall in the price of crude oil, the deficit in mineral fuels shrunk (2013: $265.3 billion deficit  2014:$246.9 billion deficit). In the first half of 2015, this trend strengthened, and the deficit in mineral fuels reduced by approximately 40% from theprevious year (2014 first half: $131.3 billion deficit  2015 first half: $75.0 billion deficit).

Figure I-18: Japan’s exports & imports by country/region

Figure I-19: Trade balance by product(Million USD, %)2012
Total exports
United StatesEU

801,335
140,624
81,742

2013
719,205
133,199
72,173

2014694,270
129,441
72,082

YoYchange
-3.5
-2.8
-0.1

2015
Jan-Jun
315,126
62,81632,421(Billion USD)

79.6

68.0

91.7

144,686

129,851

127,105-2.1

53,928

28.5

75.6

-32.3

-87.2

-119.7-122.8

-14.6

-74.0

YoY
change
-7.7
-0.2

300
84

200

67
61

-10.1

60

61

121

129,788

111,671

105,241-5.8

48,907-5.1

Total imports

888,584

838,889

817,103-2.6

329,757-20.6

76,46070,322

71,751

2.0

34,408-4.0

EU83,52078,99577,749-1.6

33,723

-14.9

China

189,019

182,192

182,071-0.1

78,692

-12.7

ASEAN

129,603

118,644

116,499-1.8

50,601

-15.0

107

95

56

45

37

29

42

156

139

157

-156

-164

157

112

161

73

67

12

5

140

133

32
2

30
3
66

61

0
-128
-100

United States

94
61

173

-12.6

ASEAN

92

71

100

China

19.8

400

-75

-142
-186

-131

-248
-265

-247

-258

-289

11

Transport equipment
General machinery
Chemicals
Other
12
13
14

-200

-300

Notes: 1) Yen-based values are converted to dollar-based values by JETRO.
2) From the EU in 2012, there were 27 countries, and since 2013 there are 28 countries.

-400

Source: "Trade Statistics" (Ministry of Finance)-500
05

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

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

Copyright (C) 2015 JETRO. All rights reserved.

14.1-6

15.1-613

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

General machinery contributed to increase in export volume■ Improvement in general machinery and chemical products
The export volume in 2014 showed an upward movement in general machinery (an increase of 2.9% from the previous year) and chemicals (anincrease of 2.7% ), however, the pace was sluggish for transport equipment (a decline of 1.9%) and electric equipment (a decline of 0.3%), and there
was only a moderate increase in the overall export volume. The upward movement of general machinery and chemicals continued in the first half of2015, but transport equipment and electric equipment were stagnant. There was a decrease in the import volume of mineral fuels (a decline of 3.0% )and food (a decline of 1.9%), and at the start of 2015, general machinery and electric equipment also declined.
■ Companies focus on profitability
The correlation between the export price index (contract currency basis) and exchange fluctuations indicates that industries such as transportation
machinery and general machinery see smaller changes in export prices than in exchange fluctuations. This shows that companies focus on
profitability during a period of weaker yen.

Figure I-20: Changes in volume index by product (year-on yearchanges)Figure I-21: Export price index (contract currency
basis) and exchange rate
(%)

2015
2012

Exports

2014

Jan-Jun

Jan

Feb

Mar

(Yen/dollar, 2010＝100)(2010＝100)

108
Apr

May

60

Jun

-4.8

-1.5

0.6

1.6

11.1

-2.1

3.2

1.8

-3.8

0.0

106

3.5

-2.1

-1.9

-0.6

9.4

-2.8

2.7

-2.9

-7.3

-2.5

104

80

-7.2

-5.5

-0.3

-0.4

8.1

-2.9

-0.2

-0.6

-5.9

0.0

102

90

Chemicals

-4.7

4.3

2.7

2.4

9.7

-7.1

5.2

5.3

0.5

1.1

100

100

Generalmachinery

-9.8

-4.5

2.9

0.4

10.9

-5.6

4.6

-1.4

-3.7

-1.1

98

110

Steel

0.6

-0.8

0.0

-2.9

1.2

-2.7

-3.1

2.9

-6.1

-9.1

96

120

Total imports

2.4

0.3

0.6

-3.4

-6.3

4.5

-10.3

0.1

-5.3

-1.4

Mineral fuels

5.4

-0.7

-3.0

-2.5

-1.8

-2.9

-8.3

6.7

0.1

-7.0

Food

0.7

-2.4

-1.9

-0.9

-6.8

5.7

-2.0

4.0

-7.6

2.7

-2.7

0.2

4.6

-3.2

-7.4

8.2

-9.2

-2.3

-3.5

-2.5

Total exports

Imports

2013

Transport
equipment
Electricalequipment

Electricalequipment
Generalmachinery
ChemicalsHigheryen

94
92

Weakeryen← Exchange rate (2010＝100, right axis)

90

70

130
140
150

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
0.8

4.0

5.5

-12.4

-15.1

1.4

-24.2

-11.4

-15.1

-6.4

0.4

3.4

4.2

-1.0

-0.7

10.0

-1.4

-2.7

-8.7

-0.3

Sources: "Trade Statistics" (Ministry of Finance)

Copyright (C) 2015 JETRO. All rights reserved.

Export price index (total average)
Transportation equipment
Note: General machinery consists of general-purpose, production & business oriented machinery.
Source: “Corporate Goods Price Index”, “Foreign Exchange Rate” (BOJ)

14

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

Increase in export volume of semiconductor manufacturing related products■ In 2014, almost half of products saw increased export volume

Figure I-22: Products with increased export volume

The exports by product indicate that in 2014, the export volume of almost half ofthe products had increased. The total amount of the exports of the products that
saw an increased export volume was equal to about 50% of the total export value.
In the export value, the largest amount is from general machinery, and comprised
20% of the total amount of the exports of the products that saw increased export
volume. What is distinctive is that among the main products in general machinerythat witnessed an increase in export volume, products related to semiconductor
manufacturing such as semiconductor devices and integrated circuit
manufacturing equipment occupy the top ranks, and the volume figures also
indicate the strength of the semiconductor market. Also, products such asmachine tools like machining centers and production equipment like industrial
robots saw increased activity in keeping with the expansion of production
capacity. Among the partner countries, besides the US (e.g., construction/mining
machines, machine tools), China (e.g., manufacturing equipment for
semiconductors, vehicle engine), the boom in exports to Vietnam which is an
emerging economy in Asia is noteworthy.
2014(Million USD, %)January to May, 2015

2014

-

No. ofitems
4,490

262,282-

Items with increased volume

2,376

350,778

100.0

2,366

144,368

100.0

General machinery

253

72,67320.7

234

26,23018.2

Electrical equipment

146

68,95319.7

13019,802

13.7

Transport equipment

73

56,141

16.0

74

26,414

18.3

Precision equipment

101

26,524

7.6

99

6,424

4.4

Chemicals

449

53,511

15.3

461

19,090

13.2

Steel

146

19,854

5.7

139

8,512

5.9

Total exports

No. of Export value
items
4,614
694,270

Share

Export value

Share

Notes: 1) HS6 digit-level. Items which have been exported during the relevant period, and whose export
volume data is complete. 2) Share means the percentage of the total export of the items with increased
volume. 3) The product categories are as follows: general equipment (HS84), eectrical equipment(HS85), transport equipment (HS86 to HS89), precision equipment (HS90 to HS91), chemicals (HS23 toHS40), steel (HS72 to HS73).
Sources: "Trade Statistics" (Ministry of Finance)

Figure I-23: Main products with increased export volume (generalJanuary
machinery)
to May, 2015
Export volume
Product

Machines for manufacturing equipment of semiconductor devices, IC

Unit

Volume Export partner with increasing volume (top 3)
increased
First
Second
Third
by

7,143

units

Mechanical shovels (with 360 degree revolving superstructure)

124,126

units

Other machinery

942,068

units

Machining centers

52,562

units

32,752 Hong Kong

Parts & accessories of manufacturing equipment of semiconductor devices

15,563

tons

1,194 South Korea Ireland

Vehicular engines (over 1000 cc)

239 10,000 units

Parts for turbojets and turbo propellers

1,949

tons

Ball bearings

87,389 10,000 units

Lathe (numeric control method)

13,359units

914 China

Ireland

10,911 United States Netherlands

17 China

UAE

7 United States Hungary

Unit

Volume Export partner with increasing volume (top 3)
increased
First
SecondThird
bySouth Korea

Parts and accessories of printer78,374

tons

1,836 Mexico

Singapore

VietnamMechanical shovels (with 360 degree revolving superstructure)

55,076

units

3,427 Vietnam

United States Netherlands

366 Saudi Arabia South Korea South Africa
China

Export volume
Product

UAE

Machining centers

28,973

units

14,444 Vietnam

China

South Korea

Vietnam

Other machinery

514,640

units

119,773 Thailand

South Africa

United States

United States

Parts & accessories of manufacturing equipment of semiconductor devices

7,070

tons

951 China

South Korea Hong Kong

FranceParts of turbojets and turbo propellers

828

tons

38 Singapore

United States Norway

Singapore

Vehicular engines (over 1000 cc)

98 10,000 units

2 ChinaSouth Korea Thailand

10,199 Hong Kong

China

United States

Lathe (numeric control method)

5,404

units

551 Netherlands

VietnamTaiwanIndustrial robots

51,193units

Germany

6,143

tons

367 United States Belgium
15,217 China

Parts for water heaters, dryers, distillation devices and so on

67,272

tons

3,407 China

Italy

Other machinery and parts

Outboard motors for marine engines

557,872

units

31,041 United States China

EcuadorGas pumps, air compressors

Industrial robots

92,232

units

23,320 China

Netherlands

Parts of gas turbine

3,694

811 Iraq

Uzbekistan

CanadaOther machinery and parts

13,976tons

UKTransmission shafts and cranks

15,901 10,000 units

77 Thailand

Philippines

MexicoCzech Republic

Injection-moulding machines for rubber or plastic

5,348

units

232 Vietnam

United States Luxembourg

VietnamFront-end shovel loaders

9,058

tons

395 Egypt

CanadaGas pumps, air compressors
Front-end shovel loaders

189 10,000 units
22,745units

Hong Kong

743 United States China
3 PolandUK

3,443 United States Egypt

80 10,000 units
tons

999 Indonesia

South Korea

Luxembourg South Korea
United States China

1 United States South Korea Hong Kong

Note: 1) Top 15 products with largest export volume, among those with a year-to-year increase. 2) The export volume increase is in comparison to the same period of the previous year. 3) Products with yellow background are those whose export increased both in 2014 and between January and June 2015.
Sources: "Trade Statistics" (Ministry of Finance)

Copyright (C) 2015 JETRO. All rights reserved.

Philippines

15

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

16.3% decrease in world FDI■ Divestment from US affected world FDI
According to UNCTAD, in 2014 the global inward FDI (balance of payments basis, net, flow) declined by 16.3% from the previous year to $1.2283
trillion. FDI in advanced economies (39 countries/regions) declined by 28.4% ($498.8 billion), mainly because of the downturn in Europe and the US.
The contribution ratio of the advanced economies reached minus 13.5%. There was a huge impact by the large scale divestment by the Vodafone fromthe US. On the other hand, FDI in emerging/developing economies declined by 5.3% to $729.5 billion. With the huge drop in the amount of FDI to theUS, in 2014 China emerged as the largest recipient of FDI.

Figure I-24: FDI for major countries/regions (BOP basis, net flows)(Million USD, %)Value

Inward FDI
Percent
Sharechange
-60.0
7.5
-23.7
4.4
-22.7
21.0
51.5
5.9
-5.6
2.5
-45.1
1.9
1.5
-64.6
1.2
1.8
-4.4
4.2
-9.3
0.2
10.8
30.7
3.7
10.5
39.0
8.4
-22.5
0.8
-21.1
0.2
5.4
10.8
4.2
5.5
20.0
1.8
-10.3
1.0
-10.9
0.9
3.4
0.7
22.0
2.8
-14.4
13.0
-2.3
5.1
38.4
1.9
-48.9
1.9
-55.1
3.4
-69.7
1.7
-3.7
3.5
-1.7
1.0
-4.0
0.8
-0.1
4.4
-31.2
0.5

Contribution

Value

Outward FDI
Percent
Share
Contributionchange
2.6
24.9
0.7
4.1
3.9
0.2
-1.8
20.7
-0.4
-28.3
3.0
-1.2
18.8
2.3
0.4
0.0
71.5
3.2
1.4
64.1
1.2
0.5
-16.3
8.4
-1.7
31.0
28.2
6.9
14.9
8.6
1.1
76.7
10.5
4.7
7.8
2.3
0.2
-11.1
0.9
-0.1
19.2
5.9
1.0
41.1
3.0
0.9
6.5
0.5
0.0
-36.5
0.6
-0.3
16.6
1.2
0.2
-41.2
0.1
-0.1
486.7
0.7
0.6
-18.1
1.7
-0.4
70.6
1.0
0.4
-60.4
0.4
-0.6
-31.4
4.6
-2.2
-34.8
4.2
-2.3
-6.0
2.8
-0.2
88.8
0.5
0.2
4.1
0.2
0.0
-18.0
1.0
-0.2
4.3
0.5
0.0

United States
92,397-9.4
336,943
Canada53,864-1.1
52,620EU28
257,567-5.1
280,124
United Kingdom
72,241
1.7-59,628
Netherlands
30,253-0.1
40,809Spain
22,904-1.3
30,688Finland18,625574
France15,191-1.9
42,869Switzerland
21,914
16,798Australia
51,854
-0.2
-351
Japan
2,090
-0.0
113,629
East Asia
377,325
2.5
382,004
China
128,500
0.3
116,000
Hong Kong
103,2542.0
142,700
South Korea
9,899
-0.2
30,558
Taiwan2,839-0.1
12,697
ASEAN
132,833
0.5
80,048Singapore
67,5230.2
40,660Indonesia
22,5800.3
7,077
Thailand
12,566-0.1
7,692
Malaysia
10,799-0.1
16,445
Vietnam
9,200
0.0
1,150
India
34,4170.4
9,848
Latin America
159,405-1.8
23,326
Brazil
62,495-0.1-3,540Chile
22,9490.4
12,999Mexico22,795
-1.5
5,201
CIS
42,137-3.5
62,440Russia20,958-3.3
56,438Middle East
43,046-0.1
38,326
Turkey12,146-0.0
6,658
The United Arab Emirates
10,066-0.0
3,072
Africa53,912-0.0
13,073
South Africa
5,712
-0.2
6,938
Developed economies(39 countries/regions)
498,762
-28.4
40.6
-13.5
822,826-1.3
60.8
Emerging and developing economies
729,501
-5.3
59.4
-2.8
531,220
12.5
39.2
World
1,228,263
-16.3
100.0
-16.3
1,354,046
3.7
100.0
Notes: 1) The definition of developed economies follows UNCTAD, and is the total for 39 countries/regions.
The figures for emerging and developing economies are obtained by subtracting the figures for developed economies from the total.
2) Figures for East Asia are the total for China, South Korea, Taiwan, Hong Kong, and ASEAN.
3) Due to the difference in FDI data compilation, the figures for Japan (directional principle) in the table do not correspond to"Japan's FDI" (assets and liabilities principles).
4) "-" denotes figures that could not be calculated.

Copyright (C) 2015 JETRO. All rights reserved.

-0.8
4.5
3.7

Figure I-25: Top 10 countries/regions for FDI (2014)
Inward FDI
1 China
2 Hong Kong
3 United States
4 United Kingdom
5 Singapore
6 Brazil
7 Canada
8 Australia
9 India
10 Netherlands
Sources: UNCTAD(Million USD)
Outward FDI
128,500 United States
336,943
103,254 Hong Kong
142,700
92,397 China
116,000
72,241 Japan
113,629
67,523 Germany
112,227
62,495 Russia
56,43853,864 Canada
52,62051,854 France
42,86934,417 Netherlands
40,80930,253 Singapore
40,660Figure I-26: Trends in global inward FDI(US$ billion)
2,200
FDI in developed countries
FDI in emerging/developing countries
Cross-border M&As
Greenfield investment

2,000

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

400
200
0
2003
04
05
06
07
08
Note: FDI is inward basis.
Source: Data from the UNCTAD and Thomson Reuters.

09

10

11

12

13

14 (Year)

16

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

Changes in share by industries with global greenfield investment■ Continuous expansion in the share of service industries

The trends by industries with greenfield investment indicate that the share of service
industries continues to increase, and in 2013 it reached a peak of 56.9%. In 2014, thereal estate sector increased by 75.6% from the previous year to $81.7 billion, andamong all industries it emerged as the largest investment sector. There were large
scale investments by Indian and Chinese companies.
■ Changes in investment destinations by transport equipment industry

Figure I-28: Greenfield investments by major industry (2014)(Million USD)
Month

Investor

July
Sobha (Sobha Developers)
Real estate
March
Shanghai Greenland Group
December
Shanghai Greenland Group
April
Total
Coal, oil and natural
July
Mac Optic
gas
March
China Gezhouba (CGGC)
NovemberSamsung
Communications
February
Smile Telecoms Holding
September China Mobile Communications Corporation
May
Volkswagen
Automotive OEM March
Fiat Chrysler Automobiles (Fiat)
April
Shahed International
May
SkyPower
Alternative/renewable
June
Shanghai ElectricenergyFebruary
Sempra Energy (Sempra Energy Resources)
Source: FDI Markets (Financial Times)

Copyright (C) 2015 JETRO. All rights reserved.

Country
India
China
China
FranceGreeceChina
South Korea
Mauritius
China
Germany
Italy
Malaysia
CanadaChina
United States

Destination
UAE
Malaysia
South Korea
AngolaEgypt
Pakistan
VietnamNigeria
Pakistan
China
CanadaSaudi Arabia
Nigeria
MoroccoMexico

100%
90%
80%
70%
60%

In the manufacturing industry, automobiles surged by 70.2% from the previous year($51.1 billion). As investment destinations of transport equipment, the increase in theshare of the US and Mexico in recent years is notable. During the period 2012 to2014, there were large scale investments made in the US by German, Italian,Japanese and South Korean automobile manufactures. Also during the same period,
investments were made in Mexico by American, German, South Korean, Italian andJapanese firms.

Insudtry

Figure I-27: Greenfield investment around world, shareby industry

50%

40%
30%
20%
10%
0%
2003

2004

2006

2007

2008

Services

2009

2010

Manufacturing

2011

2012

2013

2014

Primary

Figure I-29: World greenfield investment intransport equipment industry, share by destination(based on number of cases)
(%)

Value
4,000
3,250
3,200
16,000
4,800
3,500
3,000
1,148
1,000
2,402
2,380
2,000
5,000
2,000
2,000

2005

Notes: Classification of industries follows UNCTAD.
Sources: UNCTAD

2003-05

2006-08

2009-11

2012-14

United States

12.0

9.6

14.9

18.8

China

16.6

13.4

14.2

13.0

Mexico

2.3

4.2

5.1

10.7

India

3.7

10.5

9.0

5.6

United Kingdom

2.7

2.2

3.5

4.2

Brazil

2.4

1.7

4.4

3.4

Germany

2.7

2.1

4.1

3.2

Russia

3.7

4.9

3.9

3.2

Thailand

3.1

3.1

4.1

3.1

Czech Republic

4.1

3.1

2.0

2.8

Indonesia

1.3

1.0

1.8

2.2

Notes: 1) Classification of industries follows UNCTAD
2) Total of automotive OEM and automotive components.
Source: FDI Markets (Financial Times)

17

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

Japan’s outward FDI remains at high level■ Outward FDI remained at more than $100 billion since 2011

Japan’s outward FDI in 2014 declined by 18.6% from the previous year, to $119.7 billion. On a yen basis, Japan’s outward FDI declined by 11.6%
from the previous year to ¥12.7682 trillion. This is because there was a downturn in the equity capital (31.4% decrease) that makes up for 61.3% ofJapan’s outward FDI. In 2014, outward cross-border M&A deals (17.7% decrease) and greenfield investments (4.3% decrease) also declined.
Although it did not reach the record high, $147.2 billion in 2013, Japan’s outward FDI has surpassed $100 billion for four consecutive years. This
indicates a positive disposition by Japanese firms toward exploring growing overseas markets.
■ Steady increase in outward FDI stock
At the end of 2014, Japanese outward FDI stock increased by 6.1% from the previous year to $1.2015 trillion. Japan’s FDI stock in the US, the EU,
ASEAN and China was $383.6 billion, $274.3 billion, $159.4 billion and $104.4 billion respectively. Though the FDI stock in North America andAsia increased, the FDI stock in Europe tended to be flat. Long-term trends since 2000 indicate that there has been a remarkable increase in Asia’sshare. By industry, those such as the finance/insurance and wholesale/retail occupy a large share. In recent years, industries catering to domestic
markets have been intensifying their activities for venturing into overseas markets, and it can be said that the activities of these industries are reflectedin the outward FDI trend.

Figure I-30：Trends in Japan’s outward FDI by type
170.0

(US$ Billion)

Figure I-31: Trends in Japan’s outward FDI stock(Billion USD)

(%)

1,400

35.0

Debt instruments
150.0

Equity capital

130.0

Debt instruments

Reinvestment of earnings

1,200

29.5

Reinvestment of earnings

30.0

Net

Equity capital
110.0
90.0

1,000

24.8
25.0

FDI stock/GDP ratio (right axis)
19.2

800
16.0

70.0
50.0
30.0

20.0

14.7 14.3

600

12.2 12.5
10.7

400

7.9
6.0

10.0

6.8 6.2

6.3

9.1
7.4 7.3 7.8

15.0

10.0

5.1

200

5.0

0

0.0

-10.0

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)

Copyright (C) 2015 JETRO. All rights reserved.

Note: 1) Figures are based on BPM6.
Sources: "International Investment Position of Japan" (Bank of Japan, Ministry of Finance), Cabinet Office Statistics

18

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

US top investment destination for third consecutive year
■ Increase in US share to 35.2%
The US ($42.1 billion) continued to be Japan’s top FDI destination for the third consecutive year. While Asia, Europe, and Latin America’s shares
dropped, the share of the US increased from 32.4% in 2013 to 35.2% in 2014. Particularly, large amounts were invested in food products ($14.9
billion), wholesale/retail sector ($7.1 billion) and finance/insurance sector ($4.6 billion). In food products, in the US there were large scale M&A
activities by Japanese companies like Suntory Holdings (approximately $ 15.7 billion) and Mizkan Holdings (approximately $2.2 billion).
■ Rising gap between value of investment for ASEAN and China
In Asia, the difference in Japan’s outward FDI value has widened threefold between ASEAN ($20.4 billion) and China ($6.7 billion). In 2013, thedifference in the investment amount was 2.6 times, which further widened in 2014. China’s share in Japanese outward FDI fell by half from 11.0% in2012 to 5.6% in 2014.

Figure I-32: Japan’s outward FDI by country/region (BOPbasis, net flows)(Million USD, %)

Asia
China
ASEAN
Singapore
ThailandIndonesia
Malaysia
Philippines
VietnamIndia
North America
United States
Latin America
MexicoBrazilOceania
Australia
EuropeEU
World
Notes:

20122013

33,477
13,47910,675
1,566
547
3,810
1,308
731
2,570
2,802
35,76831,974
10,454
1,023
4,113
11,075
10,89031,01729,023
122,355

40,4709,104
23,6193,545
10,174
3,907
1,265
1,242
3,266
2,155
46,50543,703
10,197
1,750
4,037
6,098
5,835
32,22730,999135,049

2014
35,391
6,742
20,368
7,581
5,175
4,406
972
478
1,347
1,811
43,854
42,113
7,095
962
3,317
5,555
4,169
25,874
24,595
119,726

Share

January-May,
2015 (P)

29.6
5.6
17.0
6.3
4.3
3.7
0.8
0.4
1.1
1.5
36.6
35.2
5.9
0.8
2.8
4.6
3.5
21.6
20.5
100.0

13,160
3,959
9,120
2,533
1,682
1,440
2,132
408
660
-2,971
18,058
17,685
5,489
266
1,791
7,018
6,177
11,693
11,49756,734(Million USD)

Share
23.2
7.0
16.1
4.5
3.0
2.5
3.8
0.7
1.2
-5.2
31.8
31.2
9.7
0.5
3.2
12.4
10.9
20.6
20.3
100.0

Percentchange
10.8
84.9
27.7
15.0
-20.1
-24.9
11500.5
245.4
-5.0
-22.5
-20.6
108.7
9.7
8.0
250.7
222.7
-7.2
-3.2
7.1

1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank figures.
2) Figures have been calculated based on the new standards set in the sixth edition of IMF
Balance of Payments Manual since January 2014.
3) The figures for 2015 are provisional
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Copyright (C) 2015 JETRO. All rights reserved.

Figure I-33: Japan’s outward FDI - Comparison between
ASEAN and China
25,000ASEAN

20,000China

15,00010,000

5,000

0
05

06

07

08

09

10

11

12

13

14

Notes: 1) Data excludes investment in the finance and insurance sectors of Thailand in relation to the floods in the country (Q4, 2011: $3.924
billion, Q1, 2012: -$3.674 billion). Same as figure I-34.
2) Figures have been calculated based on the new standards set in the sixth edition of IMF Balance of Payments Manual since January 2014.
Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

14
1-5

15
1-5(P)

19

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

Progressive shift in Japan’s outward FDI to ASEAN■ Growing trend of investing more in ASEAN than China
Due to the shift in Japan’s outward FDI to ASEAN, since 2013, manyindustries have tended to invest a larger amount in ASEAN than in
China. In 2014, the ratio of investment amount in ASEAN to China
in the food and service industries increased. Among ASEAN
countries, Singapore, Thailand and Indonesia received large
investments.

Figure I-35: Examples of new investments in China and ASEAN
by Japanese companies (2014)
CountryMonthannounced

Company

Value

January

Nippon Electric Glass Co., Ltd.

Registered capital:
approximately ¥25 billion

AugustNissan Motor Co., Ltd.

500 million Chinese yuan

September

H2O Retailing Corporation

Total project cost of 3 billion
Chinese yuan

Opening of the first overseas full-scale department store
in the city of Ningbo.
Store expected to open in 2018.

May

Hitachi, Ltd.

Capital amount:
22.41 million Singapore dollars

Establishment of Hitachi Infrastructure Systems (Asia)
Pte. Ltd in Singapore, and expansion of functions as theregional headquarters in South East Asia for infrastructure
systems business.

AugustTOKYU HANDS INC.

NovemberTokyo Gas Co., Ltd.

March

Mitsubishi Motors Corporation

March

Isuzu Motors Ltd.

November

Mazda Motor Corporation

May

Daihatsu Motor Co., Ltd

March

Sumitomo Mitsui Banking
Corporation

May

Sumitomo Life Insurance
Company

October

Nippon Life Insurance Company Investment amount: 4.87 trillion Acquisition of shares of local life insurance company Indonesian rupiah
Sequis Life.

March

Mitsubishi Motors Corporation

China

Figure I-34: Trends in Japan’s outward FDI by industryComparison between ASEAN and China
2010

2011

2012

2013

2014

(Unit: %)2015
Jan-Mar

Food

13.9

4.5

3.8

0.0

4.1

9.3

Chemicals and pharmaceuticals

0.4

0.2

1.4

1.9

2.0

1.3

Iron, non-ferrous, and metals

0.9

0.9

1.5

1.2

1.7

1.5

General machinery

0.2

0.9

0.4

0.5

0.7

0.3

Electric machinery

3.6

1.2

-

2.0

7.5

1.4

Transportation equipment

1.3

1.5

0.9

1.9

2.9

1.5

Wholesale and retail

0.9

0.6

0.8

1.3

1.5

0.8

Service

0.4

1.3

0.6

1.1

3.5

6.0

All industries

1.2

1.2

1.1

2.6

3.0

2.3(Jan-May)

Singapore

Capital amount:approximately ¥200 million-

Capital amount:
100 million Thai bhat

Thailand-1) Index = Japan's FDI value in ASEAN/Japan’s FDI value in China. Figures greater than one indicate that theinvestment in ASEAN exceeds that in China. Shaded cells are greater than one.
2) Figures have been calculated based on the new standards set in the sixth edition of IMF
Balance of Payments Manual since January 2014.
3) All industries are cumulative total from January to May (P)4) “-” indicates unreckonable due to net outflow
5) The table lists industries with large shares of Japan’s outward FDI in 2014.
Mining was excluded since no investment in China was recorded in 2014.

Indonesia

Philippines
Source: Press releases from respective companies

Copyright (C) 2015 JETRO. All rights reserved.

Approximately ¥15 billion

Malaysia6) The service industry includes accommodation, restaurants, entertainment and otherrelated sectors.
Source: “Balance of Payments” (MOF, BOJ)

Overview-

Total acquired amount: 4.2
trillion Indonesian rupiah-

Establishment of new bases for manufacturing plate glass
used in slim panel display and new sales offices. Planned
capital investment of approximately ¥70 billion for the
first and second term.
Establishment of new design centers for the "Venucia"
brand and advanced processing technology centers. First
stage of construction expected to be completed in 2015.

Opening of the company's second direct-managed
overseas store after Shanghai in China.
Establishment of the Tokyo Gas Asia Pte. Ltd., as theregional headquarters for business and investment
activities in South East Asia.
As a part of strengthening R&D, setting up new test
courses in the vicinity of production factories. These willbe the first overseas test courses. Target for completion March 2015.
Establishment of a wholly owned company for thedevelopment of trucks for emerging economies. The newcompany will develop commercial vehicles for emerging
economies.
Construction of a new engine factory, and commencing
assembly from the fourth quarter of 2015. Initial annual
production capacity of 30,000 units in the first year. This
will be the company's fourth base, after Japan, China and
Mexico.
Construction of a new engine production factory. Annual
production capacity of 14,000 units, and operations
expected to commence mid-2016.
40% ownership interest of PT Bank Tabungan Pensiunan
Nasional tbk (BTPN) by acquiring additional outstanding
common stock.
Acquisition of approximately 40% of the total number ofshares outstanding of PT BNI Life Insurance, a subsidiaryof a state-owned commercial bank in Indonesia

Acquisition of old factory site belonging to Ford (UnitedStates), and commencing production from January 2015.

20

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

Increase in Outward M&A deals targeting Asian companies■ Booming outward cross-border M&As
Japan’s outward cross-border M&As in 2014 declined by 17.7% from the previous year to $52.7 billion. Though reduced, they have continued to be
active for four consecutive years, exceeding $50 billion. Regardless of the weakening of the yen, there has been no major change in proactive stance ofJapanese companies for M&A. The main investment destinations are the US ($29 billion), Germany ($4.2 billion) and the United Kingdom ($2.1
billion). Since 2000, the US has consistently been the top investment destination, and its share in Japan’s outward M&As in 2014 reached 55.1%. By
industry, there was an increase in the transaction value in food products. This was in the background of major deals in that sector.
■ More than 100 deals in East Asia for five consecutive years

The number of outward cross-border M&A deals by Japanese companies increased from 424 in 2013 to 446 in 2014. In recent years, there has been aremarkable increase in M&A deals targeting Asia. The total number of deals in East Asia (China, South Korea, Taiwan, Hong Kong, ASEAN) rose to
156 in 2014, exceeding 100 in each of the past five years. There were many M&As in East Asia, targeting China (25), Singapore (21), Malaysia (18),Thailand (17), South Korea (15) and Taiwan (15).

Figure I-37: Changes in number of deals and value ofJapan’s outward M&A

Figure I-36: Top deals for Japan’s outward M&A (2014 to June 2015)
Date ofcompletion

Acquiring company

Acquired company
Industry

Country1

Apr-14

Suntory Holdings Ltd.

Beverage

Beam Inc2

May-15

Japan Post

Transportation

Toll Holdings Ltd

3

Feb-15

The Dai-ichi Life InsuranceCo.

Insurance

Protective Life Corp

4

Jan-14

LIXIL Corporation,
Development Bank of Japan

Housing equipment

Grohe AG

5

Jan-15

Otsuka PharmaceuticalPharmaceuticals

Avanir Pharmaceuticals

6May-15

Canon Inc.

Precision equipment

7

Jul-14

Mizkan Holdings

Food products

Industry

United States Beverage

Value(Million
USD)(No. of deals)

Ownership(%) aftertransaction

15,688

100.0

6,021

100.0

5,708

100.0

Housing equipment

3,960

87.5

USA

Pharmaceuticals

3,154

100.0

Axis AB

SwedenPrecision equipment

2,373

84.0

Conopco Inc-N America Pasta

USA

Food products

2,150

100.0

NorwayFood products (Salmon
farming and processing)

1,727

100.0

United States

Metal and metal
products (steel)

1,550

100.0

UK

General machinery

1,478

100.0

Australia

Transportation

United States Insurance(Million USD)

600

80,000
East Asia
N. America
EU
Other
Value (right axis)

5008Nov-14

Mitsubishi Corporation

Trading

Cermaq ASA

9

Feb-14

Nippon Steel & Sumitomo
Metal, and other companies

Metal and metal
products

ThyssenKrupp USA

10

Jun-15Brother Industries, Ltd.

Office machines

Domino Printing Sciences

60,000The United Arab Emirates.

400
Germany

70,00050,000300

40,00030,000200
20,000100

10,000Notes: 1) Figures are as of July 2, 2015. 2) The deals are ranked for the transaction value each time.
Source: Thomson Reuters

0

0
2000

01

02

03

04

05

06

07

08

09

10

11

12

13

14

14
1-6

Notes: (1) Figures for East Asia are the total for China, South Korea, Taiwan, Hong Kong, and ASEAN.
(2) EU is comprised of 28 member states.
Source: Thomson Reuters

Copyright (C) 2015 JETRO. All rights reserved.

15
1-6(Year)

21

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

Japanese companies strengthen domestic production■ More than 50% of Japanese companies keen to expand domestic business
The weakening yen has encouraged a portion of Japanese firms to enhance their domestic production. According to the “Survey on Overseas Business
Operations of Japanese Companies” (2,995 companies responded) conducted by JETRO from December 2014 to January 2015, when companies werequestioned about their policies for developing domestic business in the future, 53.1% responded that they were planning to expand business, as
responses for expansion of domestic business exceeded 50% for the first time since FY2011 (a comparable year).
■ Signs of increase in the domestic production ratio of air conditioners
Trends in the domestic production ratio of general home appliances have shown an increase in that of air conditioners since September 2014.
Manufacturing companies are having to deal with a weak yen and surging personnel costs in China, which is a major manufacturing base. In China,
the base monthly salary on a yen basis for factory workers has almost doubled, from ¥24,698 in 2010 to ¥48,279 in 2014.

Figure I-39: Trends in domestic production ratio of major
home appliances

Figure I-38: Future domestic business expansion policy
1.6

FY2011 survey(n=2,769)

43.1

47.5

（％）

4.3 3.5

48.0

42.4

3.5

Refrigerator

Dishwasher

Flat-screen TV

Washer9080

1.3

FY2012 survey(n=1,957)

Air conditioner

4.8

70
60

1.4
FY2013 survey(n=3,471)

48.0

45.2

2.8 2.6

50
40

2013

Apr

Mar

Jan

Feb

Dec

Oct

Nov

Sep

Jul

2014

Aug

0
Jun

No answer

Apr

Other

May

Considering downscaling

Mar

Maintain current scaleJan

Expand operations

10

Feb

100

(%)

Dec

90

Oct

80

Nov

70

Sep

60

Jul

50

Aug

40

Jun

30

Apr

20

20

May

10

30

Mar

0

1.2
2.6 2.1

41.1

Jan

53.1

Expand operations

Feb

FY2014 survey(n=2,995)

2015

Source: “FY2014 Survey on the International Operations of Japanese Firms” (JETRO)
Note: Domestic production ratio = domestic production volume/domestic production volume+ imported production volume×100
Source: “Current Survey of Production” (METI), “Trade Statistics” (MOF)

Copyright (C) 2015 JETRO. All rights reserved.

22

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

Trend in overseas sales of Japanese companies■ Percentage of overseas sales of Japanese companies approaching 60%
According to the overseas sales figures tabulated on the basis of the financial statements and securities reports of Japanese companies (196 companies)
when the fiscal term is from December 2014 to March 2015, the share of overseas sales of Japanese companies was 56.7%. The share is approaching
60%. The share from overseas sales was approximately 30% in FY2000, but from FY2010 it has significantly increased. In particular, the Americas
have seen a remarkable gain, from 18.6% in FY2012 to 23.3% in FY2014, bolstered by the recovery of the US economy. From a long term perspective,
the share of the Asia Pacific region has greatly increased. The share of this region in FY2014 was 18.6%, which has roughly tripled when compared toits share in FY2000.
■ Largest percent of sales of transport equipment in Americas, and of other industries in Asia Pacific
By industry, the share of the manufacturing sector in overseas sales in FY2014 was 57.5%, greatly exceeding the non-manufacturing sector. In the
manufacturing sector, the share of transport equipment, at 60.5%, was particularly higher than other industries. By region, the share of the Americas, at
28.5%, was huge. The share of machinery/electrical products in overseas sales was 53.1% . The share of Europe (13.7%) was higher. The share of thenon-manufacturing sector in overseas sales was lower than the manufacturing sector’s, but has increased from 21.5% in 2000 to 38.4%.

Figure I-40: Japan firms’ sales share by region(Unit: %)Fiscal year
(number ofcompanies)
2000

(547)

2001

(581)

2002

(592)

2003

(624)

2004

(669)

2005

(724)

2006

(751)

2007

(781)

2008

(817)

2009

(844)

2010
2011

(320)
(236)

2012

(221)

2013

(211)

2014

(196)

Domestic Overseas
71.4
68.5
67.2
66.5
65.4
64.9
62.3
60.8
62.6
63.3
54.0
53.1
51.3
45.6
43.3

28.6
31.5
32.8
33.5
34.6
35.1
37.7
39.2
37.4
36.7
46.0
46.9
48.7
54.4
56.7

Americas

Europe

13.4
14.7
14.9
14.1
13.6
13.8
14.5
14.2
12.7
12.4
18.1
17.7
18.6
21.5
23.3

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
9.3

Copyright (C) 2015 JETRO. All rights reserved.

AsiaPacific
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
18.6

Figure I-41: Share of Japanese firms’ sales by industry andregion (2014)(%)
Industry(number of companies)

Domestic Overseas

(159)
(49)

42.5
39.5

57.5
60.5

23.8
28.5

9.5
8.3

AsiaPacific
18.7
17.3

(62)

46.9

53.1

14.2

13.7

20.9

4.3

(17)

56.5

43.5

11.9

9.4

21.7

0.6

(31)
(37)

56.7
61.6

43.3
38.4

8.6

6.3

25.4

3.0

9.9

3.5

17.4

7.7

OthersManufacturing

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
5.6

Transport machinery
Machinery & electric
appliances
Food products/
life style goods/
pharmaceuticals/ bio
Materials
Non-manufacturing

Americas

EuropeNote: 1) Companies surveyed: The fiscal term is from December to March,and geographical segment information is released. 2) Figures for 2014 totaled
companies with financial statements released by June 1, 2015. For
companies, however, that have both their financial statements and securities
reports publicized by the above day and have their information on the
security reports in database "SPEEDA", sales data of the report was used. 3)
Sales include transactions between internal segments. 4) Percentage = eachregional sales/entire regional sales.
5) Surveyed companies include listed subsidiaries, which were doublecounted.
6) Companies which combine multiple regional sales such as “Americas andEurope” and “Europe and Africa”, were excluded.
7)The definition of the industries is based on SPEEDA.
Source: Data from SPEEDA

Other
5.5
6.3

23

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

Japan’s inward FDI increases for three consecutive years. Asia gains importance.
Figure I-43: Trends in Japan’s inward FDI by type

■ Increased Asian presence in investment

30.0(US $ Billion)

Debt instruments

In 2014, Japan’s inward FDI increased for the third consecutive year, by
22.5% from the year before, to $9.1 billion. Japan’s inward FDI from Asia
mainly came from Hong Kong, Singapore and Taiwan. Even among theinvestment partner countries of 2014, there was an increased Asian
presence, with the Asian countries among the top, led by Hong Kong
(second position).

25.0

Reinvestment of earnings
Equity capital

20.0

Net

15.0

10.0

■ Japan’s inward FDI stock exceeds ¥20 trillion for first time

5.0

The inward FDI stock in Japan reached ¥23.3439 trillion at the end of 2014,
exceeding ¥20 trillion for the first time. Asia’s share of inward FDI stockincreased from 14.4% at the end of 2013, to 15.5% at the end of 2014.

0.0

△ 5.0

△ 10.0Figure I-42: Japan’s inward FDI by country(Million USD, %)
2012
Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN
Singapore
North America
United States
Latin America
Oceania
Europe
EU
World

2,895
72
872
366
559
1,003
978
-61
-110
-1,955125893-3,005
1,761

2013

2014

867
140
172
186
48
317
325
1,414
1,378
-1,363
376
1,061
1,401
2,358

5,402
596
1,909
1,034
144
1,716
1,431
4,363
4,328
235
557
-2,194-2,094
9,078

2015
Jan-May(P)
1,762
-326
929
181
94
895
876
880
841
224
-396
399
669
3,000

49.0
97.4
-31.2
362.3
97.2
141.9
-62.9
-64.6
534.0
10.1

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 2015 is a preliminary figure.

Copyright (C) 2015 JETRO. All rights reserved.

Figure I-44: Share of inward FDI stock in Japan by region
The endof 2000

The endof 2010The endof 2011

The endof 2012The endof 2013(Unit: %)The endof 2014

World

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

North America

32.3

34.4

32.2

30.8

31.6

29.4

Europe

51.6

42.9

45.1

46.1

46.3

46.8

Latin America

7.0

11.0

10.0

8.6

6.7

6.0

Oceania

1.1

0.6

0.6

0.8

0.9

1.8

0.2

0.2

0.3

0.1

0.1

0.4

1.2

3.9

4.0

4.0

4.1

4.8

60,958187,353

188,238

192,273

195,510

233,439

YoY change

Notes: 1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank rate.

Source: “Balance of Payment Statistics” (Ministry of Finance, Bank of Japan).

Note: 1) Yen-based values are converted to dollar-based values by JETRO. 2) Figures are based on BPM6.
3) Cumulative total for 2015 is preliminary.
Source: "Balance of Payments" (MOF, BOJ)

Middle East andAfricaInward FDI stock /GDP
Inward FDI stock(100 million yen)

Note: 1) Inward FDI stock by region is based on BPM5 until the end of 2013, and isbased on BPM6 at the end of 2014. 2) 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 office24

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

Collaboration with Asian companies also in picture■ Collaborating with Asian companies through M&As
M&A deals in Japan for 2014 increased for the first time in two years, by 17.4% from the previous year to $10.5 billion. Singapore and Hong Kong
were two countries from Asia whose M&A in Japan increased significantly. The focus has shifted from conventional sectors such as real estate tovarious other industries such as chemicals and pharmaceuticals and banking. The strategic affiliation between the major Singaporean paint maker
Wuthelam Group and Nippon Paint, the capital and business alliance between Charoen Pokphand Group, one of the largest conglomerates inThailand, and Itochu Corporation are examples of transactions aimed at cooperation with large Asian companies.
■ Venturing also into manufacturing and R&D sectors
The number of greenfield investments also rose in 2014. Many investments take full advantage of Japan’s high technological skills, such as enhanced
production of next-generation memory and establishment of production bases of high-function fibers for aviation engines, as well as leading
companies’ research and development bases.

Figure I-46: Operations of leading foreign companies since 2014

Figure I-45: Changes in the value of M&As in Japan(Million USD)

Company(No. of deals)

30,000250
Value

25,000200
M&A

Number of Deals (right axis)

Year/Month

KKR (US)

2014/Mar

Wuthelam group(Singapore)

2014/Dec

Charoen Pokphand (CP)Group (Thailand)

2014/Sep

20,000150

Baring Private Equity Asia 2014/Dec(Hong Kong)
CTBC Bank Co., Ltd.
2014/Jun(Taiwan)Micron Technology, Inc. 2014/Nov(US)

15,000

50

5,000

0

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Source: Thomson Reuters (Data as of July 2, 2015)14 15
1-6 1-6

R&D

0

Production

100

10,000

SanDisk (US)Overview
Kohlberg Kravis Roberts & Co, the US investment firm, acquired Panasonic Healthcare Co., Ltd., a subsidiary of the Panasonic
Corporation.
The Nippon Paint Co., Ltd announced strategic partnership with Singaporean paint maker Wuthelam group. Investment from Wuthelam
allowed Nippon Paint to achieve the majority of the paint business in Asia conducted in a joint venture with Wuthelam. That raised the2014 world share ranking of the Nippon Paint from 10th to 4th.
The Itochu Corporation and the Charoen Pokphand Group (CP Group), one of the largest conglomerates in Thailand, announced a capitaland business alliance. The CP Group and Itochu are mutually sponsored. The CP Group, with a large network in Asia, is seeking to takeadvantage of its relationship with Itochu, with substantial earnings power in non-resources areas, to expand their business overseas mainlyin Asia.
Baring Private Equity Asia, one of the leading Asian investment companies which is based in Hong Kong, acquired Bushu Pharmaceuticals
Ltd., a leading contract manufacturer for pharmaceuticals.
CTBC Bank Co., Ltd. (CTBC Bank), a leading Taiwanese bank, acquired Tokyo Star Bank.
This is the first acquisition made by a foreign bank.
Micron invested at the 100 billion yen level in plant of ex-Elpida Memory, which became its wholly owned subsidiary company in 2013. It
decided to increase production of state-of-the-art memory designed for smartphones, and also plans to manufacture next-generation
memory.

2014/Sep

A factory for NAND flash memory, jointly built with Toshiba, was partially completed and started manufacturing. A new factory is underconstruction to produce next-generation memory.

General Electric Company 2014/Sep(US), Safran S.A.
(France)A joint venture company with Nippon Carbon Co., Ltd. announced the construction of a new factory to produce high-function fiber for
airplanes. The special material, which is only available from two Japanese manufacturers in the world, will be supplied to General ElectricCompany and Safran S.A. as parts for the jointly-developed next-generation airplane engine.

Apple Inc. (US)2015/Mar

Nokia(Finland)2015/MayApple plans to build a technical development center in a next-generation smart city, which is under construction in Yokohama, Kanagawa.
The operation will start in fiscal 2016.
An R&D center was established in Kawasaki, Kanagawa. The center will enhance the research and development of fifth-generation (5G)
and cloud products for practical use. The results of the research will be introduced to the R&D centers in other countries.

Johnson & Johnson (US)2014/Aug

BASF (Germany)

2014/Feb"Tokyo Science Center" was established in the International Strategic Zone in Kawasaki, Kanagawa. The center, equipped with a surgery
simulation system, is expected to be utilized by Asian countries as a research and training facility for healthcare providers.

The battery material research and development center was established in Amagasaki Research Incubation Center in Hyogo. The
laboratory is the first development base in the Asia-Pacific region specializing in lithium ion batteries, which conducts basic research,develops the products and provides customer support.
Note: The dates show when M&As have been completed.
Source: Press release of each company, press report from various news sources

Copyright (C) 2015 JETRO. All rights reserved.

25

Chapter 2
Trends in development of world trade rules

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

271 FTAs in force around world■ 271 FTAs in force around world
The number of free trade agreement (FTA) in force reached 271, including 17 new agreements in 2014 (as of July 2015). The number of new FTAs entering
into force each year has recorded double digits for twelve consecutive years since 2003. Among these, a record-high 11 cross-regional FTAs (such as the one
between Vietnam and Chile) entered into force in 2014.
■ FTA coverage ratio of Americas remains at high level
The FTA coverage ratio for Japan (the percentage share of the trade value with FTA partners as of July 2015 over total trade value) recorded 22.3%,
exceeding the 20% mark for the first time. The FTA that entered into force in January 2015 with Australia, Japan’s fifth largest trading partner, raised the
FTA coverage ratio by 4.1 points. The FTA coverage ratio of the US, EU and China were 40.1%, 28.7% and 18.7%, respectively. The FTA coverage ratio of
the Americas was in general high with Chile, Peru, Mexico and Canada achieving 90.9%, 90.6%, 81.0% and 71.8%, respectively. Particularly, thepercentage (share) of Mexico and Canada covered under the North American Free Trade Agreement (NAFTA) was high, and in both countries the trade
within the NAFTA region accounted for nearly 70% of two-way trade. In Asia, the FTA coverage ratios for Singapore and South Korea were 77.2% and41.1%, respectively.

Figure II-1: Number of the FTAs which are in force
by region and year (as of July 2015)

Figure II-2: FTA coverage ratio of major countries/region (2014)(Unit: %)FTA cover ratio(Unit: case)
Asia/
Pacific

EuropeMiddle East/
Africa

1

1

2

1

1

1

3

1

1

Americas1955-59
60-64

Russia/CIS

Crossregional

65-69

75-79

2

80-84

2

85-89
4

2

4

1

3

1

3

2

95-99

1

2

5

1

5

1

6

1

18

5

3

9

16

6

39

2000-04

9

7

5

7

3

19

50

05-09

20

7

4

3

2

36

72

2

36

70

2010-

14

10

8

2010

5

1

6

2011

3

1

2012

6

2013

3

2014

2

2015

1

Total

Japan
US
CanadaMexicoChile
Peru
Colombia
Brazil

0

70-74

90-94

Total

51

1

1

2

1
35

28

23

1

13

10

14

6

14

7

12

11

13

1

1

4

29

103

271

Note: The total includes two FTAs with unknown conclusion years.
Source: WTO, data from each government and organization

Copyright (C) 2015 JETRO. All rights reserved.

EU28

Total trade
Extra-resional trade

China
South Korea
ASEAN
Singapore
India
Australia
New Zealand

FTA partner countries/regions (two-way trade)Two-way
trade

ExportImport

22.3
40.1
71.8
81.0
90.9
90.6
63.8
14.9
75.6
28.7
18.7
41.1
59.9
77.2
17.2
44.1
48.9

20.7
47.1
79.8
92.5
89.5
93.0
62.1
16.5
77.2
31.4
15.3
43.1
58.7
73.2
19.9
43.8
51.1

23.7
35.3
64.1
69.6
92.4
88.5
65.2
13.5
74.1
26.0
22.8
39.0
61.1
79.5
15.3
44.5
46.9

1st
ASEAN
NAFTA
NAFTA
NAFTA
China
China
US
MercosurEU
Switzerland

ASEAN
ASEAN
ASEAN
ASEAN
ASEAN
ASEAN
China

2nd
14.7
30.1
68.6
67.1
22.4
19.7
27.2
9.6
64.7
7.0
11.1
12.6
24.0
24.0
9.8
15.0
18.7

4.1
2.9
South Korea
1.1
EU
8.1
US
15.8
US
18.5
EU
15.2
CAN
3.1
Switzerland
2.6
Turkey3.8
Republic of China
4.6
US
10.5
China
15.9
China
12.0
South Korea
2.4
Japan
12.5
Australia
14.2

3rd

Australia

India

South Korea

DR-CAFTA

EFTA
Japan
EU
EU
Mexico
Chile
EEA
EEA
Switzerland

EU
Japan
US
Japan
US
ASEAN

1.0
1.5
1.0
2.5
14.9
14.1
5.2
2.0
1.7
3.7
1.0
10.4
8.8
8.7
2.0
7.3
13.2

Note: 1) FTA coverage ratio means the ratio of trade with countries and regions in which the subject country has established FTAs (as of July 2015), out of thesubject country's total trade. The figures are based on trade statistics in 2014.
2) Abbreviations: The Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), the Andean Community (CAN), the European Free Trade
Association (EFTA) and the European Economic Area (EEA).
3) China’s figures exclude those of Hong Kong (8.7%) 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 re-exported trade.
Source: Materials and trade statistics from each country’s government, “DOT, May 2015” (IMF)

27

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

Mega FTAs becoming pillars of trade policies for key advanced countries■ Bringing new trade rules into Asia-Pacific region through TPP
A Trade Promotion Authority (TPA) bill was enacted in the US on June 29, 2015. It is expected that this new legislation will push the Trans PacificPartnership (TPP) negotiations forward, which consists of twelve Asia-Pacific countries, including Japan and the US. The participating countries of TPP
account for 36.6% of the global GDP and 11.3% of the world population. The conclusion of the TPP would bring the Asia-Pacific region a high-level andcomprehensive liberalization as well as trade rules. Its impact on the trade in goods can be seen in examples such as, cumulative rules of origin allowing forthe inclusion of Japan and Asian countries in NAFTA’s supply chain or the progressive build-up of Vietnam’s textile industry. Also, this would accelerate
the negotiations of other mega-FTAs including the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Atlantic Trade and Investment
Partnership (TTIP) between the EU and the US.
■ Mega FTA to raise Japan’s FTA coverage ratio to 70% or more
Japan’s FTA coverage ratio would reach 73.3% if the trade values with participant countries of the mega-FTAs under negotiation were added up, such as the
TPP, RCEP and Japan-EU EPA, and would surpass the FTA coverage rate of South Korea, the US and the EU. Japan, the US and the EU are aiming for thecreation of new trade rules through the TPP, Japan-EU/EPA and TTIP. In the Japan-EU/EPA and TTIP, there are ongoing discussions on
standards/certifications and regulatory cooperation which were not there in any past trade agreements.

Figure II-3: Mega FTA coverage ratio by major countries (2014)

Figure II-4: Comparison of negotiations areas between mega
FTAs and WTO agreements

（％）
80
73.3

70.7
70

9.9

TTIP

Japan-EU

RCEP

TPP

Negotiating
areas

64.9

60
29.6
50

17.5
47.0

26.4
7.3

40

30

15.1
3.2

14.9
41.1

20

37.4

18.6

40.1
28.7

10

22.3

18.7

0

Japan

South Korea

US

EU

China

Note: Ratios are based on two-way trade as of the end of 2014. The EU’s figures exclude those of its interregional trade. China’s figures exclude those of Hong Kong and Macau. Japan’s figures exclude double-counted
numbers by TPP and RCEP. The China-Japan-South Korea FTA is not categorized but included in RCEP.
Source: Trade statistics of each country

Copyright (C) 2015 JETRO. All rights reserved.

TPP

Japan-EU

TTIP

RCEP

WTO

Trade in goods

○

○

○

○

○

Trade remedies, subsidies

○

○

○

Trade facilitation

○

○

○

Technical barriers to trade (TBT)

○

○

○

Sanitary and phytosanitary standards (SPS)

○

○

○

Trade in services

○

○

○

○

○

Protection and liberalization of investment

○

○

○

○

△2

Intellectual property

○

○

○

○

○

Competition, state companies

○

○

○

○

E-commerce

○

○

○

△1

Government procurement

○

○

○

Environment

○

○

○

Labor

○

○

○

Conflict resolution

○

○

○

Cross-cutting issues

○

○

○

○

○

Existing FTAs

Standards and conformance, regulatory cooperation

○
○

○
○
○

△3

○

○

Note: 1) △1 indicates that the area is not explicitly stated as the category of negotiation but is included in other negotiating areas. 2) △2
indicates that the area is only under negotiation in TRIM. 3) △3 indicates that the area is under negotiation in plurilateral agreements.
Source: Websites of WTO, USTR, EU, Japan’s Cabinet Office, data from METI

28

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

Japan’s FTA coverage ratio increases to 22.3%■ TPP accounts for a large share in the exports of transportation equipment, and likewise RCEP in the imports of textile products
Australia accounts for 4.5% of Japan’s transportation equipment export in value. Amongst the countries/regions that have free trade agreements withJapan, this figure of 4.5% is the second behind that of ASEAN’s share of 8.1%, and is the highest for any single country. Immediately after the FTA
enters into force, import duties for items equivalent to approximately 75% of the value of automobile exports to Australia from Japan will beeliminated, and the remaining tariffs will be eliminated in the third year. Also, import duties on automobile parts will be eliminated either
immediately or within the next three years. In the mega FTAs that are currently under negotiations, the countries participating in TPP negotiations
account for 44.8% of the export value of transportation equipment. Countries participating in RCEP negotiations account for 88.4% of the importvalue of textile products.

Figure II-5: Share of Japan’s FTA partners and key target countries in Japan’s trade value (2014)（％）

By product

World(US$ million)

In force
MexicoASEAN Switzerland

Chile

Signed or under negotiation

Subtotal
India

Peru

Australia

Mongolia South Korea Canada

Colombia

TurkeyGCC

ChinaSouth
Korea

RCEP

EU

Total

TPP

China

USA

Transportation equipment

161,727

1.9

0.4

8.1

0.3

0.3

0.3

4.5

15.8

0.2

0.7

2.9

0.4

0.2

9.2

8.8

22.5

8.1

9.8

44.8

30.8

78.9

General machinery

132,572

1.7

0.2

16.4

0.1

1.8

0.1

1.2

21.5

0.0

6.3

0.8

0.1

0.7

2.6

24.6

44.2

18.3

14.1

32.2

22.1

86.6

Electrical equipment

103,752

1.5

0.0

18.3

0.1

0.8

0.0

0.4

21.2

0.0

6.7

0.6

0.0

0.1

1.2

31.2

50.7

24.5

10.6

26.7

14.7

79.6

Chemicals

91,741

0.6

0.2

13.1

0.6

1.5

0.1

1.0

17.2

0.0

14.9

0.5

0.2

0.3

1.5

39.1

54.7

24.2

9.9

19.8

11.7

80.5

Steel products

46,515

3.4

0.2

26.5

0.0

3.3

0.2

0.9

34.4

0.0

16.1

0.7

0.6

0.4

4.6

34.3

65.0

18.2

2.6

23.1

8.6

86.3

Total export value

690,824

1.5

0.2

15.2

0.4

1.2

0.1

2.1

20.7

0.0

7.5

1.2

0.2

0.3

3.6

25.8

44.5

18.3

10.4

30.9

18.6

81.1

Mineral fuels

261,937

0.1

0.0

13.4

0.0

1.0

0.1

11.3

26.1

0.0

2.4

0.5

0.1

0.0

52.6

2.8

28.7

0.4

0.4

21.9

1.2

83.7

Machinery & equipment

221,446

0.9

0.0

14.1

1.5

0.2

0.0

0.1

16.8

0.0

5.2

0.4

0.0

0.0

0.0

46.9

61.4

41.8

14.4

21.0

13.4

91.9

Chemicals

75,888

0.3

0.2

14.3

3.6

1.4

0.0

0.6

20.3

0.0

5.6

1.4

0.0

0.0

1.0

24.5

41.3

18.9

28.4

25.3

16.4

92.5

Food products

64,407

1.5

2.9

13.9

1.1

1.2

0.4

5.7

26.7

0.0

3.0

4.0

0.6

0.4

0.0

17.0

39.9

14.0

13.4

43.0

22.4

86.6

Textile products

38,648

0.1

0.0

18.0

0.1

1.2

0.1

0.1

19.6

0.0

1.4

0.1

0.0

0.4

0.0

69.0

88.4

67.6

5.4

10.6

1.3

95.8

Total import value

812,954

0.5

1.0

14.3

0.9

0.9

0.2

5.9

23.7

0.0

4.1

1.4

0.1

0.1

17.2

26.4

47.8

22.3

9.5

25.1

8.8

87.5

1,503,779

1.0

0.7

14.7

0.7

1.0

0.2

4.1

22.3

0.0

5.7

1.3

0.1

0.2

11.0

26.1

46.3

20.5

9.9

27.8

13.3

84.6

Exports

Imports

Exports + Imports

Notes: (1) The HS codes of merchandise classification are: Transportation equipment: HS86-89, general machinery: HS84, electrical equipment: HS85, chemicals: HS28 to 40, steel products: HS72-73, mineral fuels: HS2701-2705, HS2708-2713, HS2715, machinery and equipment: HS84-91, food products: HS01-11, HS16-24, textile products: HS50-63, (2) Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman,
Qatar, Saudi Arabia, and United Arab Emirates. (3) Any duplicates among certain FTAs excluded from total.
Source: "Trade Statistics" (Ministry of Finance)

29
Copyright (C) 2015 JETRO. All rights reserved.

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

Three FTAs newly enter into force since 2014 in Asia-Pacific■ Three FTAs entered into force in Asia-PacificThree FTAs have newly entered into force since 2014 in the Asia-Pacific region.
Of the three, the South Korea-Australia FTA and Japan-Australia FTA are
formed by economic powerhouses. In addition, the region has seen the signingof the South Korea-New Zealand, China-Australia, China-South Korea, andSouth Korea-Vietnam FTAs since 2014.

Figure II-6: FTAs which have entered into force in AsiaPacific region (2014 – July 2015)
Enforcement
date
Singapore-Taiwan

2014/MarIn Taiwan, tariffs will be eliminated or reduced for 99.5% of items.
According to the announcement, tariffs will be eliminated for 83% of total
product categories, immediately when the agreement enters into
force.Singapore will completely eliminate tariffs once the agreement goes
into effect. In Singapore, however, the products subject to general tariffs arelimited to six items such as beer and medicated liquor.

South KoreaAustralia

2014/Dec

Based on tariff lines, South Korea and Australia will eliminate import tariffs
by 90.8% and 100%, respectively, within eight years after the FTA enters
into force. South Korea will gradually eliminate the tariff for beef imported
from Australia, in 15 years. Australia will eliminate the tariffs for as many as
20 automobile items imported from South Korea including medium-sizedgasoline powered vehicles (1,500-3,000 cc) and small-sized gasoline powered
vehicles (1,000-1,500 cc), once the agreement goes into effect.

Japan-Australia

2015/Jan

Australia will eliminate tariffs for about 75% of the trade value of imported
vehicles from Japan upon the agreement entering into force, with theremaining tariffs eliminated in the third year. The tariffs for automobile parts
will be eliminated within three years. Japan will eliminate tariffs for almost all
products related to mining and manufacturing including mineral fuels in ten
years. Rice is excluded from the elimination of Japan’s tariffs, while wheat,dairy products and sugar will be reviewed in the future.

■ China-South Korea FTA signed
When the China-South Korea FTA, signed in June 2015, comes into effect,
China will, on a tariff line base, eliminate import duties by 71.3% within 10
years and by 90.7% within 20 years, while South Korea will eliminate importduties by 79.2% within 10 years and by 92.2% within 20 years. For the services
and investment chapters, the two countries will launch additional negotiations
within two years after the FTA enters into force. They are planning to adopt a
so-called “negative list”, for which all service sectors except those specified in
the list are liberalized.

Source: Articles from Trade Daily (JETRO), data from METI

Figure II-7: Import duty liberalization rate of China-South Korea FTA
Type of concession
To be eliminated immediately

No. of products

Agreement details

South Korea
Value of imports from China
Percentage
Percentage

No. of products
Percentage

China
Value of imports from South Korea
Percentage

6,108

49.9

418.5

51.8

1,649

20.1

733.7

44.0

1,433

11.7

31.0

3.8

1,679

20.5

58.3

3.5

2,149

17.6

173.3

21.5

2,518

30.7

312.5

18.7

9,690

79.2

622.8

77.1

5,846

71.3

1,104.5

66.2

To be eliminated within 15 years
Sensitive
To be eliminated within 20 years
products
Total (B)

1,106

9.0

79.5

9.8

1,108

13.5

219.2

13.1

476

3.9

34.1

4.2

474

5.8

93.8

5.6

1,582

12.9

113.6

14.0

1,582

19.3

312.9

18.7

Total items with eliminated duties (A+B)

11,272

92.2

736.4

91.2

7,428

90.7

1,417.4

85.0

General To be eliminated within 5 years
products To be eliminated within 10 years
Total (A)

Source: Articles from JETRO Daily (JETRO)

30
Copyright (C) 2015 JETRO. All rights reserved.

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

ASEAN Economic Community (AEC) expected to develop further at end of 2015
■ ASEAN makes further progress in liberalizing tariffs
In 2015, tariffs were further eliminated in ASEAN. Among the 10 ASEAN countries, the six countries of Singapore, Thailand, Indonesia, Malaysia,
the Philippines and Brunei have eliminated regional tariffs on almost all products since 2010. CLMV (Cambodia, Laos, Myanmar, Vietnam) have also
eliminated tariffs on about 90% of items since 2015. Tariffs on the remaining items will be eliminated in 2018 with a few exceptions.
■ Focus in future will be on trade in goods, negotiations on trade in services
In areas other than tariffs, the requirement of FOB values to be stated in certificates of origin was removed in 2014 under given conditions. The
liberalization and facilitation of areas such as services, investment and non-tariff measures that include the introduction of a self-certification system,
the ASEAN Single Window and mutual certification of standards are expected. Among the negotiations in the services sector, particular focus will beon the relaxation of restrictions on foreign investment in the services sector which is imposed by most ASEAN countries.

Figure II-8: Focus area of AEC

Figure II-9: Status of tariff liberalization in AEC（％)

Contents
Among the 10 ASEAN states, six states (Singapore, Thailand, Indonesia, Malaysia, the Philippines andBrunei) have eliminated tariffs of almost all items within the region since 2010. CLMV (Cambodia, Laos,
Myanmar and Vietnam) have also eliminated tariffs on about 90% of items since 2015. Tariffs ofremaining items will be eliminated in 2018 with a few exceptions.
Non-tariff ○In 2014, the requierments of FOB values to be stated in certificates of origin (CO) was abolished undercertain conditions.
○Negotiations are underway to introduce a self-certification system in CO procedures in ASEAN from2016.
○Regarding the ASEAN Single Window, which aims at centralization/digitization of customs clearance
procedures in ASEAN states, full-fledged implementation would commence following a pilot project formutual exchange of CO (Form D) and customs clearance documents among a portion of states.
○Mutual certification and conformity standards of auto-related products, processed food, medical
instruments, electronic equipment, pharmaceuticals and cosmetics, for which negotiations are underway,
would be introduced in the future.
○ASEAN states are currently building ASEAN Trade Repository (ATR) centralizing trade-related
information, which will help improve transparency.

Percent of tariff lines Percent of tariff lines
with the tariff rate of with the tariff rate lesszero percent
than five percent

Trade in Tariff
goods

The ASEAN Blueprint stipulates a policy to permit ASEAN investors to invest foreign capital up to 70%
in other ASEAN members. Though it is still uncertain how much liberalization will be achieved—for
example, in some cases it might be limited to merely a promise to eventually liberalize a small portion ofeach service sector—it is probable that extensive restrictions on foreign capital into the service field,
which is currently imposed in many ASEAN states, will be alleviated.
Investment
The ASEAN Comprehensive Investment Agreement (ACIA), which includes investment protection(prohibition of performance requirement, expropriation/compensation, and fair and equitable treatment,etc.) and investment liberalization in the manufacturing industry, became effective in March 2012. The
revised protocol was signed in August 2014.
Movement of
Mutual recognition agreements (MRA) for professional service qualification are being promoted. To date,persons
ASEAN concluded MRAs in eight fields (engineering, nursing care, architectural, surveyors, accounting,medical practitioners, dental practitioners and tourism experts). Operations commenced in engineeringand construction services.
Source: Created based on materials of ASEAN

ASEAN6

99.2

99.4

Thailand

99.9

100.0

Indonesia

98.9

98.9

Malaysia

98.7

99.2

Philippines

98.6

99.4

Singapore

100.0

100.0

Brunei

99.3

99.3

90.8

98.5

Vietnam

90.0

96.9

Cambodia

91.5

98.4

Laos

89.3

99.1

Myanmar

92.6

99.5

96.0

99.1

Services

Copyright (C) 2015 JETRO. All rights reserved.

CLMV

ASEAN
Source: Data from ASEAN Secretariat

31

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

Removal from EU’s GSP list affecting companies in Malaysia■ Latin America: Mexico becoming regional hub of automobile exports
As the automobile industry thrives in Mexico, Mexico-based Japanese auto makers strive to increase their exports to both North and South America,taking advantage of the country’s FTAs and other trade arrangements with many countries in the region.
■ EU: Malaysia and Thailand’s exports to EU affected after being removed from EU’s GSP beneficiary list
The EU is currently negotiating bilateral FTAs with Japan, the US, and ASEAN countries, among others. At the same time, the EU has removed someof its trading partners from the Generalized System of Preferences (GSP) beneficiary list, including Malaysia (January 2014) and Thailand (January2015) . The number of GSP certificates of origin issued in Malaysia in 2014 (7,287 certificates, including the figures for countries other than those of
the EU) and the export value ($674 million) under the GSP fell drastically compared to the same data in the previous year, which recorded 254,806
certificates issued and $30.416 billion in exports, respectively. EU’s imports from Malaysia in 2014, on the other hand, increased by 7.4% from theprevious year to $25.8916 billion, which implies that most of the firms in Malaysia are now exporting to the EU while paying the tariffs that wereotherwise exempted under the GSP.

Figure II-10: Automobile exports to North and South America by
Mexico-based auto makers(Unit: # of Automobile, %)YearJapanese2010
Manufacturers, Total
2011

Unit

Share

South America
Unit

Share

BrazilUnit

Argentina

Share

Unit

Colombia

Share

Unit

Chile

Share

Unit

Peru

Share

Unit

Share

Total

(As of April 2015)

Countries/regions removed from GSP list

Countries/regions covered under GSP (40)

Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates,
Oman, Brunei, and M acau

Georgia, India, Indonesia, Iran, Iraq, M ongolia, Nigeria, Pakistan,
Panama, Peru, Philippines, Sri Lanka, Syria, Ukraine, Uzbekistan,
Vietnam, among others

69.1

93,75721.3

36,233

8.2

16,142

3.7

11,475

2.6

14,894

3.4

5,377

1.2

439,647

296,19859.5

151,29730.4

64,48413.0

12,2382.5

24,456

4.9

29,731

6.0

8,789

1.8

497,4492012

329,105

58.5

159,183

28.3

84,811

15.1

6,623

1.2

21,753

3.9

20,914

3.7

13,252

2.4

562,736• Middle and low-income countries/regions (18)2013

372,425

67.6

117,818

21.4

60,28410.9

10,1181.8

15,953

2.9

13,095

2.4

6,895

1.3

551,092

China, Ecuador, Thailand, Turkmenistan, Argentina, Brazil, Cuba,
Uruguay, Venezuela, Russia, Kazakhstan, M alaysia, among others

799,117

2014

Countries/regions covered• High-income countries/regions (8)303,755

638,43979.9

93,503

11.7

34,105

4.3

4,768

0.6

22,438

2.8

9,235

1.2

10,4701.3

1,116,229

78.6

103,432

7.3

38,372

2.7

42,341

3.0

10,292

0.7

5,762

0.4

1,310

0.1 1,419,870

1,224,576

74.4

155,286

9.4

66,900

4.1

56,823

3.5

22,016

1.3

3,451

0.2

559

0.0 1,646,250

1,335,345

74.5

185,086

10.3

93,343

5.2

56,3983.1

26,900

1.5

4,095

0.2

912

0.1 1,792,829

1,469,376

78.5

169,670

9.1

77,1594.1

51,536

2.8

31,574

1.7

4,602

0.2

452

0.0 1,871,991

2014

1,504,507

81.6

137,170

7.4

68,723

3.7

20,952

1.1

38,426

2.1

3,175

0.2

1,306

0.1 1,843,770

2010

1,419,984

76.4

197,189

10.6

74,605

4.0

58,483

3.1

21,767

1.2

20,6561.1

6,687

0.4 1,859,517

2011

1,520,774

70.9

306,583

14.3

131,384

6.1

69,061

3.2

46,472

2.2

33,182

1.5

9,348

0.4 2,143,699• Overseas department/overseas territories(OCT) (33)2012

1,664,450

70.7

344,269

14.6

178,154

7.6

63,021

2.7

48,6532.1

25,0091.1

14,164

0.6 2,355,565

Source: European Commission

2013

1,841,801

76.0

287,48811.9

137,443

5.7

61,654

2.5

47,5272.0

17,6970.7

7,347

0.3 2,423,083

2014

2,142,946

81.1

230,673

8.7

102,828

3.9

25,7201.0

60,864

2.3

12,4100.5

11,776

0.4 2,642,887

Non2010
Japanese
Manufacturers (GM, Ford, 2011
Fiat,
2012
Chrysler,
VW), Total
2013

Total

North America

Figure II-11: Status of EU GSP beneficiaries• Other privileges such as FTA accorded to thefollowing countries/regions

Except for weapons, all products ("EBA") are
tax-free for the following countries/regions (49)

Least developed countries (LDC)Six M editerranean countries (Algeria, Egypt, etc.), CARIFORUM (33 African countries, 10 Asian countries, five Pacific island
countries, countries covered under the market access rules ofcountries, Haiti)
economic partnership agreement (Ghana, Cameroon, etc.), countries ※ M aldives has been excluded from January 2015
from Eastern and Southern parts of Africa, Papua New Guinea,
M exico, Colombia, Costa Rica, Guatemala, El Salvador, Honduras,
Nicaragua, Panama, Peru, South Africa

Source: AMIA

32
Copyright (C) 2015 JETRO. All rights reserved.

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

Japan’s FTA utilization rate rising gradually■ Rising trend observed in Japan’s FTA utilization ratio
For the first time, the Ministry of Finance of Japan announced Japan’s FTA trade value in imports in May 2015. The trade value and rate of utilizationof almost all Japanese FTAs are on the rise. In 2014, the utilization rate which accounts for all the countries/regions which have FTAs with Japan was
16.8%. In particular, the utilization rate of Japan’s FTAs with Thailand, Vietnam, the Philippines, India, Mexico and Chile exceeded the 20% mark.
■ Utilization rate of US-South Korea FTA expected to rise from January 2016
NAFTA members continue to outclass all others who have FTAs with US in terms of US import value in 2014. The utilization rate of the US-South
Korea FTA was 23.0% which was low compared to other FTAs. One of the reasons being cited is the continuation of the 2.5% tariff on the import ofpassenger cars from South Korea even after four years of the FTA coming into effect. The utilization rate is expected to increase after January 2016
when the tariff for these products will be eliminated.

Figure II-12: Status of Japan’s FTA utilization (based on
import value)

Figure II-13: FTA unitization rate of US (based on import value)(Unit: 100 million yen, %)Value of utilized FTAs
2012
ASEAN

Latin
America

2013

2014

2010

2011

2012

2013

2014

2,726

2,659

2,952

2,953

6,247

26.0

26.1

27.2

Indonesia

2,378

3,125

3,414

9.2

11.1

12.6

Singapore

421

476

474

6.0

6.5

5.7

Vietnam

2,724

3,854

4,847

22.6

27.7

29.7

Malaysia

2,356

2,635

2,998

9.0

9.1

9.7

JordanDec-01

606

870

1,012

1,067

Philippines

1,758

2,192

2,418

23.6

24.3

22.5

SingaporeJan-04

1,010

1,040

971

Myanmar

7

11

33

1.3

1.4

3.7

Chile

Jan-04

4,277

5,598

Cambodia

13

42

105

4.0

7.4

12.9

Australia

Jan-05

2,656

Laos

7

10

9

7.2

9.2

7.7

MoroccoJan-06163

BahrainAug-06

Oman

Jan-09India
Switzerland
Mexico
Peru

0
2,716
1,042
333
684
79

0
4,130
1,367
401
834
116

1
5,207
1,565
476
1,052
134

0.0
3.5
18.7
5.1
19.5
3.5

0.0
4.8
19.8
5.6
20.3
4.6

FTA utilization rate

Year of entry into force

5,615

Chile
Total

2012

Import value from FTA partner

4,898

AJCEP
Europe2014(Million USD, %)Partnercountries/regions

Thailand

BruneiOther Asian region

2013

Utilization rate

IsraelAug-85NAFTA

Jan-94

2010

2011

2012

2013

2014

2,910

13.0

11.5

13.3

12.9

12.6

260,387 289,472 310,424 317,322 332,131

51.3

50.1

51.6

51.8

51.9

Canada141,737 155,739 169,037 172,541 171,280

51.1

49.4

52.1

51.9

49.5

Mexico118,650 133,733 141,387 144,781 160,851

51.6

50.9

50.9

51.6

54.7

1,200

62.2

82.0

87.5

89.1

88.4

1,613

1,425

5.8

5.4

4.8

9.0

8.7

5,653

6,130

4,929

61.0

61.7

60.4

59.0

51.9

2,931

3,341

3,413

4,560

30.9

28.6

34.9

36.8

42.7

202

165

188

242

23.8

20.3

17.7

19.2

24.4

274

326

425

418

540

65.2

62.9

60.6

65.7

56.0

336

1,384

551

582

600

43.5

62.7

40.7

56.9

61.5

From March 2006 till January 2009
(in serial order)

10,347

11,807

12,482

11,697

12,101

43.0

41.3

40.4

38.8

42.6

6.2

Peru

Feb-09

2,132

2,786

2,415

2,558

2,955

40.7

42.2

37.6

31.5

48.6

23.2

South Korea

Mar-12--

10,96315,00816,010

-

-

24.3

24.1

23.0

Colombia

May-12

-

-

3,497

4,921

3,588

-

-

25.5

22.8

19.7

PanamaOct-12

-

-

4

34

36

-

-

6.2

7.6

9.0

48.0

46.9

46.5

46.0

46.3

0.0
5.5
21.2

7.2

1,576

1,567

1,851

21.2

20.2

21.5

18,27522,24425,624

14.2

15.5

16.8

Note: 1) Overall import value of AJCEP excludes that of Indonesia, which has not signed the agreement.
2) According to one estimate that total imports are divided by tariff revenue, almost 80% of Japan’s imports are estimated to be
duty free.
Source: “Trade Statistics” (MOF)

Dominican Republic/
Central American countries(DR-CAFTA)

Total

284,914 319,075 354,855 367,904 383,227

Notes: (1) DR-CAFTA: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Dominican Republic. (2) For the FTAs that came into effect in 2012, thetotal import value is taken from the month after the month when the FTA came into effect (for South Korea from April, Colombia from June, Panama from
November).
Source: International Trade Commission (ITC)

33
Copyright (C) 2015 JETRO. All rights reserved.

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

Different rules applied in each FTA in Asia
■ Pay attention to different rules applied in each FTA in Asia
In Asia, a number of FTAs are in force today, and the utilization of these FTAs by Japanese firms is also becoming more apparent. In such a
scenario, one needs to pay attention to the fact that the rules tend to differ among FTAs in the region. For instances, in the rules of origin, in mostFTAs, companies can select either change in tariff classification criteria (CTC) or value-added content criteria, but not in the ASEAN-China FTA(only value-added content criteria), nor ASEAN-India FTA (both CTC and value-added content criteria must be met). The de minimis rule, which isan exception to the CTC, is not available in the ASEAN-India FTA. The requirement to state FOB values on the certificates of origin (COs), which
was becoming a serious issues for Japanese firms, is no longer applied except when using value-added content criteria in the ASEAN-Japan FTA or
AFTA and the ASEAN-South Korea FTA. However, FOB values still need to be stated on the COs of the ASEAN-China FTA and ASEAN-India
FTA.

Figure II-14: Comparison of rules of origin in key FTAs of Asia
Main rules of origin

De minimis

Mentioning of FOB values incertificate of origin
Removed (however, to be mentioned
when using value-added criteria. For
Cambodia and Myanmar, there is a
two-year grace period.)

Origin verification procedure

AFTA

Selection type (value-added criteria
40% or more OR change in tariffclassification criteria)

Applicable

ASEAN/Japan

Selection type (value-added criteria
40% or more OR change in tariffclassification criteria)

Applicable

Removed (However, to be mentioned
when using value-added criteria. For
Cambodia and Myanmar, there is a 2
year grace period.)

Third party verification system

ASEAN/China

Value-added criteria 40% or more

Applicable

To be mentioned

Third party verification system

ASEAN/South Korea

Selection type (value-added criteria
40% or more OR change in tariffclassification criteria)

Applicable

Removed (however, to be mentioned
when using RVC. For Cambodia and
Myanmar, there is a two-year grace
period.)Third party verification system

ASEAN/Australia/
New Zealand

Selection type (value-added criteria
40% or more OR change in tariffclassification criteria)

Applicable

Basic agreement to remove

Third party verification system

ASEAN/India

Combined type (value-added criteria
35% or more and change in tariffclassification criteria)

Not applicable

To be mentioned

Third party verification system

Sources: Government data/agreement of each country

Copyright (C) 2015 JETRO. All rights reserved.

Third party verification system (Plans
to introduce self-verification system inthe future)

34

Chapter 2 Section 2: Service trade expansion and increasing importance of service trade liberalization

Service sectors becoming important in merchandise trade
Figure II-15: Breakdown of value addedin Japan’s commodity exports (2011)■ Services largely contributing to exports in manufacturing industry
In global merchandise trade, service sectors provide respectable value added. For example, over 30% ofJapan’s merchandise export is comprised of the value added by services industry, and among these, theshare of transport, distribution and business services such as R&D are particularly huge. The wholesale,retail, and transportation services which are important factors for the manufacturing industry, have a highvalue added ratio of 18.3% in Japan’s exports and around 17% in world exports, which indicates thatthose services have become a critical factor for the export of goods. If the service-related restrictions
loosen, it will definitely have a positive impact not only on the service sector, but also on the operationsof the manufacturing industry.
■ Strict restrictions on foreign entry by some countries in distribution industry
The restrictions in the distribution industry are lax compared to other industries, however there are somecountries which have a high restriction index. Japan’s services industry is expanding overseas and its
share in the investment deals is also increasing. It is expected that the global liberalization of services willcontribute to the overseas expansion of Japanese companies.
Figure II-16: Share of services in number of Japan’s outward investment

30.0

(%)

(%)

60.0

55.0

25.0

Total
Agriculture, hunting, forestry and fishing
Mining and quarrying
Total Manufactures
Electricity, gas and water supply
Service industry
Construction
Distribution service
Wholesale and retail trade, repairs
T ransport and storage, post and telecommunication

Transport and storage
Financial intermediation
Real estate, renting and business activities

R&D and other business activities
Community, social and personal services
Source: “OECD-WTO Trade in Value Added” (TiVA）.

0.5

Figure II-17: Breakdown of service trade restrictions on
distribution services in major emerging countries
Stringent restrictions

50.0
20.0

(Unit: %)
ratio
100.0
0.7
5.9
57.9
2.3
33.2
0.7
15.6
14.5
4.8
3.8
2.2
8.7
5.7
1.1

Business type

Regulatory transparency
Barriers to competition

Other discriminatory measures

0.4

Restrictions to movement of people

45.0

Restrictions on foreign entry (2)0.3Mild restrictions

15.0

40.0
0.2

Greenfield Investments

10.0
M&A (Right axis)

35.0
0.1

5.0

30.0
(Year)

Notes: The definition of service industry for M&As follows Thomson Reuters.
Among the industries classified by FT, the total value of financail seivices, software/IT, transportation,communications, business services, real estate, warehousing and storage, hotels/tourism, andleisure/entertainment is considered as greenfield investments in services .
Sources: Thomson Reuters and FDI Markets (FT)

Copyright (C) 2015 JETRO. All rights reserved.

0
Indonesia

China

India

RussiaSouth Africa

BrazilChile

MexicoTurkeyNote: 1) The definitions of the distribution industry follow those of warehouses, wholesale, retail and franchises in WTO classification.
2) A 100% foreign entry can be counted as a regulation even if authorized, because "restrictions on foreign entry" includes
requirements of M&A screening, nationality requirements of executives, land possession restrictions and so on, in addition to foreign
capital ratio control.

35

Source: “Service Trade Restrictiveness Index” (OECD).

Chapter 2 Section 2: Service trade expansion and increasing importance of service trade liberalization

Restrictions on foreign investment in distribution and logistics services in emerging economies: East Asia
■ Strong restrictions in distribution and logistics services in Asia
In general, Asian countries adopt relatively strict restrictions on foreign entry in wholesale, retail and logistics services. When compared to otherregions, restriction on foreign investment are especially stringent and complex in Asia.
Figure II-18: Restriction on foreign investment in distribution and logistics services in emerging economies
Logistics
Wholesale

RetailDomestic transportation

Warehousing

Customs services/Others

China○100% foreign equity and franchise operations are allowed in principle.

○100% foreign equity is allowed for freight transport by road. ○ Air freight transport warehousing and storage is limited to○The proportion of foreign equity is restricted to up to 49%
equity joint venture, however 100% foreign equity is allowed infor freight transport by railway.
international shipping and road freight transport warehousing
and storage.

○ 100% foreign capital investment is allowed in international
freight transportation agency. Foreign companies must apply fora license from the China Air Transport Association. However,as the foreign company cannot obtain the qualification for alicense, in fact joint venture is required.

Thailand○Wholesale services with a "minimum capital of less than 100
million baht per store" are subject to foreign ownership
restrictions under the Foreign Business Act. However, theForeign Business Act defines companies with less than 50%
foreign ownership as Thai companies and therefore less than
50% foreign ownership is allowed. As an exception, foreign
ownership is allowed based on the Foreign BusinessCommittee's approval with the chief's permission.
○In some business operations, 100% foreign ownership isallowed if a company obtains permission from the Thailand
Board of Investment (BOI) .

○"Retail services with minimum capitals of less than 100
million baht and minimum capitals of less than 20 million baht
per store" and "food sales" are subject to foreign ownership
restrictions under the Foreign Business Act. However, theForeign Business Act defines companies with less than 50%
foreign ownership as Thai companies and therefore less than
50% foreign ownership is allowed. As an exception, foreign
ownership is allowed based on the Foreign BusinessCommittee's approval with the chief's permission.

○"Domestics land, water and air transportation" is subject toregulation, in which foreign ownership is limited to less than
50%. As an exception, foreign ownership is allowed based on
the Foreign Business Committee's approval with the chief's
permission.
○For some businesses, 100% foreign ownership is also
allowed on the condition that approval is obtained from the
BOI.
○The Land Transport Act specifies the conditions that foreign
ownership be 49% or less and a half of board members be
Thais.

Malaysia○100% foreign ownership is allowed.
○Companies are required to obtain open approved permits(APs) in order to import and sell new completely assembled
vehicles. However, new APs are not issued today.

○Foreign investment in stores with floor spaces that are lessthan 3000㎡, grocery shops, and pharmacies is not permitted.
○There are requirements for a minimum of 30% Bumiputera
stake in hypermarkets and supermarkets.
○A minimum capital of 20 million ringgit for department stores
and a million ringgit for specialised stores is required for 100%
foreign ownership to be allowed.

○Foreign ownership is limited to 49% for cargo and container ○ 100% foreign equity is allowed in private bonded○ 100% foreign capital investment is allowed in shippingtransportation, with minimum capital of 250,000 and 500,000
warehouses. Minimum capital necessary for storage ofagencies.
ringgit respectively. Though 100% ownership is allowed forimportant goods is 150,000 Ringgit, and 100,000 Ringgit in○ Foreign capital in customs is limited to 49% or less. The
transportation of goods possessed by a company with a capital other cases.
amount of minimum capital differs depending on the category.
of 250,000 ringgit or more.
○ There is a requirement for a minimum of 30% of Bumiputera ○ 100% foreign capital investment is allowed in comprehensive○Licenses for Malaysian domestic ships are granted only forstake in general bonded warehouses. Minimum capital of 1
international distribution.
those whose foreign ownership is 49% or less. For long-term
million Ringgit and 250,000 Ringgit is mandatory for important ○ Foreign capital in comprehensive transportation is limited topermission, 30% Bumiputra stake is required.
goods and for other goods, respectively.
40% or less.
○ 100% foreign equity is allowed in non-bonded warehouses.

Indonesia○Up to 33% foreign ownership is allowed for distributor○100% foreign ownership is allowed for minimarkets,○In the fields of general cargo transportation, domestic marine ○ Foreign equity is limited to 33% or less. However, foreignbusinesses, warehouse businesses, and cold storage businesses. supermarkets and department stores with floor spaces of larger transportation and freight forwarding and foreign ownership is equity up to 67% is allowed in refrigerated storage andUntil April 2014, 100% foreign ownership was allowed.
than or equal to 400㎡,1200㎡,2000㎡respectively (foreign
limited to 49%.
warehousing of particular regions.
entry is prohibited for those of smaller scale).
○Foreign investment is prohibited in the retail for toy,
cosmetics, footwear, electric appliance, mail-order and internet,
food and beverage.

○ Entry of foreign capital is prohibited in survey services (forexample on surveys on freight, land/water/air transport facility
and equipment, lease property or inventory/warehouse,damage/non-damage, volume, quality, etc.).

Philippines○100% foreign ownership is allowed for import-export
businesses. foreign ownership is restricted to up to 40% for
domestic wholesale services in principle, but 100% foreign
ownership is allowed if paid-in-capital is over $200,000.

○ Entry of foreign capital is prohibited in customs brokers.
○In stevedoring regarded as public managing and operations,foreign capital is limited to 40% or less.

○ "Warehousing" is subject to regulation, in which foreign○ "Customs services" and "Consigned forwarding" is subject
ownership is limited to less than 50%. As an exception, foreign to regulation, in which foreign ownership is limited to less thanownership is allowed based on the Foreign Business
50%. As an exception, foreign ownership is allowed based on
Committee's approval with the chief's permission.
the Foreign Business Committee's approval with the chief's○ 100% foreign capital in "Logistics Center" which has fulfilled permission.
the conditions such as capital of 10 million Baht or more,
introduction of the latest computer systems etc., is allowed,
when approval is obtained from the BOI.

○(1) 100% foreign ownership is allowed if $2.5 million or more ○100% foreign ownership is allowed for cases in which capital ○ 100% foreign equity is allowed in companies approved byof the minimum capital is invested and investment per store isis 200,000 dollars or more. This condition for the ownership
the Philippines Economic Zone Authority (PEZA). Regarding$830,000 or more and (2) the minimum capital requirement isratio is interpreted as being limited to 40% or less among legal companies not approved by PEZA, there are no clear foreign
relaxed to $250,000 or more for businesses that handle luxury experts recently.
capital restrictions, however for those companies involved inmanagement and operations of public enterprises, its equity is
However,if the parent company's net assets apply to (1) above, it goods.
must be capitalized at $200 million or more and if the parent
limited to 40% or less.
company's net assets apply to (2) above, it must be capitalized at $50 million or more and must have five or more stores orfranchises worldwide and the capital of one of these stores must be $25 million or more.

Vietnam○100% foreign equity is allowed in principle. However, certain
items such as cigarettes, books, newspapers, magazines, video
recording devices, precious metals, medicines, and sugar are
not allowed to be handled by foreign companies.

○100% foreign equity is allowed.
○Foreign equity restrictions are set for each individual area in○Official approval is necessary for carrying out additional
detail such as freight transport by land (51% or less foreign
stores. Approval for the second or more stores is measured
equity), freight transport by sea (49% or less foreign equity).
based on the Economic Needs Test (ENT). However, thesecond or more stores with floor spaces less than 500m2 would
be exempted from ENT.

○ 100% foreign capital investment allowed.

○ A joint venture with foreign capital of 99% or less can beestablished for custom services.
○ A joint venture with foreign capital of 50% or less can beestablished for container handling services.

36
Copyright (C) 2015 JETRO. All rights reserved.

Chapter 2 Section 2: Service trade expansion and increasing importance of service trade liberalization

Restrictions on foreign investment in distribution and logistics services in emerging economies: Other regions
Figure II-19: Restriction on foreign investment in distribution and logistics services in emerging economies (continued)
Logistics
Wholesale

RetailDomestic transportation

India○ 100% foreign capital investment allowed.

○Single brand: 100% foreign ownership is allowed withindividual permission from the government and under certain
conditions. However, for foreign ownership exceeding 51%,
procurement regulations are applied.

○Multiple brand: Up to 51% foreign ownership is allowed under certain conditions. Such conditions include the minimum
investment amount of 100 million dollars, investing in back-end infrastructure, 30% of procurement amount coming from smallscale companies, and business operations in cities with 1 million people or more.

Warehousing

Customs services/Others○100% ownership is allowed for marine and road
○ 100% foreign capital investment allowed.
transportation.
○Among air transportation, foreign ownership is limited to up
to 49% for regular services and up to 74% for irregular services
or charter flights.
○Foreign ownership is prohibited for railway transportation, except in some cases such as high-speed railway, cargo lines and public-private projects, for which 100% ownership is allowed.

Bangladesh○ There are no clear provisions prohibiting entry of foreign capital, however prior consultation is necessary with the Board of○ Foreign capital up to 49% was allowed, however in April 2012, the Ministry of Commerce sent an official notice for suspending foreign capital in eight service industries (freight forwarders,
Investment of Bangladesh, which screens on a case-by-case basis. Some companies which do not have a manufacturing function import agency, courier, shipping company, marketing agency for airlines,railways, etc.) and all registrations of joint ventures. Thus, new licenses have been suspended in transport services.
tend to have difficulty in registering with the Board of Investment.

Sri Lanka○ 100% foreign capital investment allowed. However,○ 100% foreign capital investment allowed. However, a
restrictions may be applied or licenses may have to be acquired, minimum capital of US$1 million is required (in the case of
depending on the product. Further, in the case of a branchbranch offices US$2 million). There are some cases in which
office, a minimum capital of US$200,000 is mandatory.
companies which have a domestic manufacturing function are
exceptionally allowed to engage in certain retail business.

PakistanBrazil○ 100% foreign capital investment allowed.
○ 100% foreign capital investment allowed. However, certain minimum investment amount has to be satisfied for issuingpermanent visas for resident employees.

○ Foreign capital in freight forwarding and shipping agencies is limited to 40% or less. Licenses must be obtained from the Board of Investment (BOI) for investments exceeding 40%.
○ Licenses must be obtained from BOI and competent authorities for air transport and coastal shipping.
○ Foreign capital in freight forwarding and shipping agency through branch offices is prohibited.

○ In air and land freight transport, voting right of foreign
investor should be less than 20%. Also, all board members
must be Brazilians.

○ 100% foreign capital investment allowed. However, certain minimum investment amount has to be satisfied for issuingpermanent visas for resident employees.

○Foreign capital in coastal shipping is limited to less than 50%. More than half of the board members should be Brazilians. Moreover, the ships must be registered in Brazil and operated by adomestic company which has obtained a license from the National Agency for Waterway Transportation.
Peru○ 100% foreign capital investment allowed.

○ Less than 49% foreign equity is allowed for domestic○ 100% foreign capital investment allowed.
commercial air transport. However, up to 70% foreign equity isallowed after six months following permission.
In addition, the majority of management must have Peruvian nationality or permanent residency.
○ In domestic marine transport, the proportion of foreign equity must be less than 49% and the company must own at least one ship of Peruvian nationality. In addition, the majority ofmanagement must have Peruvian nationality and must be residents. 80% or more of the ship's captain and crew must have Peruvian nationality.

Mexico○100% foreign equity is allowed. However, if a foreign company takes more than 49% of a stake in an existing company in a
non-restricted industry and the investment exceeds a certain amount, the Foreign Investment National Commission's approval isrequired. 100% foreign equity is allowed.

○Domestic freight transport by land (excluding home delivery ○ 100% foreign capital investment allowed. However, even inservices) is a restricted industry and is reserved for Mexican
non-restricted industries, approval must be obtained from thenationals only or for Mexican corporations with an Exclusion of National Foreign Investment Commission, if the foreign capital
Foreigners Clause .
is over 49% and exceeds the specified amount.
○Domestic air transport, air-taxi transport, and special airtransport are restricted industries
For foreign equity participation, only up to 25% foreign equity is allowed.
○For port transport services such as towing, mooring, and chartering, shipping companies engaged in marine operations ofocean transportation, and provision of public railway services, companies with foreign equity participation that exceeds 49%
need approval from the Foreign Investment Commission pursuant to Section 8 of the Foreign Investment Act.
○ 100% foreign equity is allowed if a certain minimum
investment amount is satisfied.

○ Entry of foreign capital in customs services industry is
prohibited, except for handling the company's own freight.
Also, registered customs specialist must be Mexican.
○ Excluding integrated harbor management, harbor services forpiloting routes in home waters based on maritime laws andtourism services, foreign capital in domestic shipping andfuel/lubricant supply to ships/aero planes/railway equipment, islimited to 25% or less.

Chile○ 100% foreign capital investment allowed.

○ 100% foreign equity is allowed if a certain minimum investment amount is satisfied.

Russia○ 100% foreign capital investment allowed.

○ 100% foreign capital investment allowed.
○ 100% foreign capital investment allowed.
○ However, in principle, only Russian-registered vessels can be used in domestic sea transportation.

Saudi Arabia○ Foreign capital is limited to 75% or less.
○ A minimum capital of 20 million Riyals is mandatory.

○Foreign entry in land transportation (excluding local
passenger railway services) is not allowed.

Turkey○ 100% foreign capital investment allowed.

○ Foreign capital in domestic sea transport and port services is ○ 100% foreign capital investment allowed.
○ 100% foreign capital investment allowed.
limited to 49% or less. Entry of foreign capital in domestic○ Regardless of whether domestic or foreign, distributors andvessel services is not allowed.
custom brokers must be separate.
○ In rail transportation, only Turkish Republic State Railways,
can operate the basic rail services.

However, in transportation by Chilean-registered vessels, the foreign equity should be less than 50%, and more than half of board members should be Chileans.

Egypt○ 100% foreign capital investment allowed. However, foreign capital is not allowed in import agencies.
South Africa○ 100% foreign capital investment allowed.
Source: Reports from JETRO overseas offices. Regulations as of end of June 2015.

Copyright (C) 2015 JETRO. All rights reserved.

○ 100% foreign capital investment allowed.

○ 100% foreign capital investment allowed.

37

Chapter 2 Section 2: Service trade expansion and increasing importance of services liberalization negotiations

Service trade liberalization in process■ Further service trade liberalization by FTA
The number of FTAs with service chapters are increasing. Such FTAs incorporate a higher level of liberalization compared with ongoing foreign
capital restrictions and the GATS. Even emerging and developing economies adopting comparatively strict restrictions in the services industry haveliberalized to a certain extent through FTAs. Japan’s FTAs with ASEAN countries also include several GATS plus commitments including
maintenance and repairs. ASEAN members are currently negotiating on the ASEAN Framework Agreement on Services (AFAS) which will allow its
internal investors to take 70% stake at most. APEC is scheduled to formulate an action plan by the end of 2015 for preferential liberalization of what
are referred to as “manufacturing related services”.
■ Ongoing negotiations on the Trade in Services Agreement (TiSA)
As of July 2015, 25 countries/regions (whose share of the global services trade value is 76.0%) are participating in TiSA negotiations which started
from 2013. Each country seems to have submitted an offer which contains the highest liberalization standards they have committed among past FTAs.
Figure II-21: GATS plus commitments by Japan’s FTA partners

Figure II-20: Examples of services trade liberalization through FTAs
Services

Current status

FTA counterparty

Various
Share of foreign capital Japan
services in in service sector isAustralia
Thailand limited to less than 50%
according to the Foreign
Business Act.

Financial In the banking industry, United States
services in there are quantitative
Singapore restrictions of branches
and ATMs.
Full bank status forJapanforeign banks is limited to
one bank.
Legal
There are strict
United States
services in restrictions on the entry EUSouthof foreign capital in legal
Korea
services.

RetailPanama's constitution
services in prohibits the entry of
Panamaforeign capital in theretail industry.

United States

Partner
GATS plus commitments
countries
Singapore
Finance:Issuanceofnewlicenseand abolition of foreign equity restriction for insurance• Allows 100% foreign capital in construction
companies, granting an additional full bank license to a Japanese bank.
services.
Communications: 100% Japanese equity is allowed.
• Allows up to 60% foreign capital in restaurants
Transportation: New commitment to liberalize 35 industries, including overseas shipping andand hotels.
warehousing.
‒• Allows up to 100% and 75% foreign capital fromThailandTransportation: Abolition of cargo reservation for overseas shipping services, and other new
Australia and Japan respectively, in wholesale andcommitments in several sectors.
retail of merchandise manufactured domestically byDistribution: Up to 75% Japanese equity is allowed in wholesale and retail for products
manufactured in Thailand.
a corporation established in Thailand.
Maintenance and repair: Up to 60% Japanese ownershio is allowed in maintenance and repair
Elimination of quantitative restrictions, expansion of Citibank to expand itsof household electrical appliances manufactured in either Thailand or Japan.
service bases, ATM network connection with local operations.
Malaysia
Communications: Up to 49% Japanese equity is allowed in application service providers.
banks, within three years after FTA coming into
Transportation: New commitment on rental services of overseas freighters.
force.
Rental, lease, maintenance and repair: Up to 51% Japanese equity is allowed in rental, lease
Singapore to provide full bank status to another
Two Japaneseor maintenance and repair of certain products manufactured in Malaysia.
Japanese bank.
megabanks now have Indonesia Finance: Abolition of differencial treatment in ratio of borrowed capital restriction in leasing
full bank licenses.
business.
Law firms from FTA partner countries are allowed Various European andCommunications: New commitment to several services including leased line. Up to 40%
Japanese equity is allowed in basic telecommunication services.
to establish offices and to offer legal services
American law firms
Maintenance and repair: Maintenance and repair of some of the machinery manufactured inrelated to foreign laws. European and American
are setting up their
Indonesia is exempt from restriction.
law firms can offer all services including lawsuits, offices in South
Philippines Finance: Up to 60% equity is allowed by Japanese commercial bank.
with hiring South Korean lawyers, from July 2016 Korea.
Computer and related services: Under certain conditions, 100% Japanese equity is allowed.
and March 2017 respectively.
Communications: Expansion of the scope of liberalization in leased line and satellite services, as
Law 62 of 2012 established just before the FTA
Walmart andwell as improving the level of liberalization.
come into force, allows large scale retailers to enter Walgreens have
India
Finance: Favorable consideration to Japanese banks's applications for opening branches.
Panama. Invesment has to be over $3 million, with shown interest in
Communication: Up to 74% Japanese equity is allowed.
goods and services provided within the sameinvesting in Panama.
Distribution: 100% Japanese equity is allowed in warehousing, wholesale and single brandfranchisees.
facilities.

Source: JETRO and press reports.

Copyright (C) 2015 JETRO. All rights reserved.

Liberalization details

Effects

Notes: The chart covers only some of the examples of commitments.
Source: "Report on Compliance by M ajor Trading Partners with Trade Agreements" (M inistry of Economy, Trade and Industry) andother M ETI resources.

38

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

Huge economic gain expected by Trade Facilitation Agreement■ Trade Facilitation Agreement (TFA) expected to contribute greatly to global trade

The TFA, agreed in Bali Ministerial, which was then adopted in November 2014, will enter into force upon ratifications by more than 2/3 of WTO
members. Importers and exporters frequently encounter, especially in the customs of developing countries, a number of issues such as lack oftransparency in laws/regulations, application of these laws/regulations, frequent delays in customs clearance and so on. Therefore, the agreement,
aiming at facilitating trade by addressing these issues, is expected to bring a huge economic gain for WTO members.
■ WTO members to formulate a work program in the Doha Round, to advance the negotiations on the Information Technology Agreement(ITA) II as well as the Environmental Goods Agreement (EGA)
WTO members were engaging in the negotiation on the post-Bali work program to meet the July 31 deadline. However, they failed to narrow theirdifferences by then on remaining issues such as non-agricultural market access (NAMA), agriculture, services, rules and so on. Some WTO members
have also participated in the negotiations on plurilateral agreements such as ITA II and the Environmental Goods Agreement (EGA), in which they
worked on selection of the products to be covered in the agreements. There was good news in the ITA II in July 2015. The participating countries
agreed on 201 products to be covered in the accord. Now their focus has shifted to determining the liberalization schedule for each product selected.

Figure II-22: Overview of some of TFA elements
Purpose

Subjects

Overview

Prompt Publication of information related ・ Each member shall promptly publish the following information: procedures for importation, exportation, and transit, and required forms and documents, applied rates of
To make public Trade-related
laws/regulations and to Improve to export/import, Making available related duties and taxes of any kind imposed on, fees and charges, rules for the classification or valuation of products, rule of origin, restrictions or prohibitions, penalty provisions
for breaches, procedures for appeal or review, agreements or parts thereof with any country or countries, procedures relating to the administration of tariff quotas.
information through internet,
Transparency
・ Each member shall make available, and update to the extent possible and as appropriate, the following through the internet: procedures for importation, exportation, andEstablishment of enquiry points (Art. 1)

Preparaton for Advanced Ruling (Art. 3)

To Expedite and Facilitate
Import/Export Procedures

Trade Facilitation Measures for
Authorized Operators (AEO)(Art.7.7)

Encouragement of Single Window (Art.
10.4)

Source: WTO Secretariat

Copyright (C) 2015 JETRO. All rights reserved.

transit, including procedures for appeal or review, contact information on its enquiry point(s), etc.
・ Each member shall establish or maintain one or more enquiry points to answer reasonable enquiries of governments, traders, and other interested parties.
・ Each Member shall issue an advance ruling in a reasonable, time-bound manner to the applicant that has submitted a written request containing all necessary
information.
・ If a Member declines to issue an advance ruling, it shall promptly notify the applicant in writing, setting out the relevant facts and the basis for its decision.
・ The advance ruling shall be valid for a reasonable period of time after its issuance unless the law, facts, or circumstances supporting that ruling have changed.
・ Where the Member revokes, modifies, or invalidates the advance ruling, it shall provide written notice to the applicant setting out the relevant facts and the basis for its
decision. Where a Member revokes, modifies, or invalidates advance rulings with retroactive effect, it may only do so where the ruling was based on incomplete, incorrect,
false, or misleading information.
・ An advance ruling issued by a Member shall be binding on that Member in respect of the applicant that sought it.
・ Each Member shall provide, upon written request of an applicant, a review of the advance ruling or the decision to revoke, modify, or invalidate the advance ruling・ Each Member shall provide additional trade facilitation measures related to import, export, or transit formalities and procedures to operators who meet specified criteria,
hereinafter called authorized operators. Alternatively, a Member may offer such trade facilitation measures through customs procedures generally available to all operators.
・ The specified criteria to qualify as an authorized operator shall be related to compliance, or the risk of non-compliance, with requirements specified in a Member's laws,
regulations or procedures.
・ The trade facilitation measures shall include at least three of the following measures: (1) low documentary and data requirements, as appropriate; (2) low rate of physicalinspections and examinations, as appropriate; (3) rapid release time, as appropriate; (4) deferred payment of duties, taxes, fees, and charges; (5) use of comprehensive
guarantees or reduced guarantees; (6) a single customs declaration for all imports or exports in a given period; and (7) clearance of goods at the premises of theauthorized operator or another placeauthorized by customs.
・ Members are encouraged to develop authorized operator schemes on the basis of international standards
・ Members shall afford to other Members the possibility of negotiating mutual recognition of authorized operator schemes.
・ Members shall endeavour to establish or maintain a single window, enabling traders to submit documentation and/or data requirements for importation, exportation, ortransit of goods through a single entry point to the participating authorities or agencies.
・ After the examination by the participating authorities or agencies of the documentation and/or data, the results shall be notified to the applicants through the single
window in a timely manner.

39

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

Solving unfair trade practices through WTO dispute settlement mechanism■ Japanese government challenging unfair trade practices of its trading partners at WTO dispute settlement (DS)WTO DS contributes to bringing member countries’ unfair trade measures in conformity with WTO rules. The number of WTO cases has greatly
increased compared to that during the GATT years. In recent years, while the number of case has been decreasing, it is worth noting that the share of
the cases brought against developing countries is rising.

Traditionally, it is the US and EU that utilize the DS mechanism most, but nowadays the Japanese government is also proactively using it for not only
addressing unfair trade measures of its trading partners but also for bringing out more clarity in established trade rules. For example, in March 2014, a
panel upheld the argument made by Japan in the case against China’s export quota and tax on rare earth. China appealed, but the WTO Appellate
Body upheld most of the decision made by the panel. The panel recommended China to bring the measures in conformity with WTO rules.

Figure II-23: WTO DS cases brought by Japanese government in recent years
Respondant

China

Case
Measures related to theexportation of rare earths,
tungsten and molybdenum

Argentina

Measures affecting theimportation of goods

RussiaRecycling fee on motor
vehiclesSouth Korea

Import bans, and testing
and certification
requirements forradionuclides

BrazilCertain measuresconcerning taxation andcharges

Overview of measures
Imposition and administration of various export
restrictions on substances like rare earth, tungsten,molybdenum. These restrictions include export duties,
export quotas, and restriction on trading rights, etc.

Points at issues in WTO agreement• Imposition of export tax on rare earth and other products is in violation of the Protocol on the Accession of the People's Republic of China
Mar-12(export tax elimination obligation), the quantitative restriction on export is violating GATT Article 11 (general prohibitions of quantitative restriction) Apr-12
and the restriction on trading rights is violating Article 5 of the Protocol on Accession, and the Report of the Working Party on the Accession.
Jun-12• The panel upheld most of the arguments made by Japan, US and EU.
Jul-12• Mineral resources are not listed in the list of exceptions to the prohibitions on export tax in the Protocol on Accession and, both export tax and Mar-14
export quantity restriction is recognized as violating GATT Article 11, and restriction on right to trade is recognized as violating the Protocol on
Apr-14
Accession.
Aug-14• China sought to justify its measures on the basis of "General Exceptions" (GATT Article 20 (b) and (g) in this case), but the panel rejected its
Jan-15claim.
May-15• The Appellate Body upheld most of the decisions by the panel
The requirement to present for approval of a non• These measures are violating GATT Article 11 (general elimination of quantitative restrictions), GATT Article 10 (publication and administration Aug-12
automatic import licence: Declaración Juradaof trade regulations) and the Agreement on Import licensing proceduresSep-12
Anticipada de Importación (DJAI), requirements• The panel mostly upheld the arguments made by Japan, the US and EU
Jan-13
imposed on importers to undertake certain trade• Based on the large amount of evidence such as the statements made by high government officials, newspaper articles and so on all submitted by Aug-14
restrictive commitments.
complainants, the Panel found the existence of measures, which effectively restricted imports, and decided that the measures was in violation of
Sep-14GATT Article 11.
Jan-15• The Appellate Body upheld the decisions made by the panel
Recycling fee on motor vehicles applied discriminately • Russia imposes a recycling fee on imported and domestic motor vehicles while exempting the fee from vehicles that are manufactured by
Jul-13against imported cars
companies that are registered in Russia. The recycling fee is in violation of GATT Article 3 (national treatment on internal taxation and regulation). Aug-13• Russia also exempts the fee for manufacturers that have committed to produce their vehicles in Russia involving certain specific manufacturing
Jan-14operations in the territory of Russia, Belarus or Kazakhstan, which is in violation of GATT Article 1 (general most-favored nation treatment).
• Russia corrected the tax on disused vehicles with the enforcement of the Amendment bill in January 2014
Import bans on certain Japanese food products,• Restrictions on food import imposed in South Korea are in violation of the "Agreement on the Application of Sanitary and Phytosanitary
May-15
additional testing and certification requirements
Measures" (SPS Agreement) and GATT Article 23 (nullification or impairment) because of various reasons such as: (1) The delays inregarding the presence of certain radionuclides, and a announcement of details on the restrictions or in giving reasons for introduction after the introduction of health quarantine regulation, (2) Absence of
number of alleged omissions concerning transparency risk assessment and insufficient scientific basis, (3) Requests for additional tests and authentication
obligations under SPS Agreement. Korea's measures
were adopted subsequent to the accident at the
Fukushima Daiichi nuclear power plant in March2011.
• After tax on industrial goods related to automobiles • Various tax breaks in automobile, electronics and technology industry, among others, are violating GATT Article 3 (national treatment on internal Jun-15
was increased by 30% in 2011, a tax break was
taxation and regulation) or GATT Article 1 (general most favoured nation treatment) as the measures are discriminatory against import goods andintroduced in October 2012 on conditions ofbeneficial to only some import goods.
manufacturing or doing the research and development • Tax break measures based on conditions such as the export performance of companies are pertinent to prohibited export subsidies.
within the country (Inovar Auto)• Besides that, taxation and charges in the electronics
and technology industry, and tax advantages forexporters.

Sources: Created from data of METI and WTO

Copyright (C) 2015 JETRO. All rights reserved.

Background
Request for consultation
Consultation held
Request to establish a panel
Panel established
Panel report circulated
Appeal by China
Appellate Body report adopted
Quantitative restriction abolished
Export tax abolished
Request for consultation
Consultation held
Panel established
Panel report circulated
Appeal by Argentina
Appellate Body report adopted
Request for consultation
Consultation held
Russia rectified tax on disused vehicles

Request for Consultation

Request for Consultation

40

Chapter 3
New efforts aimed at developing global businessChapter 3 Section 1: Development of overseas markets by Japanese corporations and Critical Mass markets

Increasingly attractive “critical mass” markets as consumer markets■ Purchasing power increasing in “critical mass” markets

In emerging and developing countries, consumption is expected to grow as their income levels rise. Japanese companies have also proactively
opened up a new market in developing markets, particularly in China and ASEAN. But in other regions, Japanese companies are behind Westerncompanies in advancing into the countries with large markets and high growth rates. The Ministry of Economy, Trade and Industry indicates that it
is “necessary to work intensively and strategically on achieving critical mass in a select few promising sectors” in emerging markets.
In this report, we analyze 10 countries which are promising as consumer markets but still have room for Japanese companies to cultivate, and namethem “critical mass” markets. We selected (1) among middle-income countries other than China and ASEAN, (2) countries which have more than a$100 billion nominal GDP, and (3) the ten most largely populated countries. In “critical mass” markets, the ratio of households with an annual
disposable income of more than $10,000 is only 13.2% as of 2014, but in 2030, it is expected to increase to 27.8%. In these markets, basic spending
on food, clothing, etc. occupies more than half of consumption, but consumption is expected to diversify to services and luxury goods as well, withrising income levels in the future.

Figure III-2: 10 “critical mass” markets

Figure III-1: Share of countries by income level
(%)
40.0

Low income countries
Lower middle income countries
Upper middle income countries
High income countries

Japan, South Korea, Singapore,
Australia, US, Chile, Uruguay,
countries of Western Europe,Israel and moreCountry

Nominal GDP($100 million)(2014)

Population(10,000)(2014)

35.0

Indonesia, Vietnam,
Myanmar, India, Egypt,
and more

30.0

25.0

20.0

15.0

10.0

China, Malaysia, Thailand, Brazil,
Mexico, Turkey, South Africa and more

Cambodia, Nepal,
Tanzania and more1987 89 91 93 95 97 99 01 03 05 07 09
Note: 1) The income classifications are revised each year.
2) Listed countries in each group are based on the latest definitions.
Source: World Bank.

Copyright (C) 2015 JETRO. All rights reserved.

11

13 14
(Year)

BrazilIndia
MexicoTurkeyNigeria
Colombia
South Africa
Egypt
Pakistan
Bangladesh<Reference: East Asia>
China
Indonesia
Thailand
Malaysia

Personal
consumption rate
against GDP (%)(2013)

23,53020,495
12,827
8,061
5,737
3,849
3,501
2,864
2,501
1,854

20,277125,970
11,972
7,690
17,394
4,766
5,400
8,670
18,62915,822

62.5
57.1
69.0
70.9
72.1
61.0
60.6
81.2
81.0
72.8

103,804
8,886
3,738
3,269

136,782
25,149
6,866
3,026

36.2
55.8
51.9
51.2

Note: M iddle income countries defined by World Bank are regarded as emerging countries.
Sources: World Bank, WEO (IM F), and UN.

42

Chapter 3 Section 1: Development of overseas markets by Japanese corporations and critical mass markets

Critical mass markets ushering period of full-fledged population bonus■ Critical mass markets ushering period of full-fledged population bonus at present or in future
In critical mass markets, there are many countries seeing a full-fledged population bonus period at present or expecting one in the future. For the
population bonus period wherein the percentage of the working age population to the total population will rise, and moreover the working age
population is more than twice the dependent population, this period shall end or is approaching its end in advanced countries and a few of the emerging
and developing countries in Asia, while currently there are many countries in the critical mass markets that are ushering or will soon usher in this period.

Figure III-3: Population bonus periods of critical mass markets(10,000 people, US$, %)Population bonus period

Population(2015)

GDP per
capita(2015)

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060

Population bonus
periodRise in working age
Working age population/
Period of continued rise
population ratio + working dependant population forin working age
age population/ dependant
2 or more periods
population ratio
population for 2 or more
periods

Critical mass
markets

Reference

Nigeria

18,352

2,884

1.1

1.1

1.2

1.2

1.1

1.1

1.1

1.2

1.2

1.3

1.3

1.4

1.4

1.5

1.6

1988～2095

1988～2095--

Pakistan

18,814 1,343（2014）

1.1

1.1

1.2

1.4

1.5

1.7

1.8

1.9

2.0

2.1

2.2

2.3

2.2

2.2

2.1

1993～2072

1993～2027

2028～2047

2048～2072

South Africa

5,349

5,902

1.4

1.5

1.7

1.8

1.9

1.9

1.9

2.0

2.0

2.1

2.2

2.2

2.1

2.1

2.0

1967～2070

1967～2024

2025～2044

2045～2070

India

128,239

1,808

1.4

1.5

1.6

1.7

1.8

2.0

2.0

2.1

2.1

2.2

2.2

2.1

2.1

2.0

2.0

1967～2060

1967～20142015～2040

2041～2060

Bangladesh

16,041

1,284

1.2

1.3

1.4

1.6

1.8

2.0

2.1

2.2

2.3

2.3

2.2

2.1

2.0

1.8

1.7

1978～2051

1978～20142015～2032

2033～2051

Egypt

8,471 3,304（2014）

1.3

1.3

1.5

1.6

1.7

1.7

1.8

1.8

1.9

2.0

2.0

2.0

1.9

1.9

1.8

1972～2048

1972～2032

2033～2041

2042～2048

Brazil20,366

9,312

1.5

1.7

1.9

2.0

2.1

2.2

2.3

2.2

2.1

2.0

1.9

1.8

1.6

1.5

1.5

1967～2038

1967～2004

2005～20202021～2038

Turkey

7,669

9,680

1.5

1.6

1.7

1.9

2.0

2.1

2.1

2.1

2.1

2.0

1.9

1.8

1.7

1.6

1.5

1967～2037

1967～20092010～2022

2023～2037

Mexico12,524

10,174

1.3

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.1

2.0

1.9

1.8

1.7

1.6

1.5

1968～2037

1968～20162017～2027

2028～2037

Colombia

4,953

6,895

1.4

1.5

1.7

1.8

1.9

2.0

2.0

2.0

2.0

1.9

1.9

1.8

1.8

1.7

1.6

1967～2031

1967～20122013～2024

2025～2031

Indonesia

25,571

3,511

1.5

1.6

1.8

1.9

1.9

2.0

2.1

2.2

2.2

2.1

2.0

1.9

1.9

1.9

1.8

1972～2044

1972～20132014～2026

2027～2044

China

140,159

8,154

1.9

1.9

2.1

2.5

2.8

2.6

2.3

2.2

2.1

1.9

1.7

1.7

1.6

1.4

1.3

1974～2034

1974～1997

1998～20102011～2034

Thailand

6,740

5,612

1.9

2.0

2.3

2.3

2.5

2.6

2.5

2.3

2.0

1.8

1.6

1.4

1.3

1.3

1.2

1969～2031

1969～1991

1992～20142015～2031

United States
Europe(excludes E. Europe& Russia)Japan

32,51356,421

1.9

1.9

2.0

2.0

2.0

1.9

1.8

1.7

1.6

1.5

1.5

1.5

1.5

1.5

1.5

1963～2014

1963～1999

2000～20082009～2014

45,062

-

2.0

2.0

2.0

2.0

2.0

1.9

1.8

1.7

1.5

1.4

1.4

1.3

1.3

1.3

1.3

1973～20101973～1983

1984～1999

2000～2010

12,68233,223

2.3

2.3

2.1

2.0

1.8

1.5

1.4

1.4

1.3

1.3

1.1

1.1

1.0

1.0

1.0

1950～2005

1950～19621963～1992

1993～2005

Note 
(1) Medium fertility projection.
(2) Light grey: Ratio of working age population/Total population rises almost consistently. Grey: Ratio of working age population/Total population rises almost consistently, and working age population/dependant population (young population + aged population) is for 2 or more
periods. Shaded: working age population/dependant population is for 2 or more periods.
(3) Numeric value of chronological data is the working age population/ dependant population.
Sources: "World Population Prospects: The 2012 Revision" (United Nations), "World Economic Outlook, April 2015" (IMF)

Copyright (C) 2015 JETRO. All rights reserved.

43

Chapter 3 Section 1: Development of overseas markets by Japanese corporations and critical mass markets

Japanese corporations in critical mass markets: Investment
Figure III-4: Critical mass market’s inward FDI stock- Share of each investing country- (as of end of 2013)■ Western investments having major presence in critical mass markets(Unit: %, US$ million)

Japan’s FDI in emerging countries has been increasing. However, westerncountries have a major presence in the inward FDI stock of critical mass
markets, on the back of both geographical and historical linkage among theregions. Chinese FDI is also emerging in Africa.

Investing country

US

UK

16.0
11.4
8.7
15.1
45.3
4.9
6.1
4.5
3.3
13.0
3.2
7.8
8.6

Germany

Japan

China

15.9
18.0
11.0
3.2
4.0
6.0
48.3
10.6

5.7
1.6
0.7
2.6
2.5
10.6
4.7
0.3

7.1
5.0
5.0
4.2
2.2
0.9
2.2
0.0

0.1
5.6
1.8
0.3
0.1
0.0
3.7
14.2

1.4
0.1
7.8
0.7
0.3
0.4
0.4
0.0

249,288
10,586
8,063
715,182
391,879
112,814152,124
94,960

0.9
5.4
4.6
3.3
4.3

2.3
2.1
1.1
2.0
4.3

6.3
7.4
11.3
35.4
14.7

0.0
3.9
1.0
1.9
0.2

2.6
0.6
3.7
1.5
1.6

2,331,238
750,078
230,439
178,221
135,638

Recipient country

India
Pakistan
Bangladesh
BrazilMexicoTurkeySouth Africa
Nigeria(Reference)
China
Singapore
Indonesia
Thailand
Malaysia■ Except for East Asia, membership to chambers of commerce byWestern companies exceed Japanese companies
Membership to chambers of commerce to some extent reflects the strength ofties between the two countries and the presence of the investing country in thehost country. Japanese companies have a large membership in East Asian
countries compared to other countries. However, in other regions
memberships by American or German companies is overwhelming. Westerncompanies, besides growing their roots deep in Central and South America,
have higher membership than Japanese companies even in Southern Asia, andthus are more proactive in networking.

South Total inward
Korea FDI stock

Notes: 1) Bangladesh's data are as of the end of 2012. No data for Colombia and Egypt. 2) Shaded areas indicate
the largest investing country for each recipient. Source: “Coordinated Direct Investment Survey” (IM F).

Figure III-5: Number of Japanese, US and European chamber of commerce members in emerging markets(in parenthesis are members from the country of that chamber’s nationality)
Critical mass markets

Country*1*2(Reference)*4*3

Chamber'snationality

India

Pakistan

Bangladesh

BrazilMexicoColombia

Japan

1,209

67

183

373
(231)

2,125

65

230

approx. 4,600

370(approx. 90%)
1,500
(approx. 85%)620
(approx. 80%)

70
(19)
736
(approx. 40%)298
(approx. 210)approx. 280

United States

approx. 7,000(approx. 1,500)

199

620

United Kingdom

81

approx. 100

n.a.

France

550
(180)

33

140

Germany

Spain

n.a.

n.a.

n.a.

1,266
(1,263)
approx. 400(approx. 300)
930
(82)
256
(approx. 60%)

*5

*6

*7

TurkeySouth Africa

China

Singapore

Thailand

Malaysia

89

64

23,094

813

1,596

585

112

225

20,210

737

650

344

797

More than 500

4,417

502

550

342

123

390

144

3,282

approx. 400

570

approx. 360

More than 300

150

33

198

2,142

approx. 600

224

More than 250

585(approx.80%)

207(approx. 70%)

approx. 70

45

1,000

n.a.

n.a.

46

Notes: ① The numbers of Japanese companiess are from the following sources: *1 Embassy of Japan in India, *2 JETRO Karachi, *3 The Japanese Commerce and Industry Association in Dhaka, *4 The Japanese Society of Istanbul, *5 "China Trade and External
Economic Statistical Yearbook" (National Bureau of Statistics, China, as of year 2012), *6 The Japanese Chamber of Commerce, Bangkok,*7 According to JETRO Kuala Lumpur survey, there are 1,438 firms.
② *1 The number of US companies based on the Indo-American Chamber of Commerce (IACC), *2 The number of UK companies are based on press reports, *5 The sources are the same as in ①.
③ For reference, there are 725 Japanese companies, more than 3,500 US companies, more than 2,400 German companies, and more than 1,000 UK companies, according to each chamber of commerce.
④ Not only companies from the concerned countries, but multinational and individual members including local companies, also join the chamber of commerce. Thus, unless otherwise specified, the data indicates the total numbers of members regardless of thechamber's nationality. On the other hand, since companies do not have the obligation to register themselves as members, there seems to be absent companies not covered by these numbers to a respctable degree. Shaded area indicate the largest numbers for each market.
Sources: Unless there is special mention, each Chamber of Commerce (as of 2014 to May, 2015).

Copyright (C) 2015 JETRO. All rights reserved.

44

Chapter 3 Section 1: Development of overseas markets by Japanese corporations and Critical Mass markets

Japanese corporations in critical mass markets: Market share
Figure III-6: Company market shares by consumption good in critical mass markets■ Rival companies with highshare in consumer goods
Japanese companies haveoccupied large shares within thecritical mass markets for various
commodity items, such as electric
appliances, tissue and hygiene
products and alcoholic drinks.
However the presence of rival
companies surpasses Japaneseenterprises. European enterprises
in household electrical appliancesand home care, Korean
enterprises in electric appliances,dominate the market in almost all
the critical mass countries.
Also, there are several industries
which are dominated by theregional enterprises. In India andPakistan, regional enterprises are
influential notwithstanding thetype of industry, and they are themain players in overall retailing(with the exception of Central andSouth America where foreign
enterprises have a large market
share).

India
Categories
Household electricalappliances(Reatail volume)

Electric appliances(Retail volume)

Alcoholic drinks(Total volume)

Tissue and hygiene(Retail volume)

Retailing(Retail value)

Categories
Household electricalappliances(Reatail volume)

Electric appliances(Retail volume)

Alcoholic drinks(Total volume)

Tissues and hygiene(Retail volume)

Retailing(Retail value)

Copyright (C) 2015 JETRO. All rights reserved.

Company name(Nationality)

Pakistan
Share(%)

Company name(Nationality)

BrazilShare(%)

Company name(Nationality)

MexicoShare(%)

Company name(Nationality)

Colombia
Share(%)

Company name(Nationality)

Share
(%)

Bajaj Electricals
Crompton Greaves

13.0
8.2

Whirlpool (USA)Electrolux (Sweden)

10.8 Jarden (USA)10.1 Colgate-Palmolive (USA)11.1 Landers & Cia
7.7 Jarden (USA)

11.5
10.9

Usha International

6.2

SEB (FR)

9.9 Controladora Mabe

6.9 Spectrum Brands (USA)

10.0

Philips (NL)

5.0

Mondial

7.8 P&G (USA)5.7 SEB (FR)9.6

Sunflame Enterprises

4.8

Britânia

6.0 Spectrum Brands (USA)5.7 HACEB

8.5

Samsung (S.Korea)
Nokia (Finland)

22.6
14.2

Samsung (S.Korea)
LG (S.Korea)

29.7 Samsung (S.Korea)
15.5 Nokia (Finland)

19.8 Samsung (S.Korea)
13.6 Alcatel-Lucent (FR)

14.9
7.6

Micromax

10.2

Nokia (Finland)

8.4 LG (S.Korea)

12.0 Nokia (Finland)

7.3

Karbonn Mobiles

7.7

Sony

5.6 Apple (USA)

7.5 LG (S.Korea)

5.9

LG (S.Korea)

5.9

Google (USA)

3.8 Sony

6.8 Sony

4.7

UB
SABMiller (UK)
Pernod Ricard (FR)ABD
Carlsberg (Denmark)P&G (USA)42.6 Murree Brewery
12.6 Lucas Bols (NL)
5.4 Russian Standard (Russia)
3.3 Carlsberg (Denmark)3.3 Aujan Industries（UAE）
42.4 Packages

80.9 Anheuser-Busch (USA)
2.1 Kirin Holdings
2.0 Cervejaria Petrópolis
1.0 Heineken (Germany)
0.6 Bavaria (NL)
31.9 Kimberly-Clark (USA)56.2 Anheuser-Busch (USA)13.8 Heineken (Germany)
9.8 Damm (Spain)
5.8 Pernod Ricard (FR)
1.6 Brown-Forman (USA)20.7 Kimberly-Clark (USA)47.9 SABMiller (UK)40.7 Fábrica de Licores de Antioquia
3.3 Empresa de Licores de Cundinamarca
1.1 Bogotá Beer
0.9 Industria Licorera de Caldas60.7 SCA Group (Sweden)

93.7
1.6
0.7
0.5
0.4
44.7

Johnson & Johnson (USA)11.7 P&G (USA)30.4 P&G (USA)14.2 SCA Group (Sweden)

7.9 Kimberly-Clark (USA)16.1

Unicharm

7.7 Jasmine Tissues

6.1 Santher10.8 P&G (USA)

7.1 Tecnoquímicas

14.5

Kimberly-Clark (USA)6.9 Santex Products

4.1 Hypermarcas

7.7 Controladora Mabe

5.4 Kruger (Canada)

6.8

Avantha Group

3.0 Misk Paper Mills

3.6 Mili

6.9 Empresas CMPC (Chile)

2.2 Johnson & Johnson (USA)

4.2

Flipkart Online Services

0.5 Utility Store Corp of Pakistan

2.2 Casino Guichard-Perrachon (FR)6.4 Wal-Mart Stores (USA)10.7 Casino Guichard-Perrachon (FR)7.1

Tata Group

0.5 Canteen Stores Department

0.4 Wal-Mart Stores (USA)3.3 FEMSA

3.6 Falabella SACI (Chile)

2.9

Future Group

0.4 Carrefour (FR)0.3 Carrefour (FR)

1.7 Organización Soriana

3.4 Olímpica

2.7

Reliance Group

0.3 Imtiaz Supermarket

0.2 Lojas Americanas

1.7 Grupo Coppel

2.8 Cencosud (Brazil)

2.6

Godrej Group

0.2 PSO Outlets

0.2 Cencosud

1.2 Liverpool

2.2 Colombiana de Comercio

2.3

TurkeyCompany name(Nationality)
Arçelik
BSH Bosch & Siemens (Germany)

Philips (NL)SEB (FR)
Arzum Elektrikli
Samsung (S.Korea)
Nokia (Finland)Apple (USA)Sony
LG (S.Korea)
Anadolu
Carlsberg (Denmark)
Diageo (UK)
Kavaklidere
SABMiller (UK)
P&G (USA)
Hayat
Eczacibasi Group
Ontex bvba (Belgium)
Kimberly-Clark (USA)BIM Birlesik Magazacilik
Migros Tic
LC Waikiki
Koç Holding
A101 Yeni Magazacilik

South Africa
Egypt
Nigeria
Notes: (1) The shaded cells are
Share
Company name
Share
Company name
Share
Company nameShare regional enterprises. Thick(%)(Nationality)(%)(Nationality)(%)(Nationality)(%) borders are Japanesecompanies. FR, SW, NL are
23.1 Spectrum Brands (USA)21.4 Toshiba
18.2
short for France, Switzerland,
9.0 Philips (NL)
8.1 Electrolux (Sweden)
13.4
Netherlands, respectively.
7.7 Arçelik (Turkey)
6.6 Universal Group
6.9(2) Consumer appliances refers
7.0 De'Longhi (Italy)
6.4 Fresh Electric Co
6.7
to dishwashers, washing
5.6 P&G (USA)5.9 Kiriazi Group
6.4
machines, cooking appliances,
32.8 Samsung (S. Korea)
28.1 Nokia (Finland)
25.8
refrigerators, air conditioners,
10.1 Nokia (Finland)
24.9 Samsung (S. Korea)
18.4
irons, beauty appliances,
7.9 BlackBerry (Canada)
8.1 Sony
7.1
vacuum cleaners, etc. Consumer
electronics refers to computers
7.6 LG (S.Korea)
6.6 Apple (USA)6.6
and peripheral accessories,
4.1 Apple (USA)
5.4 LG (S.Korea)
6.5
video equipment,
66.4 SABMiller (UK)63.3 Heineken (Germany)
69.2 Heineken (Germany)
61.6 telecommunication equipment,
18.2 Distell
9.2 Brauerei Hurlimann (SW)
13.2 Diageo (UK)25.5 gaming devices, etc. Tissues
6.0 UB (India)
8.3 Egyptian International Beverage
3.6 SABMiller (UK)
4.2 and hygiene refers to tissues,
1.4 Heineken (Germany)
5.0 Carlsberg (Denmark)2.4 Sona Breweries
0.4 cotton, diapers, sanitary
1.3 Diageo (UK)1.2 Al Masria Al Alamia
0.8 Carlsberg (Denmark)0.4 napkins, etc.
22.2 Kimberly-Clark (USA)23.7 P&G (USA)46.2 P&G (USA)30.5 (3) Data on consumer
17.0 Nampak Ltd
20.4 Nuqul Group (Jordan)
21.6 Boulos Group
14.2 electronics and alcoholic drinks
15.0 P&G (USA)17.3 Zeritis Group (Greece)
7.4 Kimberly-Clark (USA)13.3 are as of 2013.
(4) Especially for retailing, even
7.5 Lil Lets Group (UK)
2.3 Egyptian Co for P aper & Tissue P roducts
3.1 Wemy Industries
6.6
the leading company's share is
4.5 Johnson & Johnson (USA)
2.2 Unicharm
2.1 Epesok Paper Mills
2.1 comparatively small. This is
Shoprite
Holdings(SouthAfrica)3.6 Shoprite Holdings
10.6 Mansour Mfg & Distribution
1.3
0.8 because the share of "other
1.8 Pick 'n' Pay Stores
8.1 Ragab Sons
0.8 Exclusive Stores
0.4 companies" whose specificInternationale
Spar
Centrale(NL)
1.4
6.1 Carrefour (FR)
0.8 Everyday Group0.3 names are not avaliable is large.
RocketInternet
GmbH(Germany)
1.2 Wal-Mart Stores (USA)4.8 Anwal (Saudi Arabia)
0.5
0.3 Sources: Euromonitor
1.2 Woolworths Holdings
4.0 Tawheed & El Nour
0.4 Artee Industries
0.3 International

45

Chapter 3 Section 1: Development of overseas markets by Japanese corporations and Critical Mass markets

Trends in expansion into critical mass markets■ The number of expansion through M&As into critical mass markets has increased sharply
The number of expansions through M&As in the world’s critical mass markets was at 2,518 from years 2010 to 2012, showing an increase of morethan six times while it was 417 in the three years ranging from 1992 to 1994. By industry type, the share of the manufacturing industry occupied in the
total number of M&A cases is on the decline, while the share of the non-manufacturing industries such as retail, wholesale and services is on the rise.
■ Trends in Japanese firm’s business expansion by country and approach
Looking at the trends in Japanese firms’ business expansion into the critical mass markets, in most countries, greenfield investment was more than half.
In Mexico, the trend shows that many automobile companies have advanced alone, with greenfield investment accounting for 81.4% of all expansion
cases. In other countries, the rate of expansion through alliances with regional enterprises is also high in addition to greenfield investment. The rate of
expansion through the establishment of joint ventures is higher in Bangladesh, Turkey and India, the rate of acquisition and merger based expansion ishigher in South Africa, Turkey and Brazil, and the rate of business alliance-based expansion is higher in countries such as Egypt, Colombia and South
Africa.

Figure III-8: Trends in Japanese firms’ business expansion bycountry and approach (January 1, 2010 – April 13, 2015)

Figure III-7: Trends in expansion through M&As into critical mass
markets by industry in world(%)

Manufacturing

Retail/Wholesale

ServiceFinanceResource

Other

No. of investments (right axis)(No. of investments)

100.0

3,000

2,500

70.0
2,000
60.0
50.0

1,500

40.0

(Case, %)Business/
Capitalcapitalparticipation
alliance

Total

Greenfield
investment

1,700

62.9

9.1

9.7

1.5

11.6

5.1

India

829

61.6

10.4

9.4

0.7

12.7

5.2

Mexico

349

81.4

7.2

1.7

2.0

5.4

2.3

Brazil

292

57.5

4.5

15.4

2.1

13.4

7.2

Turkey

82

50.0

11.0

19.5

-

7.3

7.3

South Africa

52

42.3

-

26.9

-

21.2

-

Bangladesh

45

57.8

28.9

-

-

-

-

Colombia

18

38.9

-

-

-

27.8

-

Egypt

13

-

-

-

-

38.5

-

90.0
80.0

Cooperation
withgovernment

Establishmentof a joint
ventureOverallcritical mass
market

M&A

1,000
30.0
20.0
500

10.0
0.0

0
1992～1994

1995～1997

1998～2000

2001～2003

2004～2006

Sources: Thomson Reuters

Copyright (C) 2015 JETRO. All rights reserved.

2007～20092010～20122013～2015.4

Note: Only items with five or more cases are valid.
Source: Nikkei ValueSearch

46

Chapter 3 Section 1: Overseas Business and Exploration of Critical Mass Markets by Japanese Companies

Making inroad into markets through tie-ups with local enterprises■ For making inroad into critical mass markets, partnering with local firms good option
Making inroad into huge and complicated “critical mass” markets alone, many firms, especially those trying to sell consumer products aswell as in the service sector, are likely to face a number of obstacles in exploring those markets, acquiring customers and so on. This
indicates that tie-ups with local firms or third-country companies with abundant knowledge of and experience in the markets can be
another option, which may ease entrance into the markets. The forms of partnership often observed in the markets include: (1) business
partnerships, (2) joint ventures, (3) mergers and acquisitions (M&As), and (4) support to local governments for programs such as
improvements in the system of healthcare, education, etc. US/EU companies, engaging in these tie-up schemes early on, havesuccessfully gained ground in the critical mass markets.
Figure III-9: Examples of Japan/US/European firms partnering with local firms in critical mass markets
Form of tie-up Host country
Industry
Company Home country
Overview
Business
India
Pharmaceuticals Novartis
Switzerland• Announced in July 2013 an agreement related to vaccine development and license
partnershipprovision with the local bio-pharmaceutical company Biological E.
• Objective was to provide a vaccine that is convenient and affordable in developing
countries.
• Biological E aims at providing a WHO certified vaccine to developing countries,
after continued development of a combination vaccine for abdominal typhoid andparatyphoid from Novartis.
MexicoTransformers
Spellman
United States • Maintain several plants in the northern part of Mexico with most of the products
exported to the United States.
• Focus today on Mexican markets. By forging an alliance with the local distributor
Electrónica Seta, its sales to the Universidad Nacional Autonoma de Mexico andInstitute of Technology's research center, as well as business with Pemex and eachairline are progressing.
South Africa Cosmetics
SHISEIDO Japan• Partnered with local sales agency Prestige Cosmetics for domestic sales of
SHISEIDO products. Sales began in October 2010.
• Partnering with this local company, SHISEIDO started over the counter sales
through a beauty consultant to sell their brand in local high end department stores.
Joint ventures India
Food
UNIVEG
Belgium• Announced in April 2014 about the establishment of a joint venture with Motherson
Sumi Systems Ltd., a subsidiary of the local Samvardhana Motherson Group.
• With the modernization of the supply chain, the supply of high quality raw fruits to
Indian markets and foreign markets is possible.
TurkeyAuto-parts
Bridgestone Japan• Established in 1988 the joint venture company Brisa, with the Turkish Sabanci
Group.
• In September 2013, reached an agreement with Aksaray Province OrganizedIndustrial Zone, regarding the acquisition of a site for the construction of a newpassenger car radial tire plant with total investment amount reaching approximately ¥28.0 billion.
MexicoBeverages
PepsiCo
United States • Established a bottling joint venture between the local Grupo Empotrados-Unidos
and the Venezuelan Empresas Polar.
• The former aims at introducing its sales network and experience in the country andthe latter is to introduce operation techniques.
BrazilTravel Agency JTB
Japan• Established Altur JTB by partnering with the local major travel agent Walhalatur,
now expanding business in the country as well as other regions in South America• Expanding BTM (business travel management) business that targetted both Brazilian
and South American markets, while also striving to expand MICE (meetings,
incentives, conferences, exhibitions).
• Established a new division oriented for Brazil-based Japanese customers within
Alatur JTB, and planning to expand the customer base to include Asian companies
operating in Brazil and other parts of South America.

Form of tie-up Host country

Mergers andacquisitions

Bangladesh

Industry
Medicalequipment

Company
Nipro

TurkeyFood

Ajinomoto

Egypt

Pharmaceuticals Otsuka
Pharmaceutical

MexicoBrazilCourier

Collaborations India
withgovernment in
upgradinghospitals andeducational
institutions

Colombia

Infrastructure

Medicalequipment

Home country
Overview
Japan• Announced decision to invest in JMI Pharma Ltd. in Bangladesh, by subscribing newly
issued shares so as to make it Nipro's subsidiary by the end of March 2012.
• Could take advantage of their cooperative relations based on the manufacturing system andsales basement established by JMI Pharma Ltd. for effectively promoting the pharmaceuticalbusiness.
Japan• Agreed in November 2013 to acquire 50% of the shares of the local food company Kukre.
• With the strong branding and distribution capability of Kukre, and by including a wide rangeof product development and production techniques of Ajinomoto, strengthening existing
business and expanding into new food products was possible. In the future, the plan is tostrengthen development into the Middle Eastern and Central Asian markets.
• Without giving up on direct entry into the market, Ajinomoto is also considering businessdevelopment in Turkey through learning from local companies, because in this country, which
has a culture, customs and religion different from Japan, there remain things that Japanesecompanies do not know how to handle or cope with.

• Announced in the middle of August 2014 the acquisition of local IV manufacturing and sales
company Ateco pharma Egypt.
• With the acquisition of Ateco, the manufacturing capabilities for transfusions increased by
1.5 times, and the company could respond to the high demand.
• The plan is to supply IV products not only within Egypt but also export products to theMiddle East and various countries in Africa.
FedEx
United States • The company has proactively acquired local companies in Central and Southern America. It
acquired MultiPack in Mexico and Rapidão Cometa in Brazil. The aim was to increase
market share and reduce competition through these acquisitions.
• In Brazil, there are many instances where the acquired company does not meet thecompliance standards of the United States. The company selected Rapidão Cometa becauseof its long history of collaboration.
Mitsubishi Heavy Japan• Signed a memorandum in January 2011 with Gujarat State government of India and DelhiIndustries
Mumbai Industrial Corridor Development Corperation (DMICDC) to collaborate in thedevelopment of an environmentally friendly smart community.
• In order to promote the development of the smart community, which creates energyconserving, low-carbon, next-generation urban infrastructure through the introduction of themost advanced energy-saving technologies and urban transportation systems, MHI will form a
consortium with four other Japanese companies - Mitsubishi Electric Corporation, Mitsubishi
Corporation, Mitsubishi Research Institute, Inc. and the Electric Power Development Co.,
Ltd. (J-POWER)
Medtronic Plc
United States • Established the regional hub office for the Andian region in Bogota in 2007. Collaborations
were made for hospitals and clinics, and a training center for doctors was set up in Bogota in2010.
• Carried out training by inviting more than 100 doctors each year from the entire Andes area.
Selling its products while collaborating for improvements in health care systems withgovernments.
Japan

Source: Compiled from interviews by Americas Market Intelligence (AMI) with each company, JETRO trade publicity, press release of each company and various
magazines.

47
Copyright (C) 2015 JETRO. All rights reserved.

Chapter 3 Section 1: Overseas Business and Exploration of Critical Mass Markets by Japanese Companies

Careful checks on business partner candidates necessary in each process■ Careful deliberation for each process necessary for tie-up
For any form of partnership, careful business partner selection and due diligence (DD), closing and post-merger integration (PMI) is essential. For
joint ventures, selection of a partner with shared management philosophies. For acquisitions, comprehensive check-ups on business conditions,financial situations and labor conditions of the target company. For closing, inclusion of a cancellation policy in the contract. And for PMI,
management of personnel and financial affairs of the acquired partner.
■ Insufficient financial information on conglomerates and family businesses
Japanese firms tend to select local agencies to whom they have entrusted sales of their products/services prior to advancing into the market, or local
firms with whom they have worked before, for their partner candidates. Moreover, in critical mass markets, Japanese firms often choose groups orfamily businesses, and encounter difficulty in obtaining detailed financial information from them during the DD process. PMI by Japanese firms
reveals that many pick top management of the acquired company as new CEOs while often replacing heads of human resources and financedepartments of the old companies.

Figure III-10: Things to consider in each process for joint ventures and M&As in critical mass markets

Explanations andnotes for
each
phase

• Clarifying goals of the joint
venture/acquisition based on theoverseas business strategies• Difficulties in making inroads
into critical mass markets alone,
especially in BtoC market.
There are cases when it isbeneficial to partner with local or
third country company

Elaboration of strategy

Comments from thecompanies
in eachcountry• Main objective of the allianceby a Japanese company with alocal enterprise: (1) Expansionof sales channel, (2) Acquisitionof licenses, (3) Collection ofcustomer information (4) Rapid
localization (India, Turkey, andBrazil)• Acquisition preferred if weightis given to unifying business
management while JV preferredweight is more on growing
together with the partners (India,
Turkey, and Brazil)
・ Cultures, traditions andreligions different in the hostcountry. Exploring businessdevelopment there whilelearning from the business
partner (Turkey)• Search for business partners incompany lists held by investmentbanks and trust banks, pastcustomers and business partners,
distributors or market reports• Selection of a business partner byconsidering its business, share,
performance and growth prospects• After negoting with the business
partner, conclude basic agreement

Selection of a business
partner• Selected a sales agent as thebusiness partner due mainly to its
solid dealer network base andsoftware development abilities(Turkey)• From among local companies
which were business associates in
the past, selected a joint venture
partner with an excellent
performance (Brazil)• Selected a local company with ahigh domestic market share as abusiness partner (Brazil)• Selected a joint venture partnercompany having respect forJapanese culture and sharing
similar management philosophies(Brazil)

Sources: Compiled from interviews with each company by JETRO, and JETRO Sensor

Copyright (C) 2015 JETRO. All rights reserved.

• Through detailed study,
evaluate profitability and risk ofthe business partner and assesscompany value• Necessary to study the labor,
taxation and large corporationgroups in critical mass markets• Conclusion of contract,
payment, etc.
• In case of establishment of a
joint venture, it is necessary to
stipulate the cancellation clauses
by taking into consideration themeasures on dissolution of thepartnerDue diligence (DD)

Closing contracts• Many companies unlisted, andhence difficult to obtain financial
information (Turkey)• Confirmation on existence oflabor and tax law suits andpayment of taxes (Brazil)• Compliance awareness is low(Brazil)• Compared to the US, loose
standards for acquisitions (Brazil)• Quoted prices high, since
European firms were cheaper,acquired a European company
with a subsidiary in Brazil andadvanced into Brazil (Brazil)• Due to labor and corruption
problems under the same groupcompanies, and because ofcollective responsibility, the due
diligence targets needed to be
widened to associated partners of
the acquisition targets and joint
venture companies (Brazil)• Retroactivity of the income tax
debt is for a period of five years.
During due diligence, it isnecessary to confirm the income
debt status by tracing back five
years (Brazil and Mexico)• Did not include the datailed
cancellation clause in the contracts
for establishment of joint ventures.
Now facing a difficult timeadvancing the talks with the JV
partner about cancellation (India)• Keeping in mind the risk ofcancellation of the joint venture.
Necessary to clarify how and whatcompany will absorb (acquire) theother company in the memorandumof articles. (Mexico)• Take note of laws for agency
protection. There are times when it
becomes necessary to make hugecompensations to local agencies
after sigining the contract.
Necessary to avoid contracts thatare vague and can be read as both
agency and distributor contracts.
(Colombia)• Huge difference in income tax
withholding rate. Depending on thetype of contract: franchise, license,or technology provision(Colombia)• Joint management and businessintegration with the business
partner after closing the contract• In case of business integration,
cut costs through reduction in
duplication of duties and system
integration• Examination of personnel of thebusiness partner, handling ofacquired personnel, etc. areimportant

Post merger integration(PMI)• Sharing ideologies with joint
venture partners, and having theholding company exert control
over subsidiary companies(Brazil)• Changes in heads of financialand HR division. This is for risk
aversion against fraudulent
accounting and recruitment of
personnel through personalconnections. (Brazil)• Expectations from employees
toward the acquiring company
high. Thus increasing amenities
and carrying out fair evaluation
system (Brazil)• After acquisition, gradually
introducing Japanese rules. Big
disparity exists and thus very
difficult. (Brazil)• Not having spent much time ondue diligence, facing difficult
situation in PMI (Brazil)

48

Chapter 3 Section 1: Overseas Business and Exploration of Critical Mass Markets by Japanese Companies

Exploring frontier markets in cooperation with the companies from critical mass markets■ Partnering with third-country companies with abundant local knowledge and experience
It is fair to say that local firms can be the main targets of consideration by Japanese companies for potential partners as they have an advantage in theirknowledge and experience in domestic markets. But cases of partnering are often observed with third-country companies, such as highly experienced
firms from the US and the EU and a few Asian companies in critical mass markets, which have a long history of local operations. This trend is
especially strong in Mexico, Brazil and South Africa. The reason for this type of alliance being: (1) Maintaining good business relations in the countryof origin of partners and there agreeing on tie-up operations globally, (2) These firms have steadier corporate governance than local firms of criticalmass markets, and (3) The value of these firms is shrinking due to the economic downturn back home.
■ Moving into “frontier” markets through alliances with critical mass market firms
There are some cases where Japanese firms partner up with critical mass market enterprises to enter into the surrounding smaller markets. In manycases, the neighboring countries of the critical mass markets are unknown to Japanese firms, but are well known to those critical mass market firms.
Thus, partnering with companies from critical mass markets can be an option for those who want to explore the surrounding countries. For example,
Mitsubishi Corporation, by partnering with the Turkish Calik Enerji, a company well versed with Turkmenistan, successfully won a project for theconstruction of a large scale fertilizer plant in said country in August 2014.

Figure III-11: Examples of alliances in third countries between Japanese companies and critical mass market companies• Financing

Example 1. Tie-up in the water/waste water treatment project

Sumitomo Mitsui Banking
Corporation (Japan)

SUMITOMOCORPORATION(Japan)Saudi Arabia
WABAG (India)

ABSA Bank (South Africa[subsidiary of UK Barclays])

Mozambique• Providing water treatment
technology, pricecompetitiveness,management know-how• Providing Centaur adevelopment and sales
license for a drug thatcures Herpes Zoster in
Asian countries

Example 3. Tie-up in banking service industry

Bahrain

Egypt

Example 2. Tie-up for the development and sale ofthe drug for Herpes Zoster

aRigen Pharmaceuticals Ltd. (Japan)• Starting sales within India first• Undertaking all development costs fromclinical trials to patent applications andpermissions• After product launch, payment of royalty inaccordance with turnoverSource: Press releases from the individual companies

Copyright (C) 2015 JETRO. All rights reserved.

• Along with Mitsubishi Heavy
Industries, responsible for thedesign, manufacture,procurement and commissioningof the plant

Example 4. Order request for large scalefertilizer plant

India
Sri Lanka

Centaur Pharmaceuticals
Ltd. (India)• Partnering in the banking service in South Africa in2010• Expansion of similar focus in the Sub Sahara African
region• Announcement in January 2014 to have businessalliances in Mozambique, where large scale projects by
Japanese companies continue to take place

Nepal

BhutanMitsubishi
Corporation (Japan)

GAP, Calik Holding(Turkey)

Turkmenistan• Responsible for all construction
works including detail engineeringand design49Chapter 3 Section 1: Overseas Business and Exploration of Critical Mass Markets by Japanese Companies

Expectations high on Hispanic market, critical mass market in US■ US Hispanic population is projected to reach around 30% of the entire population by 2060.
According to the US Census Bureau, in July 2013, the US Hispanic population was about 54 million. The rapidly-growing Hispanic population is
forecasted to increase from 17.7% in 2015 to 20.3% in 2025, 25.3% in 2045 and 28.6% in 2060.
■ Getting into unique Hispanic markets requires approach tailored to their needs
Marketing activities on Hispanic consumers often requires the careful considerations of their awareness and nostalgia for their families’ country oforigin, the usage of Spanish language or contents that touch their core value as well as face-to-face contact with them. Hence, an approach different
from general US markets such as over-the-counter demonstrations and sampling is required. In addition, since the rate of usage of internet and smart
phones by youths is higher than any other race, it is important to use various mass media. Some US companies and Japanese companies now see the
Hispanic market separately from the general US market and have begun market strategies carefully tailored to the Hispanic population.

Figure III-12: Population pyramid of Hispanics and whites the US<Hispanic>(age group)

Female女性<European White>

Male
男性

>90
85～89
80～84
75～79
70～74
65～69
60～64
55～59
50～54
45～49
40～44
35～40
30～34
25～29
20～24
15～19
10～14
5～9
<5
-3000000 -2000000 -1000000

Female女性(age group)

Industry

Male
男性

Media

>90
85～89
80～84
75～79
70～74
65～69
60～64
55～59
50～54
45～49
40～44
35～40
30～34
25～29
20～24
15～19
10～14
5～9
<5
0

1000000

2000000

3000000-10000000

Figure III-13: Examples of US companies’ marketingstrategies tailored to Hispanic consumers

Foods

Company

Date

TurnerBroadcasting(CNN)
Business Wire
CNET

3/1/97・ Began broadcasting CNN Espanol. The broadcasting coverage
have been expanded to the entire Latin America.

7/1/08
9/1/13・ Began "Latino Wire" news content service in empanel.
・ Partnered up with "Latin World Entertainment," a Hispanic
talent management and entertainment marketing firm to open
website in Espanol.

Nestle4/1/14・ Began campaign for Hispanic consumers by partnering up
with "Superior," a supermarket chain mainly operating inthe southern California region.
・ Delivered catalogues featuring "El Major Nido," a website
established in 2011 which listed various recipes for Nestle
products.

MacDonald-5000000

05000000

10000000

Retails

Walmart

3/1/09[Material] Created from the 2012 American Community Survey

Telecomm AT&T
unications

Copyright (C) 2015 JETRO. All rights reserved.

Source: Campanies' news release

Overview

・ Introduced scholarship programs for Hispanic students andtraining programs for Hispanic workers.
・ Always ranked among the top in terms of spending onmarketing for Hispanic markets.
・ Won the Marketer of the Year Award from Association of
Hispanic Advertising Agencies (AHAA) in 2014.
・ Opened "Supermercado", food stores for Hispanic consumers
in Arizona and Texas.
・ Since then, opened new stores in California, Florida, New
Mexico and so on.
・ Won the Marketer of the Year Award from AHAA in 2013.
・ Replenished stores with Spanish languages in the Hispanicconcentrated areas in California, Florida, New York and Texas.
・ Invested in programs aiming at upgrading of life such as
education in Hispanic community
・ Had "Mobile Movement" campaign, targeting for Hispanic
youngsters, which mainly featured their suffering in balancing two
different cultures (US and Hispanic), speaking "Spanglish"(mixture of Spanish and English).

50

Chapter 3 Section 1: Development of overseas markets by Japanese corporations and Critical Mass markets

Scale of US economy to surpass total of 50 emerging countries
Figure III-14: Comparisons of economic scale between US states andother countries (2014)■ Economic scale of each state matches with prospective emerging
countries
The scale of the US economy matches that of 50 emerging countries.
California’s GRP, which is the largest economy among US states, surpasses
India’s GDP. Texas’ GRP, which is the second largest economy, surpasses
Mexico’s GDP. Personal consumption in the US occupies about 70% of GDP.
The difference in personal consumption between 2013 and 2014 (US$446
billion) surpasses the GDP of UAE and Thailand.
■ Consumption patterns greatly differ among regions
The US is expected to continue to show economic recovery from “Lehman
shock” along with upward trends in employment and income. Thus,
expectations toward the biggest market of the world are generally highamong companies. Caution is, however, needed when one attempts to enter
into the market in which consumption trends differ greatly among the regions.
For instance, the state of California has the largest consumption base of all
the states, maintaining a huge lead over the 2nd ranked Texas. However, thestate falls to 2nd in spending on automobiles and automotive parts, following
the top-ranked Texas. Ranked third in total consumption, New York is
ranked 2nd to California when it comes to spending on clothing andentertainment. In addition to regions, consumption patterns also largely differ
among races, income brackets and so on. Thus, it is imperative for acompany to examine markets carefully and to determine targeting on which
region, state, city, and race best fits their products and/or services.

Figure III-15: Top 10 consumption values, by state and product (2012)
All
Rank

State

1 California

Household durables

Automobiles and automobile components
Consumed value Rank

1,412,648

State

Consumed value

Rank

State

Food

Consumed
value

Rank

State

(US$ million)
Entertainment products

Clothing
Consumed
value

Rank

State

Consumed
value

Rank

State

Consumedvalue

1 Texas45,1201 California

32,218

1 California

101,079

1 California

45,647

1 California

51,746

2 Texas840,967

2 California

39,9342 Texas

23,0482 Texas69,751

2 New York33,6982 New York27,7643 New York822,789

3 Florida

25,096

3 Florida

19,0193 Florida

56,0783 Texas31,7193 Texas

25,8494 Florida

652,058

4 New York

18,632

4 New York

18,2244 New York52,135

4 Florida

18,833

4 Florida

20,731

5 Pennsylvania

480,144

5 Pennsylvania

16,7385 Pennsylvania

10,416

5 Pennsylvania

36,4115 Illinois

15,984

5 Washington

14,027

6 Illinois

467,266

6 Illinois

16,0796 Illinois

10,0546 Illinois

34,002

6 New Jersey

13,933

6 Pennsylvania

11,646

7 Ohio382,555

7 Ohio14,606

7 New Jersey

9,333

7 Ohio29,307

7 Pennsylvania

13,6887 Michigan

10,5498 New Jersey

378,108

8 North Carolina

12,8058 Ohio8,309

8 New Jersey

27,2698 Ohio11,1548 Illinois

10,0499 North Carolina

310,999

9 Georgia

12,6439 North Carolina

8,292

9 Georgia

25,826

9 Georgia

10,3489 Massachusetts

9,706

10 Georgia

309,690

10 New Jersey

11,67010 Virginia

7,884

10 North Carolina

25,79010 North Carolina

9,798

10 Ohio

9,631

Source: Created based on statistics of U.S. Department of Commerce

Copyright (C) 2015 JETRO. All rights reserved.

51

Chapter 3 Section 2 Global business development using local resources

Investment by foreign companies have positive impact on regional economies■ Increased contribution of foreign capital
The number of total full-time persons employed by foreign companies with a more than a 33.4% foreign capital ratio is 610,000. Greenfield
investment in Japan varies depending on region: a large amount of investment is made in the tourism-related industry in Hokkaido, the renewableenergy industry in Kyushu and Okinawa and the electronic parts industry in Tohoku, Chubu and Kansai. Large scale investments by semiconductor
manufacturers have had an especially large impact on the local economy. Investment by foreign companies have a positive impact on regional
economies, by such means as creating jobs, increasing the number of foreign tourists, expanding exports and the introduction of new technologies andservices.

Figure III-16: Top greenfield investment in Japan by region

Figure III-17: Examples of companies making use of JETRO
supports to set up their business/affiliate in region (2009-2014)(Unit: US$ million)

Destination

Project date

Apr 2013
Hokkaido
May 2008
Aug 2008
Fukushima Jun 2006
TohokuIwate
Jul 2014
Yamagata Feb 2004
IbarakiJan 2009
Kanto
Tokyo
Jan 2007
Tochigi
Oct 2013
Shizuoka Apr 2006
Shizuoka Feb 2012
Chubu
Aichi
Jul 2008
Gifu
Nov 2014
Mie
Aug 2013
KansaiMie
Dec 2003
Osaka
Dec 2007
Hiroshima Nov 2014
Chugoku Yamaguchi Dec 2006
Okayama Feb 2012
Ehime
Aug 2005
Shikoku
Ehime
Nov 2012
Tokushima May 2008
Fukuoka Nov 2013
Kyushu/Apr 2013
Okinawa
Nagasaki Apr 2014

Company nameHanwhaNationality

Industry sector

South Korea Renewable energy

West Paces Hotel Group US

Hotel/tourism
Leisure/entertainment
Spansion
US
Semiconductor
Royal Dutch Shell Plc Netherlands Renewable energy
Entegris
US
Semiconductor
Coal, oil and natural gas
Areva
FranceAegon
Netherlands Financial service
Juwi
Germany
Renewable energy
Corning
US
Electronic components
Intelligent Energy
UK
Electronic components
ProLogis
US
Real estate
Simon Property Group US
Real estate
SanDisk
US
Semiconductor
SanDisk
US
Semiconductor
Corning
US
Electronic components
Micron Technology
US
Semiconductor
Royal Dutch Shell Plc Netherlands Chemicals
Global Logistics Properties (GLP) Singapore
Real estate
Albemarle Corporation US
Chemicals
Assuranceforeningen Gard Norway
Financial service
Volkswagen
Germany
Automotive parts
US
First Solar
Renewable energy
South Korea Renewable energy
HanwhaRoyal Dutch Shell Plc Netherlands Renewable energy
Pacific Century Group (PCG) Hong Kong

Note: Investment values include estimates.
Source: “fDi Markets” (Financial Times)

Copyright (C) 2015 JETRO. All rights reserved.

Capitalinvestment
272
183
170
1,200
272
220
840
490
272
174
147
144
144
4,000
2,600
400
859
168
103
81
48
30
272
272
272

Destination

Nationality

Business

Osbert Hotels Ltd.

Hong Kong

Hot spring & spa resort

Chiba

Snowflake

Switzerland

Open source software

SaitamaThaicom Public Company
Limited (IPSTAR)

ThailandSatellite base station

Chiba

Spring Airlines Japan

China

LCC

Kanagawa Faurecia Japan

FranceAutomobile parts

Aichi

Infosys Ltd.

India

IT Consulting

Mie

Mag-Isover KKFranceGlass wool for residential and industrial use

Aichi

Magnate Technology Co., Ltd. Taiwan

Parts of air planes, precision parts of industrial
machinery

Mie

Cabot Microelectronics Japan US

Polishing materials and cloth for semiconductors

Hyogo

INSTAR ITS

Czech Republic

Energy saving business management

Hyogo

UmicoreBelgium

Materials of lithium-ion battery

DBS Cruise Ferry Co., Ltd.

South Korea

Cargo-passenger liner

China

LCC

South Korea

LCC

US

Translation

South Korea

LCC

Tohoku Miyagi

Kanto

Chubu

Company nameKansai

Chugoku Tottori

Okinawa/
Juneyao Airlines
Osaka
Fukuoka/
Air Busan
Kyushu/Osaka
Okinawa
Fukuoka Elanex
FukuokaT'way Airlines

Note: The investment destinations of Juneyao Airlines and Air Busan are classified according to their first flight destinationsin Japan.
Source: JETRO website

52

Chapter 3 Section 2 Global business development using local resources

Exports of Japanese agricultural, forestry, fishery and food products hit record high■ Share of Asia has exceeds 70%
In 2014, exports of Japanese agricultural, forestry, fishery and foodproducts hit a record high at ¥611.7 billion, 11.1% higher from a year
earlier. Exports to Asian countries and regions including Hong Kong,
Taiwan, China and Korea accounted for 72.3%. The top fivecommodities being “scallops”, “alcoholic beverages”, “pearls”,“cigarettes” as well as “sauces and mixed seasonings”. The 3rd ranked“pearls” has shown a sudden increase in Hong Kong (of 43.2%) where
an international jewelry show was held, as compared to the 30.5% of
the previous year.
■ Efforts towards regional export promotion through the “OnePrefecture, One Support Program”
At JETRO, we support the systemized incorporation of local pioneer
exports as well as cooperation between production zones. We haveunearthed specific export projects and developed a total of 50 ideas forthis program, set up over all prefectures from July 2013 onwards, withan aim to achieve an advanced model in other regions. For example,
we endorse the Ishinomaki City Fisheries processing brand “Hitakami
no Kuni”, achieving exports to the tune of about ¥46 million to Hong
Kong in FY2014.

Figure III-18: “One Prefecture, One Support Program” initiatives
Region and product

700,000

30.0

Agricultural products
Forestry products
Fishery products
Year-to-year rate

600,000
500,000

20.0
10.0

Flowering plants (tree peony,balloon flowers)

Yamanashi Peach and grapes

OkayamaPeaches, grapes and related
processed foods

Kelp

NaganoFresh lettuce

Hiroshima

Fishery products such as
small sardines

Farm produce such as melons

Fukui

Japanese sakeYamaguchi/Fukuoka

Marine products in Kanmon
straits

AomoriJapanese scallops and apples

ToyamaFishery products such as
yellow tailTokushima

Citrus sudachi, Asiatic citronand its processed products

Iwate

Livestock and fisheries

Ishikawa

Traditional products such as
soy sauce and miso paste

KagawaBonsai

Akita

Japanese sake

Gifu

Sweet Japanese persimmons

Ehime

Lumber

Kochi

Tosa wood (Japanesecypress)

FukuokaEbisu oysters

Bulls for dairy cattle
breeding, Japanese beef
Hokkaido cattle

Niigata

ShizuokaTea and related related
products

Yamagata Apples La-France

Aichi

Agricultural produce andrelated processed items

Fukushima Peach

Mie

Cultivation of tai (sea bream),yellow tail, etc.

Shiga

Omi beef

Melons and their processed
goods
Strawberries, pears, andTochigi
grapesVarious agricultural andChiba
livestock products
Tsukiji (Higashioroshi)Tokyomarine products
Various agricultural andKanagawa
livestock products
Saitama

BonsaiGumma

Konjak product300,000-10.0

Colored carp

MiyagiFishery product brandIshinomaki"Hitakami no Kuni"
restoration

All Kansai Fresh foods such asArea
vegetables, fruits and fish
Kyo-tanabe high quality
Kyoto
green tea
Nara

Saga

Gold kiwi related products

Nagasaki

Dried shiitake

Oita

Dried shiitake

Miyazaki

Agriculture and livestock
products
Tomatoes and its processed
products

Persimmons

Kumamoto

Wakayama Persimmons

Kagoshima

Brown sugar shochu

Okinawa

Spermatochnaceae seaweed

Hyogo

Tanba black soybeans

TottoriJapanese pears, water melons
and sweet Japanesepersimmons

400,000
0.0

Region and productShimaneJapanese scallops

IbarakiFigure III-19: Japan’s exports in agricultural and fisheryproducts (Million yen)（％）

Region and productSource: Compiled by JETRO

200,000-20.0

100,000

0

-30.0
2010

2011

2012

2013

2014

Note: Alcoholic beverages, tobacco and pearls are included.
Source: “Overview of Foreign Trade of Agricultural, Forestry, and Fishery Products” (MAFF)

Copyright (C) 2015 JETRO. All rights reserved.

53

Chapter 3 Section 2 Global business development using local resources

Revitalization of regional economies through inbound tourism■ Exploring emerging markets with focus on Asia
The Japan National Tourism Organization (JNTO) announced that the number of inbound tourists in 2014 reached a new high of 13.41 million, an
increase of 29.4% from the previous year, on the back of the weakening yen and other factors. Inbound tourists from Asia are the engine of overall
growth. There is a correlation between the number of international outbound tourist for every 1,000 people and the per capita GDP, thus, in the future,
more tourists are expected to come from countries and regions in Asia, given their proximity to Japan. Importance is laid on the exploring of emerging
markets with Asia as the focus, aiming toward the attainment of the goal of 30 million in 2030.
■ Industrial tourism extending in region
In the midst of increase of travelers to Japan, in the future it will be important to focus on the increase of repeat travelers. Beyond the conventionalframe of tourism, tours offering a chance to experience production centers, such as superb Japanese manufacturing sites or farms, are extending over all
regions. In the tourist farm (peaches and grapes) in Akaiwa City, Okayama Prefecture, foreign tourists have shown a considerable rise from 50 visitors
in 2011 to 5,111 visitors in 2014. Recently, the rise in individual travelers is significant. At JETRO, we invite overseas buyers, media and educationaland research institutions, and along with publicizing the local industries and tourist attractions abroad, we incorporate plans for overseas businessdevelopment of local industries, collaborative development of local products, attracting foreign business, increasing inbound tourists and training ofinternational business human resources.

Figure III-21: JETRO’s industrial tourism support projects by region

Figure III-20: Per capita GDP and number ofinternational outbound tourists

Saga

1,000

(Number of intenational out-bound tourists for every 1,000 people)

CanadaHamamatsu

Ibaraki

Kyoto

Area

DesignMusic

Science

Lifestyle

800

PeriodMar 1-5, 2015

Mar 9-10, 2015

Mar 16-19, 2015

Mar 11-12, 2015

700

InvitedBuyers, media,
personnel designers anddesign schools
from Singapore

A researchorganization ofindustrial technology
from Taiwan, media
and travel companies
from Vietnam

Buyers, media andothers fromASEAN andNortheast Asia

900

600

IsraelNew Zealand

500

Australia

400

Russia300

South Korea

200
100

India
0
0

United StatesJapan

MexicoThailandChina Turkey

Indonesia
10,000Brazil
20,00030,00040,00050,00060,000GDP per capita (US$)
Sources: World Economic Outlook Database, April 2015 (IMF), World Development Indicators (World Bank)

Copyright (C) 2015 JETRO. All rights reserved.

70,000Those involved inmusic business, amusic businessschool and media
from the US andFranceDestination Arita wareMusic instrumentcompanies, Arita manufacturers
College of(vocal synthesis
Ceramics,
technology, scorecompanies related recognition andto Morodomi
writing technology,
furniture and so on etc.), highsensitivity acoustic
systems and so on
Source: JETRO

Tsubame Sanjo
Manufacturing suchas metal working
Jun 25-28, 2015

Buyers, designers,
hairdressers, chefs,
design schools,
media fromSingapore andMalaysia
Science andCompanies related Companies related
technology research to kitchen,
to kitchen tools
facilities (Space
tableware, interior, including knives andCenter, AIST,
beauty and health cutlery, beauty
robot suitproducts, gifts and products such as
development
so on
scissors and nailcompanies) and so
clipperson54Chapter 3 Section 3 Development of overseas business through globalization of management

Strengthened governance through dialogue between companies and investors■ Corporate Governance Code enforced
The corporate governance in Japan has moved into a direction that accelerates corporate profitability along with the prevention of misconduct andcompliance of laws and regulations. (1) Japan’s Stewardship Code (February 2014), (2) Revision of the Companies Act (May 2015) and (3) Japan’s
Corporate Governance Code (June 2015), are the three main pillars of corporate governance. By promoting dialogue between the company andinvestors, further utilization of outside directors and ensuring diversity within the company, the aim is to achieve improved profitability through good
corporate governance. The interest in Japanese corporate governance reform is high overseas as seen in articles such as “Few initiatives could be more
effective in revitalizing Japan’s economy”, “Corporate initiatives are all more effective because of their complementary nature” (the Financial Times,
March 30, 2015).

Figure III-22: Creation of code related to corporate governanceand revision of Companies Act
Japan's Stewardship Code (finalized on February 26, 2014)• Monitor investee companies• Constructive engagement with investee companies• Clear policy on voting and disclosure of voting activity• In-depth knowledge and skills and resources needed to appropriately engage with the companies and makeproper judgement, etc.
Revision of Companies Act (Enforced on May 1, 2015)• Establishment of companies with committee governance structure such as that capable of audits• Strict requirements of independence for outside directors• Clarification of reasons for non appointment of outside directors
Japan's Corporate Governance Code (Entered into force on June 1, 2015)• Securing the rights and equal treatment of shareholders-Disclosure of policy with respect to cross-shareholdings• Appropriate cooperation with stakeholders other than shareholders-Ensuring diversity, including active participation of women• Ensuring appropriate information disclosure and transparency-Full disclosure of business strategies and remuneration of the senior management and directors• Responsibilities of the board-Appointment of multiple independent outside directors• Dialogue with shareholders-Senior management and directors should have a basic position to engage in dialogue with shareholders andthe like
Sources: Japan's Stewardship Code, Japan's Corporate Governance Code, among others

Figure III-23: Ratio of companies appointing independent
outside directors (companies listed on First Section ofTokyo Stock Exchange) over time
(%)
100.0
Percentage of independent outside directors
appointed
Percentage of multiple appointments

90.0

87.0

80.0
70.0
61.4
60.0
46.9

50.0
38.8

40.0
31.5

48.4

34.6

30.0
20.0
10.0

12.9

15.0

16.7

18.0

2011

2012

2013

21.5

0.0
2010

2014

2015

Source: Tokyo Stock Exchange

55
Copyright (C) 2015 JETRO. All rights reserved.

Chapter 3 Section 3 Development of overseas business through globalization of management

Globalization of management: Diversity by hiring foreign employees■ Promotion of a diversity strategy to hire human resources having diverse values and capabilities

To enhance corporate competitiveness in overseas markets, training and securing human resources capable of playing such roles is of prime
importance. One of the methods is to promote the diversity strategy to hire human resources with diverse values and capabilities as employees,
independent of nationality, age or sex, such as foreigners or the elderly. Among challenges that Japanese firms face when engaging in export andexpanding their overseas business, a lack of human resources capable of playing a central role in overseas operations is commonly reported.
■ Aggressive hiring and appointments of foreign employees
Looking at the status of employment of foreigners by Japanese firms, companies that are currently hiring foreign staff (42.2%) or are interested in
hiring foreign staff in the future (20.8%) totals 63%. Of these companies, the percentage of hiring or expressing a desire to hire foreign students
studying in Japan is the highest. This indicates that there is a high demand for international students among Japanese companies.
Figure III-24: Bottlenecks for export and overseas business expansion

Figure III-25: Hiring of foreign employees by Japanese firms(Unit: %)（Unit：％,Multiple answers）
Total（n=3,471）

Large companies（ n=680）SMES（ n=2,791）

Total（ n=2,995）

Currently hiring foreign employees
Not currently hiring foreign employees but expecting toconsider recruitment of it
Not currently hiring foreign nationals and not planningto consider it in the futureLargecompanies（ n=661）S MEs（n=2,334）

42.2

70.3

34.2

20.8

10.4

23.8

27.2

12.9

31.3

9.7

6.4

10.7

Local business partners

47.8

46.3

48.1

Human resources to play a central rolein overseas business

41.2

52.6

38.4

Information on rules&regulation(tariff, regulations, license, etc.)

40.1

48.7

38.0

Note: Parameter is the total number of replying companies participating in this survey.
Source: “Results of JETRO’s FY 2014 Survey on the International Operations of Japanese Firms” (JETRO)

Information on local markets(Consumers' preferences and needs, etc.)

39.4

42.1

38.8

Figure III-26: Demand for foreign nationals by Japanese firms

Expansion of sales network inoverseas

32.5

33.8

32.2

Cost competitiveness

27.0

36.0

24.8

Products development for local
markets

21.4

26.3

20.2

Securement of necessary funds

16.2

8.1

18.2

No answer(Unit: %, multiple answers)

Note: Parameter is the total number of replying companies participating in this survey.
Source: “Results of JETRO’s FY 2013 Survey on the International Operations of Japanese Firms” (JETRO)

Copyright (C) 2015 JETRO. All rights reserved.

Large
companies(n=534)SMEs(n=1,353)

48.1

60.7

43.2

40.6

42.1

40.0

34.6

35.8

34.1

3.5

3.4

3.5

Total
(n=1,887)

Hiring/want to hire foreign students studying in Japan
Hiring/want to hire foreign nationals (not including
foreign students studying in Japan)
Hiring/want to hire foreign foreign nationals residing
overseas
OthersNote: Parameter is the total number of companies responding with "hiring foreigners" and "want to hire
foreigners". Source: "Results of JETRO’s FY 2014 Survey on the International Operations of JapaneseFirms" (JETRO)

56

Chapter 3 Section 3 Development of overseas business through globalization of management

Expansion in overseas development through utilization of foreign students■ Increased trend in employment rate of foreign students
According to “Lifestyle survey of privately financed international students ” (the Japan Student Services Organization) (*), the percentage of foreign students who
intend to work in Japan was 65.0% in 2013. On the one hand, according to the “Survey on international students’ career and academic pathways” (sameorganization), the employment rate of foreign students in Japan has risen yearly since FY2009, but it still remained at 23.7% in FY2013. The number of foreign
students changing to resident status with the objective of gaining employment in Japan was the highest among Chinese students (7,637 in 2013, 65.6% of applicants
who were granted the change), while in recent years, Vietnamese students showed an increasing trend at 424 students (3.6%), an increase of 40.4% as compared tothe previous year. *Survey of 7,000 students from universities, junior colleges, specialized training colleges, Japanese language institutes, etc.
■ SMEs consider foreign staff to be useful in expanding sales channels
According to the “FY2014 Survey on the International Operations of Japanese Firms”, the highest merit of recruiting foreign students for companies is “expanded
sales channels” (40.9%). The smaller the scale of the company, the higher the ratio. As regards to expansion of sales channels, the importance of language of thetarget country and its business practices become clear. However, some companies also pointed out the advantage of having personal connections.

Figure III-27: Status of employment of foreign students in Japan(People)45,000Figure III-28: Benefits of hiring/employing foreign employees

100%

0

Employed

1020(Multiple answers, %)
40
50

30

41.0

Unemployed
40,000

Expanded sales channels

Employment rate of foreign students (right axis)

44.0
80%

35,000

39.7
40.3
39.4

Improved international negotiating
ability

31.4
31.9
31.1

Improved language ability

30,00060%
25,00030,57325,58923,95027,53530,06024,951

20,00030,68030,26829,98840%

15,00026.9%

28.5

Strategic preparation for localizationof management

36.0
25.6

Lowering psychological barriers
among Japanese employees incommunication with foreign nationals

23,198

27.9

31.4
26.5
13.8
15.4
13.2

Increased motivation among Japaneseemployees

28.8%
24.1%

24.1%
10,000

33.4

20.9%

19.7%
16.8%

22.2%

17.8%

13.4
12.4
13.8

Financial effects (sales, businessperformance, etc.)

23.7%
20%

11.7
10.0
12.4

Contributions to development of new
products

5,000
7,911

9,411

9,684

8,736
6,073

5,705

6,663

7,910

8,722

9.3
10.4
8.9

Improved problem-solving ability

0
2004

9,382

05

06

07

08

09

10

11

12

0%
13 （Fiscal year）

Note: 1) "Foreign study abroad students " are defined as those studying in such institutions as universities, two-yearcolleges, specialized vocational high schools, special technical schools, etc. 2) Years represent fiscal years 3)"Unemployed" is calculated by subtracting the number of "employed" from that of "foreign study graduates". The number
includes those with no set career options.
Source: Survey on international students career and academic degrees (JASSO)

Copyright (C) 2015 JETRO. All rights reserved.

Other

6.1
6.7
5.9

Total (n=1,913)
Large scale firms(n=539)SMEs (n=1,374)

Note: Parameter is the total number of companies responding with "hiring foreigners" and "want to hire
foreigners". Source: "Results of JETRO’s FY 2014 Survey on the International Operations of Japanese Firms"(JETRO)57

Chapter 3 Section 3 Development of overseas business through globalization of management

Expansion in overseas development through utilization of foreign students■ Overseas expansion through utilization of foreign students

There are also cases of SMEs proactively utilizing foreign students in developing their overseas business. Moreover, in certain regions, collaborative
industry-academia-government bodies provide support to help foreign students find employment with Japanese companies.
■ Efforts corresponding to each step important for utilization of foreign students (next page)The utilization of foreign students by companies is broadly divided into four categories: (1) motivation, (2) recruiting preparations, (3) recruiting, and(4) retention. It is important for companies to take measures tailored to each process. Moreover, utilizing local governments, universities, industryacademia-government cooperation is an effective means for utilizing foreign students. Lack of understanding of methods of recruiting, treatment, andhuman resource management are some of the issues faced by companies in hiring and employing foreign students.

Figure III-29: Cases of utilizing foreign students and other foreign nationals in terms of SMEs’ business expansion overseas andemployment supported by industry-academia-government collaboration bodies
Effects
Companies Expanding sales channels

Cases regarding business expansion overseas/industry-academia-government collaboration bodies
On referral from a local university, we hired a foreign student from Asia in 2014. He was hired as a part-timer at first and was made a regular employee. The staff enhanced our public relations
activities by posting product information on our new English website jointly created by a Japanese engineer. This brought us specific results such as increased business inquiries from overseas.

We started to employ foreign staff seven years ago, hoping to hire employees with knowledge on trading operations and partner countries. Our current foreign staff member, who is from Africa andExpanding sales channels,
improving international negotiation fluent in four languages, has helped us to expand business in Africa and the Middle East. We intend to hire a foreign employee who has a good command of Portuguese and Spanish in accordancewith our business expansion plans.
ability
We hired a foreign staff member with experience studying in Japan in 2013, which allowed us to create a dedicated department for overseas business afterward. Active promotional activities such
Expanding sales channels,
improving international negotiation as demonstrating products at overseas exhibitions resulted in exports. He/she also contributed to changing specifications and taking the necessary steps to make our products meet local standards.
We came to be able to grasp overseas customers’ needs accurately, which led to the improvement of our products.
ability
We started to employ foreign employees from around 2004. We hired foreign staff including international students from Latin America in 2014 as well. Employees from Northeast Asia, Southwest
Management localization,
improving international negotiation Asia and Latin America are working with us. They are improving our international negotiation ability. We have assigned Chinese employees with a good command of local languages to the
procurement department, because we largely depend on materials from China. We are promoting foreign staff to sales managers of the headquarters and directors of the overseas offices.
ability

Management localization,
expanding sales channels

We have hired foreign students from China and also assigned Chinese employees to top executive positions of our local office in China. Our Chinese staff has contributed to our business expansion
in China, through the discovery of customers by utilizing their knowledge on Japanese management and adapting it to the Chinese culture. Since our customers largely consist of Chinese local
companies, the Chinese staff is essential to our business. We are considering the employment of foreign nationals from the region into which we are planning to expand business.

Management localization,
expanding sales channels

We employed a person from Southeast Asia as an engineer at the headquarters. He is currently playing an important role as a future executive officer in our overseas office in his native country.
Additionally, our overseas office employed a local with experience working in Japan for the sales department. We are planning to train him to be a candidate president of our subsidiary. We arealso planning to further utilize local staff. Senior personnel with experience working for large companies are also hired to be assigned to overseas subsidiaries as their executive officers.

Establishment of bases

A capable graduate from a local university in Southeast Asia, who we employed five years ago, was the deciding factor in expanding our business there. The headquarters hired an engineer who
graduated from a university in Southeast Asia. He is expected to be assigned as a manager of a representative office, which is planned to be established. Moreover, we are planning to hire a few
other local employees as programmers. They are expected to be responsible for selecting local staff and communicating with the headquarters.

Industry-academia-government collaboration In recent years, some regions see a number of local governments establishing organizations in collaboration with industry and academia, in order to provide comprehensive service ranging fromattracting foreign students to assisting them in getting a job in Japanese companies. The Fukuoka International Student Support Center (established in 2008) and the Hiroshima Support Center forbodiesInternational Students (established in 2011) have taken steady steps. In Nagasaki, aiming to boost the economy, Nagasaki Summit has been held by its parent organization composed of prefecturaland municipal governments, Nagasaki University, the Nagasaki Chamber of Commerce and Industry and other local management organizations. The Nagasaki International Student Support Center
was built in 2013 as a facility to deal with the top priority issues of support for and utilization of foreign students. It also provides the students living in Nagasaki with employment support such as
creating opportunities to meet with local companies in addition to recruiting and supporting the students. Iwate Prefecture has established an organization in 2007, Iwate Exchange Student Job
Search Support Association, which is dedicated to providing employment support with international students and composed of universities, industry groups and local governments.

Source: Interview survey

Copyright (C) 2015 JETRO. All rights reserved.

58

Chapter 3 Section 3 Development of overseas business through globalization of management

Corporate efforts in recruiting foreign employees (steps)
Figure III-30: Efforts by companies to recruit foreign students• Once companies succeed in recruiting
foreign employees, the companies starttransforming themselves, such as by seeking
to employ even more foreign employees.
→ Using networks of recruited foreigners.
→ Employing salespeople after success inrecruiting engineers.
•Internship applications increased at thecompany where foreigners were employed as
human resources, because students could
apply in English.

Industry-academia-government collaboration bodies: Creating contact points between foreigners keen to work in Japanese corporations and potential
companies, providing continuous support to foreign students from preparing to study in Japan to assisting them in getting a job in Japanese companies.

Efforts by local
governments,
universities, etc.

Local governments: Seminars/matching events...  Companies that have foreign employees share their experiences, Certified Administrative Procedures Legal Specialist introduces procedures related to recruiting foreign employees such as obtaining resident status, Events to meet with foreign students in the prefecture

Universities etc.: Job finding support ... Explaining the job search process unique to Japan (in multiple languages), touching up job application forms, etc.
Educate foreign students on careers... Lectures where companies themselves explain in English their global strategy. This helps foreign students tounderstand Japanese corporations.
-----------------------------------------------------------------------------------------------------------------------------------------------------------Issues• Foreign students want to work in the metropolitan areas. • Companies can't find foreign nationals that they require in local universities• Career centers need to be globalized.

MotiveEfforts bycompanies

Reasons for wanting to recruit foreigners• Want to expand exports• Want to switch from indirect exporting to direct exporting• Want to expand overseas• Companies that have been accepting technical intern trainees
feel the technical intern trainees can only stay for a short timeand have to return to their home countries after several
years.in the current system.

Recruiting preparations
Point of contact
Some companies do not know how to recruit foreign
employees.
• Universities in Japan→ Career centers, placement offices, international student
offices, research labs (especially science and engineering
students)• Overseas universities→ Recruiting overseas college students directly throughoverseas employment agencies and consulting companies.
→The companies established scholarship systems under theirnames in overseas universities.
• Seeking candidates through business partners• Using private employment agencies• Using matching events held by local governments------------------------------------------------------Using internships and part-time jobs
• Using internships→ Internship programs help foreign interns to have a better
understanding about the company. In addition to this,internship programs are effective in eliminating mismatches
between foreign employees and companies after joining
companies. That is because companies can understand theirreasons for applying through the programs.
• Employing part-time→ Recruiting foreign student who worked part-time as an
English instructor in the company. The company had alreadygotten to know the character of the candidate over the long

Universities: Exempting student loan... Student loans shall be exempted if thestudent works in a local company for a few years after graduation.

RecruitEmployment test
• Language barriers→ Many companies seek employees with high levels of
proficiency in Japanese, such as ones who passed the N1 level
Japanese Language Proficiency Test (JLPT). While thecompanies look for candidates who have already achieved therequired levels of Japanese language proficiency as aprerequisite for recruitment, the company also consider the
proficiency level at the time of "screening", its development
at the time of "joining" the company, and its development
potential "after joining" the company.
→ Job application form written both in Japanese and English.
Set up the contact where English speaking staff can answer
inquiries in English.
• Job hunting process that is paticular to Japan→ Some foreign students graduate in September, so
companies need to introduce more flexible recruiting systems
than the traditional one, which employs new graduates all atonce.
• Can't find foreign nationals in local universities (Manyinternational students want to work in big corporations inmetropolitan areas)→The company holds factory tours for foreign students. The
company organizes bus tours in collaboration with theuniversity, for students keen on working in Japanesecompanies, so that the students can better understand it.
-----------------------------------------------After hiring• Administrative procedures
Procedures that differ from the regular procedures forrecruiting Japanese is needed, such as obtaining a work visa.
There were cases in the past where the employee couldn't
begin working on the set starting date, because the company
didn't know how to apply for the visa.
→The university confirms changes in visa status as necessary
for companies who are recruiting foreign students for the firsttime, and for foreign students.
→ Local governments hold "seminars on utilization of foreign
nationals including students" where the experiences ofcompanies who have hired foreign students are shared, andCertified Administrative Procedures Legal Specialists explain
the necessary procedures.

FixingClarification of career plan
• Companies used to utilize job rotation to train their foreign
employees, just as they usually did for Japanese, as a part oftheir career development plans. However, seeing as many
employees left their jobs because of this practice, thecompanies changed their ways, and began assigning foreign
employees to departments where they could exercise theirabilities and skills.
• Companies prepare recruitment announcements describing
work at the local subsidiary to promote the localization ofmanagement.
• However, as a company's business becomes more globalized,
it must draw up their career plans from the viewpoint that
employees can be assigned to any location, regardless of theirnationalities.
--------------------------------------------------Sharing vision• Many comapnies don't know how to treat and manage
foreign employees.
→The company creates a common world-wide code of
conduct in multiple languages.
--------------------------------------------------In-house training• The company carries out training for Japanese language andmentor systems.
•The company carries out technical training using videos foreasy understanding.
--------------------------------------------------Preparing environments• Arrangement by the company of basic needs such asapartment, car, etc.
• The barrier that foreigners face when working in Japan islanguage and culture. Organizing a course of lectures on
Japanese language and etiquette for overseas groups, paid by
the company.
• Considering religious and cultural events (e.g., Christmas)• The management takes the lead in publishing in-housemagazines focused on diversity.

Reasons for leaving job• Foreign employees start thinking of a job change when they
are given the same treatment as Japanese (not only in terms ofsalary but also of job responsibilities), because they feel thatJapanese employees can also do so.
• Foreign employees quited as they felt mistrust regarding theuncertainty of their career path, as they were transferred oncompany orders without any prior discussion. The reason theyquited was not because of the transfer itself, but because it
was without any consultation.
-------------------------------------------Risks• Outflow of technology and know-how→ Foreign employees have not decided whether to returnback to their country in the future, so it is difficult forcompanies to decide to assign them with tasks that are
sensitive.
-----------------------------------------------Utilization• Predecessor introduces successor.
• Assuming the foreign employees will eventually leave thecompany, the company considers that they can play an activerole at the agency in their home countries.
• In the case of inbound business, foreign employees may lose
touch with their local ways and current trends in their homecountries by staying longterm in Japan. Therefore, whendeveloping a recruitment plan, it is necessary to consider the
possibility of replacing the foreign employees with new
recruits after several years.

Source: Made from interviews

Copyright (C) 2015 JETRO. All rights reserved.

59