2 015

JETRO Global Trade andInvestment Report〜New eﬀorts aimed at developing
global business〜
Overview

C O N T E N T S

JETRO Global Trade and Key
Investment Report 2015 points
１. World trade growth is weak.

２

２. Japanʼs trade deﬁcit shrinking since middle of 2014. Proﬁts from overseas operations increasing further.

３

３. Japanʼs outward FDI remains at high level with robust investment in ASEAN.

４

４. Japanʼs inward FDI increases for three consecutive years. Asia gains importance.

５

５. 271 FTAs are in force around the world. Mega FTAs expected to develop further, led by TPP.

６

６. ASEAN Economic Community (AEC) to develop further at the end of 2015

７

７. Service sectors becoming important in overseas expansion.

８

８. Increasingly attractive “critical mass” markets and business expansion through alliances.

９９. Revitalization of regional economies through investment in Japan,
exports of agricultural and ﬁshery products and inbound tourism

10

10. Globalization of management through diversity.

11◆ JETRO activities promoting “Cool Japan”

13◆ JETRO activities for promoting direct investment in Japan

14【Disclaimer】
Information provided in this material should be used with the judgment and responsibility of users. Although
JETRO aims to oﬀer information as accurately as possible, it will not take any responsibility for any loss that the
information related to this material may cause for the users.

Japanʼs trade deﬁcit shrinking since middle of 2014. Proﬁts fromoverseas operations increasing further.

2■Japan's export volume growth rate reversed to a slight increase of 0.6% for the first time in four years, driven bya strong demand for general machinery, up 2.9% from the previous year. The trade balance marked a deficit of$122.8 billion for the fourth consecutive year, while the latest deficit has been shrinking since the middle of2014. 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 weakeryen.
■Profits from overseas operations of Japanese firms, assumed to consist of credit on direct investment income
and credit on intellectual property right, has been increasing recently, reaching nearly 20% of total exports.

Japanʼs trade trends

Export price index (contract currency basis)and exchange rate

（Unit: US$ million, 100 million yen, ％）Dollar-based

Total exports（growth rate）
Total imports(growth rate)
Trade balance(year-to-year difference)
Yen-based

Total exports（growth rate）
Total imports（growth rate）
Trade balance(year-to-year difference)
Export volume index（growth rate）
Import volume index（growth rate）
Crude oil import price（dollar/barrel, growth rate）
Exchange rate (yen/dollar)(yen appreciation, %)

2013

2014

719,205-10.3

694,270-3.5

2015（Jan-Jun）
315,126-7.7

108838,889- 5.6

817,103- 2.6

329,757- 20.6

106-119,684-32,435-122,832- 3,148- 14,630
59,394104

80

697,7429.5

730,930
4.8

378,079
7.9

102

90

812,42514.9

859,091
5.7

395,378
- 7.4

100

100

-114,684- 45,273-128,161- 13,477-17,299
58,983

98

110

90.2
-1.5

90.7
0.6

89.9
1.6

96

120

105.3
0.3

106.0
0.6

101.9
- 3.4

94

110.5
- 3.7

105.1
- 4.9

57.9
- 47.792

97.6- 18.3

105.8
- 7.8

120.2
- 14.890

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.
Source: "Trade Statistics" (Ministry of Finance), "Foreign Exchange Rate" (Bank of Japan)(Yen/dollar, 2010＝100)
60
Higheryen

Weaker
yen

70

130
140

← Exchange rate (2010＝100, right axis)

150
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14（year）
Export price index (total average)

General machineryTransportation equipment

Exchange rate (yen/dollar, 2010 = 100)

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

Profits from overseas operation

Main items with increase in export volume(general machinery, 2014)
Products(2010＝100)(Billion dollars)
140

Export partner with increasing volume (top 3)
1st

2nd

3rd

Machines for manufacturing equipment of semiconductor devices, IC

China

Ireland

South Korea

Mechanical shovels（with a 360 degree revolving superstructure）

US

Netherlands

Vietnam

Other machinery

Saudi Arabia South Korea South Africa

Machining centers

Hong Kong

China

Vietnam

Parts & accessories of manufacturing equipment of semiconductor devices South Korea

Ireland

US

Vehicular engines (over 1000 cc)

China

UAE

FranceParts of turbojets and turbo propellers

US

Hungary

Singapore

Ball bearings

Hong Kong

China

US

Lathe (numeric control method)

Netherlands

VietnamTaiwanParts of water heaters, dryers, distillation devices and so on

China

Germany

Italy

Outboard motors for marine engines

US

China

EcuadorIndustrial robots

China

Other machinery ‒ Other (parts)

US

China

UK

Gas pumps, air compressors

PolandUK

Czech

Front-end shovel loaders

US

Egypt

Vietnam120（%）

Credit on Direct investment income + credit on intellectual
property right /export rates (right axis)

19.4
15.9 16.4
14.0

100
9.3

9.9

11.3 11.6

9.9

11.9 12.1

Credit on intellectual
property right royalties

7.0

80

20.0
18.0
16.0
14.0
12.0
10.0
8.0

Credit on direct
investment income

60

6.0
4.0
2.0

40

0.0

20
0

Hong Kong Netherlands

05

06

07

08

09

10

11

12

13

14

14. 15. （year）
1-5 1-5(P)（month）

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

Note: Top 15 products with largest export volume, among those with a year-to-year increase in export
volume (based on HS6 ﬁgures)
Source: "Trade Statistics" (MOF)

Copyrightⓒ2015 JETRO. All rights reserved.

3

Japanʼs outward FDI remains at high level with robust investment
in ASEAN

3■Japanʼs outward FDI in 2014 declined by 18.6% to $119.7 billion from the previous year. Although it did notreach the record high, $147.2 billion in 2013, Japanʼs outward FDI has surpassed $100 billion for four
consecutive years. This indicates a positive disposition by Japanese firms toward exploring growing overseas
market. In Asia, the difference in Japanʼs outward FDI value has widened threefold between ASEAN ($20.4
billion) and China ($6.7 billion). Since 2013, many industries have tended to invest a larger amount in ASEAN
than in China.
■The percentage of overseas sales of Japanese firms has risen since 2010. In particular, Americas has seen aremarkable gain from 18.6% in FY2012 to 23.3% in FY2014, bolstered by the recovery of the US economy.
■Weakening yen and other factors have encouraged parts of Japanese firms to enhance their domestic
production. Trends in the domestic production ratio of general home appliances have shown an increase in thatof air conditioners since September 2014.

Trends in Japanʼs outward FDI by type

Trends in Japanʼs outward FDI byindustry-Comparison between ASEAN and China(US$ Billion)

170.0（Unit: %, US$ million)

Debt instruments

150.0

2010

130.0

2012

(Jan-Mar)

0.0

4.1

9.3

1.9

2.0

1.3

1.2

1.7

1.5

0.4

0.5

0.7

0.3

-

2.0

7.5

1.4

1.5

0.9

1.9

2.9

1.5

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)

Equity capital

Food

13.9

4.5

3.8

Net

Chemicals and pharmaceuticals

0.4

0.2

1.4

Iron, non-ferrous, and metals

0.9

0.9

1.5

General machinery

0.2

0.9

Electric machinery

3.6

1.2

Transportation equipment

1.3

Wholesale and retail

110.0
90.0
70.0
50.0
30.0
10.0

.1

15

P)

(
-5

-5
.1

14

14

13

12

11

10

08
09

07

06

05

04

03

02

98
99
20
00
01

97

-10.0

96

2011

2013

2015

2014

Reinvestment of earnings

FDI value in ASEAN

8,930

15,721

14,34923,61920,3689,120(Jan-May)

FDI value in China

7,252

12,64913,479

9,104

6,742

3,959(Jan-May)

Notes: 1) Index=Japan's FDI value in ASEAN/Japanʼs FDI value in China. Figures greater than one indicatethat the investment 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) The FDI values in ASEAN and in China for 2015 are cumulative total from January to May (P)4) The FDI values in ASEAN for 2011 and 2012 exclude investments in the ﬁnance and insurance sectors ofThailand related to its ﬂoods. (Q4, 2011: $3.9 billion, Q1, 2012: - $3.7 billion)5) “-” indicates unreckonable due to net outﬂow
6) The table lists industries with large shares of Japanʼs outward FDI in 2014.
Mining was excluded since no investment in China was recorded in 2014.
7) The service industry includes accommodation, restaurants, entertainment and otherrelated sectors.
Source: “Balance of Payments” (MOF, BOJ)

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

Japan firmsʼ sales share by region(Unit: %)Fiscal year
Domestic Overseas Americas Europe Asia-Pacific Others(number of companies)
2000

(547)

71.4

28.6

13.4

5.6

5.8

3.8

2001

(581)

68.5

31.5

14.7

6.1

6.3

4.4

2002

(592)

67.2

32.8

14.9

6.6

6.8

4.5

2003

(624)

66.5

33.5

14.1

7.0

7.7

4.8

2004

(669)

65.4

34.6

13.6

7.4

8.5

5.1

2005

(724)

64.9

35.1

13.8

6.9

9.5

4.9

2006

(751)

62.3

37.7

14.5

7.7

10.3

5.1

（％）
90

2007

(781)

60.8

39.2

14.2

9.1

10.7

5.2

80

2008

(817)

62.6

37.4

12.7

8.6

10.8

5.3

70

2009

(844)

63.3

36.7

12.4

7.5

11.3

5.4

2010

(320)

54.0

46.0

18.1

8.1

15.2

4.7

2011

(236)

53.1

46.9

17.7

8.9

15.0

5.3

2012

(221)

51.3

48.7

18.6

7.8

17.2

5.1

40

2013

(211)

45.6

54.4

21.5

9.2

18.2

5.5

30

2014

(196)

43.3

56.7

23.3

9.3

18.6

5.6

20

Notes: 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 andhave their information on securities reports in database "SPEEDA", sales data of the report was used.
3) Sales include transactions between internal segments.
4) Percentage = each regional sales/entire regional sales.
5) Surveyed companies include listed subsidiaries, which were double-counted.
6) Companies which combine multiple regional sales such as “Americas and Europe” and “Europe andAfrica”, were excluded.
Source: Data from SPEEDA

10

Trends in domestic production ratioof major home applianceAir conditioner

Refrigerator

Dishwasher

Flat-screen TV

Washer

60

0

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr

50

2013

2014

2015

Note: Domestic production ratio = domestic production volume/domestic production volume + imported
volume×100
Source: “Current Survey of Production” (METI), “Trade Statistics” (MOF)

Copyrightⓒ2015 JETRO. All rights reserved.

4

Japanʼs inward FDI increases for three consecutive years.
Asia gains importance.

4■In 2014, Japanʼs inward FDI increased for the third consecutive year, by 22.5% from the year before, to $9.1
billion. Asia is becoming more important as FDI in Japan, mainly from Hong Kong, Singapore and the Republicof China, are growing. The inward FDI stock in Japan posted ¥23 trillion at the end of 2014, exceeding ¥20 trillion
for the first time. Asiaʼs share of inward FDI stock increased from 14.4% at the end of 2013 to 15.5% at the end of
2014.
■Many investments take full advantage of Japanʼs high technological skills, such as enhanced production of anext-generation memory and establishment of production bases of high-function fiber for aviation engines aswell as leading companiesʼ research and development bases.

Trends in Japanʼs inward FDI by type

Share of inward FDI stock in Japan by region(US $ Billion)
30.0(Unit: %)The endof 2000

The endof 2010The endof 2011

The endof 2012The endof 2013

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

Middle East and Africa

0.2

0.2

0.3

0.1

0.1

0.4

Inward FDI stock / GDP

1.2

3.9

4.0

4.0

4.1

4.8

Debt instruments

25.0

Reinvestment of earnings
Equity capital

20.0

Net

15.0
10.0
5.0
0.0
-5.0

1
15 4.1
.1 -5
-5
(P
)

13
14

12

11

10

08
09

07

06

05

04

03

02

98
99
20
00
01

97

96

-10.0
Inward FDI stock(100 million yen)

Notes: 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)

60,958 187,353 188,238

192,273 195,510 233,439

Notes: 1) Inward FDI stock by region is based on BPM5 until the end of 2013, and is based 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 office

Operations of leading foreign companies since 2014

R&D

Production

M&A

Company

Year/Month

Overview

KKR (US)

2014/Mar

Kohlberg Kravis Roberts & Co, the US investment firm, acquired Panasonic Healthcare Co., Ltd., a subsidiary of the Panasonic Corporation.

Wuthelam group(Singapore)

2014/Dec

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 the 2014 world shareranking of the Nippon Paint from 10th to 4th.

Charoen Pokphand (CP)Group (Thailand)

2014/Sep

The Itochu Corporation and the Charoen Pokphand Group (CP Group), one of the largest conglomerates in Thailand, announced a capital andbusiness alliance. The CP Group and Itochu are mutually sponsored. The CP Group, with a large network in Asia, is seeking to take advantage of
its relationship with Itochu, with substantial earnings power in non-resources areas, to expand their business overseas mainly in Asia.

Baring Private Equity
Asia (Hong Kong)

2014/Dec

Baring Private Equity Asia, one of the leading Asian investment companies which is based in Hong Kong, acquired Bushu Pharmaceuticals Ltd., aleading contract manufacturer for pharmaceuticals.

CTBC Bank Co., Ltd. (Taiwan)

2014/Jun

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 Technology,
Inc. (US)2014/Nov

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.

SanDisk (US)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(US), Safran S.A. (France)

2014/Sep

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 Electric Company andSafran S.A. as parts for the jointly-developed next-generation airplane engine.

Apple Inc. (US)2015/MarApple 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.

Nokia(Finland)

2015/May

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"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.

BASF (Germany)

2014/Feb

The battery material research and development center was established in Amagasaki Research Incubation Center in Hyogo. The laboratory is thefirst development base in the Asia-Pacific region specializing in lithium ion batteries, which conducts basic research, develops the products andprovides 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ⓒ2015 JETRO. All rights reserved.

5271 FTAs are in force around the world. Mega FTAs expected todevelop further, led by TPP.

5■The number of free trade agreements (FTAs) in force reached 271, including 17 new agreements in 2014(as of July 2015).The
number of new FTAs enacted each year has recorded double digits worldwide for twelve years in a row since 2003.
■A Trade Promotion Authority (TPA) bill was signed by US President Obama on June 29, 2015. It is expected that this new law
will encourage the Trans-Pacific Partnership (TPP) negotiations, which consists of twelve Asia-Pacific countries, including
Japan and the US. The conclusion of the TPP would bring the Asia- Pacific regions a high-level and wide range of liberalization
as well as trade rules. This also 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 US.
■Japanʼs FTA coverage ratio, the share of total trade represented by countries with which Japan has FTAs, recorded 22.3% in
2014, exceeding the 20% mark for the first time. Japanʼs FTA coverage ratio would reach 73.3% if the trade values withparticipant countries of the mega-FTAs under negotiation were added up, such as the TPP, RCEP and Japan-EU EPA.

Number of the FTAs which are in force byregion and year (as of July 2015)

Comparison of negotiations areas between
mega FTAs and WTO agreements(Unit: case)

Asia/
Pacific Americas Europe
1955〜5960〜64

1Middle East/
AfricaRussia/CIS

Crossregional

1

2

1

1

3

65〜69

0

70〜74

1

75〜79

2

80〜84

2
4

95〜99

1
5

1

6

1

18

9

16

6

39

7

5

7

3

19

50

3

2005〜09

20

7

4

14

10

8

2010

5

1

6

2011

3

1

2012

2015
Total

5

3

2010〜

6
2

2

1

9

3

3

5

2000〜04

2014

4

1

3

2

2013

2

1

85〜89
90〜94

1

1

2

36

72

2

36

70

1

2

1

1

51

35

28

23

TPP

Japan-EU

TTIP

RCEP

WTO

Trade in goods

○

○

○

○

○

Trade remedies, subsidies

○

○

○

Trade facilitation

○

○

○

○

○

Total

1

1

13

10

14

6

14

7

12

11

13

1

1

4

29

103

271

○

Technical barriers to trade (TBT)

○

○

○

○

Sanitary and phytosanitary standards (SPS)

○

○

○

○

Trade in services

○

○

○

○

○

Protection and liberalization of investment

○

○

○

○

△2
○

Negotiating Intellectual property
areas
Competition, state companies

○

○

○

○

○

○

○

○
△1

E-commerce

○

○

○

Government procurement

○

○

○

Environment

○

○

○

Labor

○

○

○

Conflict resolution

○

○

○

Cross-cutting issues

○

○

○

○

○

Standards and conformance, regulatory cooperation

△3

○

○

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

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

Mega FTA coverage ratio by majorcountries (2014)

FTA coverage ratio of major countries/region (2014)(Unit: %)FTA cover ratio

FTA partner countries/regions (two-way trade)（％）
80

Two-way trade

ExportImport

Japan

22.3

20.7

23.7

ASEAN

14.7

Australia

4.1

India

1.0

US

40.1

47.1

35.3

NAFTA

30.1

South Korea

2.9

DR-CAFTA

1.5

Canada

71.8

79.8

64.1

NAFTA

68.6

South Korea

1.1

EFTA

1.0

Mexico

81.0

92.5

69.6

NAFTA

67.1

EU

8.1

Japan

2.5

Chile

90.9

89.5

92.4

China

22.4

US

15.8

EU

14.9

Peru

90.6

93.0

88.5

China

19.7

US

18.5

EU

14.1

1st

2nd

3rd

Colombia

63.8

62.1

65.2

US

27.2

EU

15.2

Mexico5.2

Brazil

14.9

16.5

13.5

Mercosur

9.6

CAN

3.1

Chile

2.0

75.6

77.2

74.1

EU

64.7

Switzerland

2.6

EEA

1.7

EU28

Total trade

28.7

31.4

26.0

Switzerland

7.0

Turkey

3.8

EEA

3.7

China

Extra-resional trade

18.7

15.3

22.8

ASEAN

11.1

Republic of China

4.6

Switzerland

1.0

South Korea

41.1

43.1

39.0

ASEAN

12.6

US

10.5

EU

10.4

ASEAN

59.9

58.7

61.1

ASEAN

24.0

China

15.9

Japan

8.8

Singapore

77.2

73.2

79.5

ASEAN

24.0

China

12.0

US

8.7

India

17.2

19.9

15.3

ASEAN

9.8

South Korea

2.4

Japan

2.0

Australia

44.1

43.8

44.5

ASEAN

15.0

Japan

12.5

US

7.3

New Zealand

48.9

51.1

46.9

China

18.7

Australia

14.2

ASEAN

13.2

Notes: 1) FTA coverage ratio means the ratio of trade with countries and regions in which the subject country has established FTAs (asof July 2015), out of the subject 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) Chinaʼs ﬁgures exclude those of Hong Kong (8.7%) and Macau (0.1%). 4) ASEANʼsﬁgures 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 countryʼs government, “DOT, May 2015” (IMF)

70

TTIP

73.3

Japan-EU

RCEP

TPP

Existing FTAs

70.7

9.9

64.9

60

29.6
50

17.5

26.4

47.0
7.3
15.1

40
30

14.9

0

28.7

22.3

Japan

18.6

40.1

41.1

20
10

3.2

37.4

18.7

South Korea

US

EU

China

Note: Ratios are based on two-way trade as of the end of 2014. The EUʼs ﬁgures
exclude those of its interregional trade. Chinaʼs ﬁgures exclude those of Hong
Kong and Macau. Japanʼs 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ⓒ2015 JETRO. All rights reserved.

6

ASEAN Economic Community (AEC) to develop further at the endof 2015

6■The ASEAN Economic Community (AEC), trying to complete its integration process by the end of 2015, hasalmost eliminated all tariffs. Cambodia, Laos, Myanmar and Vietnam (CLMV) have eliminated tariffs for 89-93%
of items from 2015, expecting to complete the tariff elimination in 2018 with a few exceptions. In areas otherthan 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 ofstandards are expected.
■ Three FTAs have newly entered into force since 2014 in Asia-Pacific region.
■ The trade value and ratio of utilizing the current Japanese FTAs are both increasing each year.

Focus area of AEC

Status of tariff liberalization in AEC(Unit: %)Percent of tariff
lines with thetariff rate of zero
percent

Contents

Tariff

Trade ingoods
Nontariff

Among the 10 ASEAN states, six states (Singapore, Thailand, Indonesia, Malaysia, the Philippines and Brunei)
have eliminated tariffs of almost all items within the region since 2010. CLMV (Cambodia, Laos, Myanmar andVietnam) have also eliminated tariffs on about 90% of items since2015. Tariffs of remaining items will be eliminated in 2018 with a few exceptions.
●In 2014, the requierments of FOB values to be stated in certificates of origin (CO) was abolished under certain
conditions.
●Negotiations are underway to introduce a self-certification system in CO procedures in ASEAN from 2016.
●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.

Services

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 somecases it might be limited to merely a promise to eventually liberalize a small portion of each service sector̶it isprobable 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 inAugust 2014.

Movement of
persons

Mutual recognition agreements (MRA) for professional service qualification are being promoted. To date, ASEAN concluded
MRAs in eight fields (engineering, nursing care, construction, surveyors, accounting, practitioners, dentists and tourism
experts). Operations commenced in engineering and construction services.

Source: Created based on materials of ASEAN

ASEAN6Percent of tariff
lines with thetariff rate lessthan five percent

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

CLMV

ASEAN
Source: Data from ASEAN Secretariat

FTAs which entered into force in Asia-Pacific region(2014 ‒ July 2015)

Status of Japanʼs FTA utilization(based on import value)(Unit: 100 million yen, %)SingaporeTaiwan

South KoreaAustralia

JapanAustralia

Enforcement
date

Agreement details

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

2014/Dec

2015/Jan

Value of utilized FTAs
2012

2013

2014

2012

2013

2014

Thailand

4,898

5,615

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

Philippines

1,758

2,192

2,418

23.6

24.3

22.5

Myanmar

7

11

33

1.3

1.4

3.7

Cambodia

13

42

105

4.0

7.4

12.9

Laos

7

10

9

7.2

9.2

7.7

Brunei

0

0

1

0.0

0.0

0.0

AJCEP

2,716

4,130

5,207

3.5

4.8

5.5

Other Asian
region

India

1,042

1,367

1,565

18.7

19.8

21.2

EuropeSwitzerland

333

401

476

5.1

5.6

6.2

Mexico

684

834

1,052

19.5

20.3

23.2

ASEAN

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-sized gasoline powered
vehicles (1,500-3,000cc) and small-sized gasoline powered
vehicles (1,000-1,500cc), once the agreement goes into effect.
Australia will eliminate tariffs for about 75% of the trade value ofimported vehicles from Japan upon the agreement entering into
force, with the remaining 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 tomining and manufacturing including mineral fuels in ten years.
Rice is excluded from the elimination of Japanʼs tariffs, while
wheat, dairy products and sugar will be reviewed in the future.

Utilization rate

Latin
America
Total

Peru

79

116

134

3.5

4.6

7.2

Chile

1,576

1,567

1,851

21.2

20.2

21.5

18,27522,24425,624

14.2

15.5

16.8

Notes: 1) Overall import value of AJCEP excludes that of Indonesia, which has not signed the agreement.
2) According to one estimate that tariﬀ revenue is divided by total imports, almost 80% of Japanʼs
imports are estimated to be duty free.
Source: “Trade Statistics” (MOF)
Copyrightⓒ2015 JETRO. All rights reserved.

Source: Trade publicity (JETRO), data from METI

7

7

Service sectors becoming important in overseas expansion■Commodity trade includes a large amount of value added created by intangible services. In particular, thewholesale, retail and transportation services have a high value added ratio of 18.3% in Japanʼs exports andaround 17% in world exports, which indicates that those services have become a critical factor for goods
exports.
■Meanwhile, emerging countries, especially Asia, still have restrictions on foreign entry in the service industry.
With Japanese companies accelerating their business expansion overseas, the liberalization of the area isrequired.
■Several frameworks on service liberalization, such as the Trade in Services Agreement (TiSA) which mainly
consists of developed countries, and the ASEAN Framework Agreement on Services (AFAS), which allows its
internal investors to take a 70% stake at most, are under negotiation. APEC is also addressing the liberalizationof manufacturing related services. The utilization of deregulation in the service industry, implemented by theseinternational frameworks, will be a critical choice for overseas business.

Breakdown of value added inJapanʼs commodity exports (2011)

Restrictiveness of distribution services in major emerging countries
0.5(Unit: %)Business type

Stringent restrictions

ratio

Total

100.0

Agriculture, hunting, forestry and fishing

0.7

Mining and quarrying

5.9

Total Manufactures

57.9

Electricity, gas and water supply

2.3

Service industry

33.2

Construction

0.7

Distribution services

15.6

Wholesale and retail trade, repairs

14.5

Transport and storage, post and telecommunication

4.8

Transport and storage

2.2

Real estate, renting and business activities

8.7

R&D and other business activities

5.7

Community, social and personal services

1.1

Barriers to competition

0.4

Other discriminatory measures
Restrictions to movement of people

Mild restrictions

0.3

Restrictions on foreign entry (2)

0.2

0.1

3.8

Financial intermediation

Regulatory transparency

0.0

Indonesia

China

India

RussiaSouth Africa

BrazilChile

MexicoTurkeyNotes: 1) The deﬁnitions of the distribution industry follow those of warehouses, wholesale, retail and franchise 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.
Source: “Service Trade Restrictiveness Index” (OECD).

Source: “OECD-WTO Trade in Value Added” (TiVA）.

Restriction on foreign ownership in distribution and transportation services in Asia

Thailand

Malaysia

Indonesia

Philippines

India

Wholesale

RetailDomestic transportation●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, the Foreign Business Act defines companies withless than 50% foreign ownership as Thai companies and therefore less than
50% foreign ownership is allowed. As an exception, foreign ownership isallowed based on the Foreign Business Committee's approval with thechief's permission.
●In some business operations, 100% foreign ownership is allowed if acompany 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 theForeign Business Act. However, the Foreign Business Act definescompanies with less than 50% foreign ownership as Thaicompanies and therefore less than 50% foreign ownership isallowed. As an exception, foreign ownership is allowed based on
the Foreign Business Committee'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.

●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 less than
3000㎡, grocery shops, and pharmacies is not permitted.
●There are requirements for a minimum of 30% Bumiputera stake inhypermarkets and supermarkets.
●A minimum capital of 20 million ringgit for department stores and amillion ringgit for specialised stores is required for 100% foreign
ownership to be allowed.

●Foreign ownership is limited to 49% for cargo and containertransportation, with minimum capital of 250,000 and 500,000
ringgit respectively. Though 100% ownership is allowed fortransportation of goods possessed by a company with a capitalof 250,000 ringgit or more.
●Licenses for Malaysian domestic ships are granted only for those
whose foreign ownership is 49% or less. For long-term
permission, 30% Bumiputra stake is required.

●Up to 33% foreign ownership is allowed for distributor
businesses, warehouse businesses, and cold storage
businesses. Until April 2014, 100% foreign ownership wasallowed.

●100% foreign ownership is allowed for minimarkets, supermarkets
and department stores with floor spaces of larger than or equal to
400㎡,1200㎡,2000㎡respectively (foreign 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 andbeverage.

●In the fields of general cargo transportation, domestic marinetransportation and freight forwarding and foreign ownership islimited to 49%.

●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-incapital is over $200,000.

●(1) 100% foreign ownership is allowed if $2.5 million or more of theminimum capital is invested and investment per store is $830,000 or
more and (2) the minimum capital requirement is relaxed to $250,000
or more for businesses that handle luxury goods. However,if theparent company's net assets apply to (1) above, it must be capitalized
at $200 million or more and if the parent company's net assets apply
to (2) above, it must be capitalized at $50 million or more and musthave five or more stores or franchises worldwide and the capital of
one of these stores must be $25 million or more.

●100% foreign ownership is allowed for cases in which capital is
200,000 dollars or more. This condition for the ownership ratio isinterpreted as being limited to 40% or less among legal experts
recently.

●100% foreign ownership is allowed.

●Single Brand: 100% foreign ownership is allowed with individual 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 infrastructures, procuring 30% of
the procurement amount from small-scale companies, and business
operations in cities with 1 million people or more.

●100% ownership is allowed for marine and road transportation.
●Among air transportation, foreign ownership is limited to up to
49% for regular services and up to 74% for irregular services orcharter flights.
●Foreign ownership is prohibited for railway transportation, except
in some cases such as high-speed railway, cargo lines andpublic-private projects, for which 100% ownership is allowed.

Source: Reports from JETRO overseas oﬃces. Regulations as of end of June 2015.
Copyrightⓒ2015 JETRO. All rights reserved.

8

Increasingly attractive “critical mass” markets andbusiness expansion through alliances

8■In emerging and developing countries, consumption is expected to grow as their income levels rise. In emerging regions other thanChina and ASEAN, Japanese firms are behind European and US companies in advancing into the countries with large markets and highgrowth rates. It is becoming important to cultivate these so called “Critical Mass” markets which are 1) among middle-income countries
other than China and ASEAN, 2) have more than a $100 billion nominal GDP and 3) the ten most largely populated countries.
■ Making inroad into huge and complicated “Critical Mass” markets alone, firms especially in the field of sales of consumer products
and in the service industry, are likely to face many obstacles in exploring markets, acquiring customers and so on. This indicatesthat partnering local firms or third-country companies with abundant knowledge and experience can be considered as a good
option easing entrance into the markets. When advancing into promising markets such as India, Brazil and Turkey, some Japanesecompanies have chosen to set up joint ventures, acquire local companies, establish business alliances and so on.
■ The large US market sees a remarkable gain in the Hispanic population, which is expected to reach around 30% of Americaʼs entire
population by 2060. The Hispanic market can be regarded as the critical mass market of America.

Share of countries by income level（％）

10 Critical mass markets

Low income countries

40.0

Lower middle income countries
Upper middle income countries
High income countries

35.0

CountryJapan, South Korea, Singapore,
Australia, US, Chile, Uruguay,
countries of Western Europe,Israel and so on

Indonesia, Vietnam,
Myanmar, India, Egypt,
and so on

30.0

25.0

20.0

Nominal GDP Population($100 million)(10,000)(2014)(2014)

Personal
consumption rate
against GDP (%)(2013)

Brazil

23,53020,277

India

20,495125,97062.5
57.1

Mexico12,827

11,97269.0

Turkey

8,061

7,690

70.9

Nigeria

5,737

17,394

72.1

Colombia

3,849

4,766

61.0

South Africa

3,501

5,400

60.6

Egypt

2,864

8,670

81.2

Pakistan

2,501

18,62981.0

Bangladesh

1,854

15,82272.8
36.2<Reference:East Asia>
China

15.0

10.0

Cambodia, Nepal,
Tanzania and so on

China, Malaysia, Thailand, Brazil,
Mexico, Turkey, South Africa and so on

1987 89

91

93

95

97

99

01

03

05

07

09

11

13 14

Critical mass marketʼs inward FDI stock (2013):
Share of each investing country

136,7828,886

25,14955.8

Thailand

3,738

6,866

51.9

Malaysia

3,269

3,026

51.2

Note: Middle income countries deﬁned by World Bank are regarded as
emerging countries.
Sources: World Bank, WEO(IMF), and UN.

(year)

Notes: 1) The income classiﬁcations are revised each year.
2) Listed countries in each group are based on the latest deﬁnitions.
Source: World Bank.

103,804

Indonesia

Trends in Japanese firmsʼ business expansion by country
and approach (January 1, 2010 ‒ April 13, 2015)(Unit: %, US$ million)

Investing country

GermanyJapan

Total inward
FDI stock

15.9

5.7

7.1

249,288

11.4

18.0

1.6

5.0

10,586

Bangladesh

8.7

11.0

0.7

5.0

8,063

Brazil

15.1

3.2

2.6

4.2

715,182

Mexico

45.3

4.0

2.5

2.2

391,879

Turkey

4.9

6.0

10.6

0.9

112,814South Africa

6.1

48.3

4.7

2.2

152,124

Nigeria

4.5

10.6

0.3

0.0

94,960

China

3.3

0.9

2.3

6.3

2,331,238

Singapore

13.0

5.4

2.1

7.4

750,078

Indonesia

3.2

4.6

1.1

11.3

230,439

Thailand

7.8

3.3

2.0

35.4

178,221

Malaysia

8.6

4.3

4.3

14.7

135,638

US

UK

India

16.0

Pakistan

Recipient country(Case, %)Total

Overall critical mass
market(Reference)

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

Establishment
Greenfieldof a joint
investment
ventureCooperation Business/
Capitalwithcapitalparticipation
government alliance

M&A

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

-

Note: Only items with ﬁve or more cases are valid.
Source: Nikkei Value Search
Copyrightⓒ2015 JETRO. All rights reserved.

9

Revitalization of regional economies through investment in Japan,
exports of agricultural and ﬁshery products and inbound tourism.

9■The number of total full-time persons employed by foreign companies, with a more than 33.4% foreign capital ratio, is
610,000. Greenfield investment in Japan varies depending on regions: a large amount of investment is made in the
tourism-related industry in Hokkaido, the renewable energy industry in Kyushu and Okinawa and the electronic partsindustry in Tohoku, Chubu and Kansai. Investment by foreign companies have a positive impact on regional economies, bysuch means as creating jobs, increasing the number of foreign tourists, expanding exports and the introduction of newtechnologies and services.
■In 2014, exports of Japanese agricultural, forestry, fishery and food products hit a record high at ¥612 billion, 11.1% higher
from a year earlier, driven by a rise in exports to Asian countries and regions including Hong Kong, Taiwan, China and Korea.
Geographical Indication (GI) Act came into force in June 2015. The law is expected to promote the creation of regional
brands. JETRO has implemented the “One Prefecture One Support Program”, which creates specific export projects.
■The Japan National Tourism Organization (JNTO) announced that the number of overseas tourists in 2014 reached a newhigh of 13.4 million, an increase of 29.4% from the previous year, on the back of weakening yen and other factors. (The deficitof the travel service balance substantially shrank from $6.8 billion in 2013 to $0.5 billion in 2014). Industrial tourism, utilizing
the Cool Japan resources, is expanding in region. More tourists are expected to come from countries and regions in Asia,
given their proximity to Japan.

Examples of companies made use of JETRO supports to
set up their business/affiliate in region (2009-2014)

Top greenfield investment in Japan by region(Unit: US$ million)

Destination

Project date
Apr 2013

Hokkaido

Company nameNationality

HanwhaSouth Korea Renewable energy

May 2008 West Paces Hotel GroupAug 2008 Pacific Century Group (PCG)

Fukushima Jun 2006
Iwate

TohokuHotel/tourism

Hong Kong Leisure/entertainment
US

Semiconductor

Netherlands Renewable energy

Capitalinvestment

Tohoku

183
170
1,200
272

Kanto

Company nameNationality

MiyagiOsbert Hotels Ltd.

Hong Kong

Chiba

Snowflake

Switzerland

Open source software

Saitama Thaicom Public Company
Limited (IPSTAR)

ThailandSatellite base station

US

IbarakiJan 2009

FranceTokyo

Jan 2007

Aegon

Netherlands Financial service

490

Tochigi

Oct 2013

Juwi

Germany

Renewable energy

272

Aichi

US

Electronic components

174

UK

Electronic components

147

Mie

US

Real estate

144

Aichi

Shizuoka Apr 2006

Areva

Corning

Shizuoka Feb 2012 Intelligent Energy
ProLogisSemiconductor

220

Coal, oil and natural gas

840

Aichi

Jul 2008

Gifu

Nov 2014 Simon Property GroupUS

Real estateMie

Aug 2013 SanDisk

US

Semiconductor

4,000

Mie

Dec 2003 SanDisk

US

Semiconductor

2,600

Osaka

Dec 2007 Corning

USElectronic components

400

Hiroshima Nov 2014 Micron Technology

US

Semiconductor

859

Kansai

Chugoku Yamaguchi Dec 2006 Royal Dutch Shell Plc
Okayama Feb 2012 Global Logistics Properties (GLP)

Netherlands Chemicals

168

Singapore Real estate

103

Ehime

Aug 2005 Albemarle Corporation

US

Chemicals81

Nov 2012 Assuranceforeningen Gard

NorwayFinancial service

48

Germany

Automotive parts

30

US

Tokushima May 2008 Volkswagen
Fukuoka Nov 2013 First Solar-

Apr 2013

Nagasaki Apr 2014

Renewable energy

272

HanwhaSouth Korea Renewable energy

272Royal Dutch Shell Plc

Netherlands Renewable energy

272

Chubu

Kansai
Chugoku(Million yen)

700,000
600,000（％）
Agricultural products

Forestry products

Fishery products

Year-to-year rate

30.0
20.0

500,000

10.0

400,000

0.0

300,000-10.0

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)

Spring Airlines Japan

Business
Hot spring & spa resort

China

LCC

FranceAutomobile parts

Infosys Ltd.

India

IT Consulting

Mag-Isover KKFranceGlass wool for residential and industrial use

Magnate Technology Co., Ltd.

TaiwanParts of air planes, precision parts ofindustrial machinery
Polishing materials and cloth forsemiconductors

Mie

Cabot Microelectronics Japan

Hyogo

INSTAR ITSUSCzech Republic Energy saving business management

Hyogo

UmicoreBelgium

Tottori

DBS Cruise Ferry Co., Ltd.

South Korea Cargo-passenger liner

Okinawa/
Osaka
Fukuoka/
Osaka

Juneyao Airlines

Air Busan
Kyushu/Okinawa Fukuoka Elanex
Fukuoka T'way Airlines

China

Materials of lithium-ion battery

LCC

South Korea LCC
US

Translation

South Korea LCC

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

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

Japanʼs exports in agricultural and fishery products

Chiba

Kanagawa Faurecia Japan

144

Shikoku Ehime

Kyushu/Okinawa

Destination

272

Yamagata Feb 2004 Entegris
Kanto

Chubu

US

Spansion
Royal Dutch Shell Plc

Jul 2014

Industry sector

JETROʼs industrial tourism support projects in region
Saga

Hamamatsu

Ibaraki

Kyoto

Tsubame Sanjo

Area

DesignMusic

Science

Lifestyle

Manufacturing suchas metal working

PeriodMar 1-5, 2015

Mar 9-10, 2015

Mar 16-19, 2015 Mar 11-12, 2015 Jun 25-28, 2015

Buyers, media,
designers andInviteddesign schools
personnel from Singapore

Those involved inmusic business, amusic businessschool and media
from the US andFranceA researchorganization ofindustrial technology
from Taiwan, media
and travel companies
from Vietnam

Buyers, media
and others fromASEAN andNortheast Asia

Buyers, designers,
hairdressers,
chefs, design
schools, media
from Singapore
and Malaysia

Arita warecompanies, Arita
College of
Destination Ceramics,
companies related
to Morodomi
furniture and so on

Music instrument
manufacturers (vocal
synthesis technology,
score recognition andwriting technology, etc.),
high-sensitivity acoustic
systems and so on

Science andCompanies
technology research related to kitchen,facilities (Space
tableware,
Center, AIST, robot interior, beauty
suit development
and healthcompanies) and so products, giftsonand so on

Companies related to
kitchen tools
including knives andcutlery, beauty
products such as
scissors and nailclippers

Source: JETRO
Copyrightⓒ2015 JETRO. All rights reserved.

10

10

Globalization of management through diversity■Among challenges that Japanese firms face when engaging in export and expanding their business overseas, alack of human resources capable of playing a central role in overseas operations is commonly reported.
■Looking at the status of hiring foreign employees by Japanese firms, Japanese companies that are currently
hiring foreign staff (42.2%) and interested in hiring foreign staff in the future (20.8%) totals 63%. Of thesecompanies, the percentage of hiring / wanting to hire foreign students studying in Japan is the highest. This
indicates that there is a high demand for international students among Japanese companies.
■Lifestyle survey of privately financed international students concluded by the Japan Student Services
Organization (JASSO) found that the percentage of foreign students who intend to work in Japan was 65.0% in
FY2013. According to the survey on international students career and academic degrees by the sameorganization, despite the high number, their actual employment rate was only 23.7%. This difference inpercentage indicates that there is room for improvement.

Bottlenecks for export and overseas businessexpansion

Hiring of foreign employees by Japanese firms(Unit: %)（Unit：％,Multiple answers）

Total
SMEs
Large companies（n=2,995） （n=661） （n=2,334）

Total
SMES
Large companies（n=3,471） （n=680） （n=2,791）
Local business partners

47.8

46.3

48.1

Human resources to play a central
role in overseas business

41.2

52.6

38.4

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

40.1

48.7

38.0

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

39.4

42.1

38.8

Expansion of sales networkin overseas

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

Currently hiring foreign employees

42.2

70.3

34.2

Not currently hiring foreign employees but
expecting to consider recruitment of it

20.8

10.4

23.8

Not currently hiring foreign nationals andnot planning to consider it in the future

27.2

12.9

31.3

No answer

9.7

6.4

10.7

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

Status of employment of foreign students in Japan(People)100%

45,000

Employed
Unemployed
Employment rate of foreign students (right axis)

40,000Note: Parameter is the total number of replying companies participating in this survey.
Source: “Results of JETROʼs FY 2013 Survey on the International Operations of Japanese Firms”(JETRO)80%

35,00030,000Demands for foreign nationals by Japanesecompanies

60%
25,000(Unit: %, multiple answers)

24,951

Total
SMEs
Large companies(n=1,887)(n=534)(n=1,353)
Hiring/want to hire foreign
students studying in Japan

48.1

60.7

20,000Hiring/want to hire foreign nationals(not including foreign students studying in Japan)

40.6

42.1

40.0

10,000Hiring/want to hire foreign
nationals residing overseas

34.6

35.8

34.1

5,000

3.4

3.5

0

26.9%

30,573

28.8%
24.1%

19.7%

5,705

3.5

29,98830,060 30,680

40%

15,00043.2

27,53523,19824.1%

Others

25,589 23,950

30,2682004

16.8% 17.8%

7,911

05

9,411

9,684

8,736
6,073

06

07

08

09

6,663

10

20.9%

22.2% 23.7%
20%

7,910

8,722

9,382

11

12

13（Fiscal year）

0%

Notes: 1) "Foreign study abroad students " are deﬁned as those studying in such institutions asuniversities, two-year colleges, 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)

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

Copyrightⓒ2015 JETRO. All rights reserved.

11

10

Globalization of management through diversity■Challenges that Japanese companies face in terms of expanding utilization of foreign employees, such as
international students, include lack of experience of how to recruit, treat and manage foreign staff.
■There are also cases of SMEs proactively utilizing foreign personnel, including international students, in developing
their overseas business. SMEs consider foreign staff to be useful in areas such as expanding sales channels.
Nowadays, local governments in certain regions are establishing collaborative industry-academia-government
bodies that offer continuous services from recruitment of foreign students to support for their employment.

Current status and challenges to promote utilizationof foreign students and other foreign nationals

Preemployment

Postemployment

Benefits of hiring/employing foreign employees(Unit: %, Multiple answers)

Total(n=1,887)

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

Expanding sales channels

40.9

33.0

44.0

Unclear recruitment process that isparticular to Japan (employing new
graduates all at once)

Improving international negotiation ability

39.7

40.1

39.6

Difficulties in finding appropriate
foreign nationals in local universities(especially for local companies)

High demand for positions in large
companies around Tokyo.

Improving foreign language ability

31.6

32.0

31.4

Low retention rate (high attrition rate,
concerns over leakage of technologies
and know-how)
Difficulties in sharing a common visionof the organization
Lack of experience of how to treat andmanage foreign employees.

Unclear career plan
(Searching for a job where staff can
exercise their expertise, preferredwork locations and compensation
package according to job responsibility
are available, among others).

Strategic preparation for localization of management

28.6

36.1

25.6

Lowering psychological barriers among Japaneseemployees in communication with foreign nationals

27.9

31.6

26.5

Companies

Foreign nationals including international students

High Japanese skills required(1st level of the Japanese Language
Proficiency Test or the equivalent)

A good command of Japanese is required.
(Japanese literacy is required from thetime of submitting entry sheets)

Lack of knowledge on how to recruit
foreign employees, a small number ofapplicants (especially for SMEs)

Lack of knowledge on administrative
procedures such as changing status ofresidence (for companies hiring theirfirst foreign staff member)

Note: Parameter is the total number of companies responding with "hiring foreigners" and"want to hire foreigners".
Source: “Results of JETROʼs FY2014 Survey on the International Operations of Japanese Firms”(JETRO)−

Source: interview survey and others

Cases of utilizing foreign students and other foreign nationals in terms of SMEsʼ business expansion
overseas and employment supported by industry-academia-government collaboration bodies
Effects

Companies

Cases regarding business expansion overseas/industry-academia-government collaboration bodies

Expanding sales channels

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 aJapanese engineer. This brought us specific results such as increased business inquiries from overseas.

Expanding sales channels,
improving international negotiation
ability

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 and 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 accordance with our business expansion
plans.

Expanding sales channels,
improving international negotiation
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 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 customersʼ needs accurately, which led to the improvement of our products.

Management localization, improving
international negotiation 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 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.

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 Japanesemanagement 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 thesales department. We are planning to train him to be a candidate president of our subsidiary. We are also 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 ourbusiness there. The headquarters hired an engineer who graduated from a university in Southeast Asia. He is expected to be assigned as amanager 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
bodiesIn recent years, some regions see a number of local governments establishing organizations in collaboration with industry and academia, in order toprovide comprehensive service ranging from attracting 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 for International 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 prefectural and 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ⓒ2015 JETRO. All rights reserved.

12

◆

JETRO activities promoting “Cool Japan”

Japan is a country rich in culture and history, and also a leading center of design and innovation. From traditional
crafts with a modern appeal to gourmet foods and cutting-edge textiles, the Japanese Government has created acampaign called “Cool Japan” to redefine its reputation as a pioneer in design, fashion, entertainment and cuisine.
JETRO has an important role in promoting the Cool Japan concept by supporting unique, attractive products andservices to be showcased all over the world.

Japan
CuisineDesignFashionEntertainment

JETRO

Asia, Europe, US, etc.

1) Promoting the CoolJapan concept andrelated products to
expand exports.

Cool Japan products which havepenetrated overseas markets

OutboundInbound2) Promoting tourism
to attract foreign visitors
Tourism

Promoting the allure of Japan

Service

1) JETRO provides various support to SMEs to expand Cool Japan related activities overseas.

Inviting potential buyers andinﬂuencers to Japan

Business consultation

Business seminar

Participating in overseas trade fairs
Business meeting in emerging markets

Dispatching business delegations
to promising countries and areas

2) JETRO cooperates with The Japan Tourism Agency (JTA), the Ministry of Economy, Trade and Industry(METI) and the Japan National Tourism Organization (JNTO) to increase the number of foreign visitors.
Copyrightⓒ2015 JETRO. All rights reserved.

13

◆

JETRO activities for promoting direct investment in Japan

Government
establishments overseas

Local governments
Cooperation

Cooperation

Overseas oﬃces/Invest Japan specialists

Domestic oﬃces(1)Providing

information on
Japanese businessenvironment(2)Finding anddeveloping businesses
interested in investingin Japan(3)Supporting
business startups
through IBSCs(4)Increasing
business
opportunities withJapanese companies●Invest Japan website●Approach by Invest Japan specialists●Temporary oﬃces (IBSCs)●Business matching events●Visiting companies and exhibitions●Seminars and symposia●Advice from specialists●Individual consultation●Providing information

HQ/Invest specialists
Cooperation

Consultation hotline forinvesting in Japan

Hotline for requesting
regulatory reform

Relevant government
authorities(1) Providing information on Japanese business environment:Promoting investing in Japan via Invest Japan website (available in six
languages), brochures, Invest Japan seminars/symposia.

(2) Finding and developing businesses interested in investing in Japan:Approach by Invest Japan specialists, ﬁnding businesses
interested in investing in Japan by visiting companies and exhibitions, individual consultation, providing information about Japanesemarket and industries, helping build business models, providing information about regulations, supporting establishment of branchoﬃces, solving problems related to regulations and business.

(3) Supporting business startups:Oﬀering temporary oﬃces (IBSCs located in six major cities in Japan). Consultation by professionals(taxation/accounting, incorporation, human resource and labor, visa, real estate, etc.).

(4) Increasing business opportunities with Japan:Supporting business matching with Japanese companies.
●Cooperation with local governments:Providing information on locations all over Japan, market and industry information, incentives
provided by local governments, and supporting promotional activities by local governments.

●Cooperation with government establishments overseas:Finding businesses interested in investing in Japan by cooperating withgovernment establishments overseas.

●Cooperation with relevant government authorities:Arranging meetings with oﬃcials of regulatory agencies, relaying requests forregulatory reforms to the Japanese Government.

Invest Japan website(available in six languages)

Distributing information via
seminars/symposia, etc.

Providing temporary oﬃces(IBSC)

Business matching events,
increasing business
opportunities with Japan
Copyrightⓒ2015 JETRO. All rights reserved.

14

For more information,please contact:

Japan External Trade Organization
International Economy Division
Overseas Research Department

ORI@jetro.go.jp