Japan External Trade Organization (JETRO)

2013 JETRO Global Trade and Investment Report-Revitalizing Japan through global business-

Overview
August 8, 2013
Overseas Research Department, JETRO

Copyright (C) 2013 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Contents
Chapter 1: The world economy, trade and direct investment
Chapter 2: Trends in the development of world trade rules
Chapter 3: Revitalizing Japan through global business

Copyright (C) 2013 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 1
The world economy, trade and direct investment

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)World economic growth stagnates, concerns of future slowdown
In July 2013, the IMF revised downward its estimate of the world’s real GDP growth for 2013 by 0.2 points to 3.1%, over the estimate in April 2013.
Compared to 2012, the estimate showed a stagnation in the world economy. Initially, growth had been expected to accelerate. However, weak recovery of
the European economy as well as the harsh view toward growth in emerging and developing economies such as China, India, Russia and South Africa, gave
rise to concerns of a further slowdown. Amongst developed economies, Japan is estimated to achieve remarkably high growth.
Figure I-1: GDP growth and contribution by country and region
2011
PercentchangeWorld
Advanced economies
United States
Euro Area
Germany
France
Italy
Spain
Japan
United Kingdom
Emerging and developing economies
Central and Eastern Europe
Commonwealth of Independent States
Russia
Asia
China
India
ASEAN 5Latin America and the Caribbean
BrazilMiddle East and North Africa
Sub-Saharan Africa
South Africa(Reference) EU

3.9
1.7
1.8
1.5
3.1
2.0
0.4
0.4
△ 0.6
1.0
6.2
5.4
4.8
4.3
7.8
9.3
6.3
4.5
4.6
2.7
4.0
5.4
3.5
1.7

2012

Contribution
3.9
0.9
0.3
0.2
0.1
0.1
0.0
0.0
△ 0.0
0.0
3.0
0.2
0.2
0.1
1.8
1.3
0.3
0.2
0.4
0.1
0.2
0.1
0.0
0.3

Percentchange
3.1
1.2
2.2
△ 0.6
0.9
0.0
△ 2.4
△ 1.4
1.9
0.3
4.9
1.4
3.4
3.4
6.5
7.8
3.2
6.1
3.0
0.9
4.5
4.9
2.5
△ 0.2

Contribution
3.1
0.6
0.4
△ 0.1
0.0
0.0
△ 0.1
△ 0.0
0.1
0.0
2.4
0.0
0.1
0.1
1.6
1.1
0.2
0.2
0.3
0.0
0.2
0.1
0.0
△ 0.0

2013 (Projections)Difference
Percent
from April Contributionchangeprojections
3.1
△ 0.2
3.1
1.2
△ 0.1
0.6
1.7
△ 0.2
0.3
△ 0.6
△ 0.2
△ 0.1
0.3
△ 0.3
0.0
△ 0.2
△ 0.1
△ 0.0
△ 1.8
△ 0.3
△ 0.0
△ 1.6
0.0
△ 0.0
2.0
0.5
0.1
0.9
0.3
0.0
5.0
△ 0.3
2.5
2.2
0.0
0.1
2.8
△ 0.6
0.1
2.5
△ 0.9
0.1
6.9
△ 0.3
1.7
7.8
△ 0.3
1.2
5.6
△ 0.2
0.3
5.6
△ 0.3
0.2
3.0
△ 0.4
0.3
2.5
△ 0.5
0.1
3.0
△ 0.1
0.2
5.1
△ 0.4
0.1
2.0
△ 0.8
0.0
△ 0.1
△ 0.1
△ 0.0

(Unit: %)2014 (Projections)Difference
Percent
from April Contributionchangeprojections
3.8
△ 0.2
3.8
2.1
△ 0.2
1.0
2.7
△ 0.2
0.5
0.9
△ 0.1
0.1
1.3
△ 0.1
0.0
0.8
0.0
0.0
0.7
0.2
0.0
0.0
△ 0.7
0.0
1.2
△ 0.3
0.1
1.5
0.0
0.0
5.4
△ 0.3
2.7
2.8
0.0
0.1
3.6
△ 0.4
0.2
3.3
△ 0.5
0.1
7.0
△ 0.3
1.8
7.7
△ 0.6
1.2
6.3
△ 0.1
0.4
5.7
0.2
0.2
3.4
△ 0.5
0.3
3.2
△ 0.8
0.1
3.7
0.1
0.2
5.9
△ 0.2
0.2
2.9
△ 0.4
0.0
1.2
△ 0.1
0.2

Notes: (1) The definitions of advanced economies and emerging and developing economies follow the World Economic Outlook (IMF). The ASEAN 5 refers to Indonesia, Malaysia, Philippines, Thaiand, and Vietnam.
(2) Contributions by country and region are calculated using the weighted PPP (Purchasing Power Parity) for 2012, based on "WEO, April 2013."
Source: "WEO, July 2013" (IMF).
4
Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Emerging and developing economies continue to lead world economy
 Emerging and developing economies, including China and India, are estimated to contribute more than 60% to world economic growth from2010 to 2018. In contrast, the contribution rate of developed economies for the same period is expected to decline to less than 40%.
 In recent years, China has achieved the greatest growth to lead the world economy. With the exclusion of Australia, which has strengthened its
national power through the high price of natural resources, emerging and developing economies occupied the top 10 economies which
contributed to the world economic growth. (Japan’s contribution rate has been on the decline as follows: 1980-1990: 17.6%; 1990-2000: 16.1%;
2000-2010: 2.5%; 2010-2018: 1.3% [IMF figures prior to the announcement of the Growth Strategy].)

Figure I-2: Contribution to world economic growth by
emerging and developing economies

2010 - 2018
(Projectections)

38.4

61.6
Advanced economies
Emerging and developing economies

2000 - 2010

50.6

49.4

1990 - 2000

79.3

20.7

Figure I-3: Ranking of contribution to the world economic growth(Unit: %)Difference between thetwo periods
1980-2000
2000-2018
1 United States
33.1 China
21.1 China
16.4
2 Japan
16.9 United States
17.1 India
2.5
3 Germany
4.9 Russia
4.5 Brazil
1.9
4 China
4.6 Brazil
4.2 Indonesia
1.7
5 United Kingdom
4.3 India
3.8 Australia
1.1
6 France
3.0 Germany
3.2 Saudi Arabia
0.9
7 Italy
2.9 France
2.7 Turkey
0.7
8 Brazil
2.3 United Kingdom
2.3 Nigeria
0.6
9 South Korea
2.2 Canada
2.2 Iran
0.6
10 Canada
2.2 Australia
2.2 Colombia
0.4
12
Japan
1.8 Japan△ 15.1【Reference: By region】

1980 - 1990

83.1

0.0

10.0

20.0

30.0

Source: "WEO, April 2013″(IMF).

40.0

16.9

50.0

60.0

70.0

80.0

90.0

1.3 ASEAN5

Difference between thetwo periods
17.2 EU△ 5.2
4.2 ASEAN5
2.9

Central and South America

6.0 Central and South America

9.0 Central and South America

Central and East Europe- Central and East Europe

6.0 Central and East Europe-

Middle East and North Africa

1.3 Middle East and North Africa

5.0 Middle East and North Africa

3.6

Sub-Saharan Africa
0.2 Sub-Saharan Africa
Source: "WEO, April 2013″ (IMF).

2.4 Sub-Saharan Africa

2.1

1980-2000
EU
100.0 (%)
ASEAN5

5

2000-201822.4 EU

3.0

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)World trade levels off in 2012
JETRO estimated that world trade for 2012, based on merchandise trade and nominal exports, rose by 0.02% to US$17.977 trillion year-on-year.
The drop in trade prices had the effect of curbing the overall amount of trade. Real growth rate grew 2.5% in comparison with the previous year,
indicating that the actual flow of goods was also sluggish. Data could be obtained for the most recent period of the first quarter of 2013. During thisperiod, the growth of export value for the main 23 countries and regions was down 0.2% as compared to the same period last year.
Figure I-4: World trade indicesFigure I-5: Long-term trends in world trade (exports) (1949-2012)
2008

2009

2010

2011

2012

17,974 17,977(Export Value, US$ billion)(Growth, %)20,000World merchandise trade, export basis (US$ billion)

16,006

12,382

15,107

Nominal percent change(%)

15.3△ 22.6

22.0

19.4

0.0

Real percent change(%)

4.7△ 11.9

16.9

8.2

2.5

14,000Price percent change(%)

10.6△ 10.7

5.1

11.2

△ 2.5

12,000World merchandise trade, import basis (US$ billion)

16,32012,551

15,23450.0

18,00040.0

16,00030.0

20.0

10,00010.0

18,575 18,664
8,000

Nominal percent change(%)

15.5△ 23.1

21.4

19.2

0.5

6,000

Real percent change(%)

3.2△ 10.2

15.4

5.7

1.5

4,000

Price percent change(%)

12.3△ 12.9

6.0

13.6

△ 1.0

2.8

△ 0.6

5.2

3.9

3.1

△ 2.3

△ 12.9

6.7

2.2

0.5

Average price($/barrel)

97.0

61.8

79.0

104.0

105.0

Quantity of demand(million bbl/day)

86.1

85.1

87.8

88.9

89.8

0.0
△ 10.0△ 20.02,000△ 30.00World real GDP growth(%)
Industrial production index growth (Advanced economies, %)49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 200003 06 09 12
Export Value

Export Growth (nominal)(Year)

Export Growth (real)

Note: 2011 and 2012 trade values and 2012 nominal growth rates are JETRO estimates.
Source: "IFS, May 2013" (IMF).

Crude oil
Notes: (1) 2011 and 2012 trade values and 2012 nominal growth rates are JETRO estimates.
(2) Real percent change = Nominal percent change - Price percent change(3) Real GDP growth based on purchasing power parity.
Figures for 2008 - 2010 are those released in April, and figures for 2011-2012 are those revised in July.
(4) Definition of advanced economies follows IFS classification.
Sources: “IFS, May 2013”(IMF)，WEO，April 2013”(IMF) ,WEO, July 2013(IMF)，WTO，BP plc.，and statistics from individual countries/regions.

6

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)EU trade declines
Exports (including exports within the region) for the 27 EU member countries (EU27) fell by 4.4% year-on-year, while imports (including imports within theregion) fell by 5.7%. The decline in imports for EU, which is the largest import market in the world, has curbed the growth of exports among other countries.
Looking at individual export products, exports of chemicals and steel have declined. Due to factors such as the economic sanctions imposed by the United Statesand EU on Iran, crude oil prices are on the rise and maintaining their positive growth.
Figure I-6: World trade by country and region (2012)
Value

NAFTA
2,371,289
U.S.
1,545,709
Canada454,691
Mexico370,890EU27
5,814,257
Germany
1,408,462
The Netherlands
656,607
France569,721Italy
501,274UK
483,388
Belgium
447,194
Japan
801,335
East Asia
4,595,825
China
2,048,935
South Korea
547,870
Hong Kong
493,366
Taiwan284,412ASEAN6
1,221,242
Singapore
408,621
Thailand
228,407
Malaysia
227,617
Indonesia
190,032
Russia352,536India
296,111
Australia
256,789
Brazil242,580
South Africa
87,264
World trade (estimate)
17,977,031
Advanced economies
10,681,261
Emerging and developing economies 7,295,771
BRICs
2,940,161

Exports
Growth
Share
Rate

3.9
13.2
4.4
8.6
0.5
2.5
6.1
2.1
△ 4.4
32.3
△ 4.5
7.8
△ 1.6
3.7
△ 4.5
3.2
△ 4.3
2.8
△ 5.7
2.7
△ 6.1
2.5
△ 2.4
4.5
4.3
25.6
7.9
11.4
△ 1.4
3.0
8.3
2.7
△ 2.4
1.6
1.2
6.8
△ 0.3
2.3
3.6
1.3
△ 0.3
1.3
△ 6.6
1.1
△ 6.9
2.0
△ 3.6
1.6
△ 5.1
1.4
△ 5.3
1.3
△ 9.8
0.5
0.0 100.0
△ 1.9
59.4
3.0
40.6
3.5
16.4

Contribution（US$million, %)Value

0.5 3,108,418
0.4 2,275,320
0.0
462,3520.1
370,746△ 1.5 5,886,800△ 0.4 1,168,601△ 0.1
591,914△ 0.1
674,804△ 0.1
487,454△ 0.2
692,523△ 0.2
437,889△ 0.1
888,584
1.0 4,355,634
0.8 1,817,826△ 0.0
519,5840.2
554,225△ 0.0
270,565
0.1 1,193,434△ 0.0
379,935
0.0
249,487△ 0.0
196,814△ 0.1
191,691△ 0.1
290,406△ 0.1
489,319△ 0.1
250,712△ 0.1
223,149△ 0.1
101,558
0.0 18,664,441△ 1.2 11,430,781
1.2 7,233,660
0.6 2,820,700

Imports
Growth
Share
Rate

3.3
16.7
3.0
12.2
2.4
2.5
5.7
2.0
△ 5.7
31.5
△ 6.9
6.3
△ 1.2
3.2
△ 6.3
3.6
△ 12.8
2.6
3.3
3.7
△ 6.2
2.3
4.2
4.8
4.0
23.3
4.3
9.7
△ 0.9
2.8
8.4
3.0
△ 3.7
1.4
5.9
6.4
3.8
2.0
8.8
1.3
4.9
1.1
8.0
1.0
4.2
1.6
5.2
2.6
6.9
1.3
△ 1.4
1.2
1.5
0.5
0.5 100.0
△ 1.5
61.2
3.8
38.8
4.0
15.1

Contribution

0.5
0.4
0.1
0.1
△ 1.9
△ 0.5
△ 0.0
△ 0.2
△ 0.4
0.1
△ 0.2
0.2
0.9
0.4
△ 0.0
0.2
△ 0.1
0.4
0.1
0.1
0.0
0.1
0.1
0.1
0.1
△ 0.0
0.0
0.5
△ 1.0
1.4
0.6

Notes: (1) Data for the world, EU27, advanced economies, emerging and developing economies follow JETRO estimates.
(2) EU27 includes internal trade.
(3) ASEAN6 in this chart stands for the following six countries: Singapore, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam(4) East Asia in this chart are the following 10 countries/regions: China, South Korea, Hong Kong, Taiwan and ASEAN6.
(5) Definitions of advanced economies, emerging and developing economies follow WEO (IMF) standards
Source: Statistics from individual countries/regions.

7

Figure I-7: World trade by product: exports (2012)
Growth
Value
Rate
Total
17,977,031
0.0Machinery and equipment
6,603,028
0.8
General equipment
2,061,511△ 0.3Electrical equipment
2,164,973
1.0Transport equipment
1,774,836
0.8
Precision equipment
601,707
4.2
Chemicals
2,321,878△ 2.2
Chemical industrial products
1,561,479△ 2.0
Pharmaceuticals and medical supplies
468,982△ 0.4
Plastics and rubber
760,399△ 2.8
Food
1,162,286△ 0.2
Seafood
93,042△ 3.3
Coffee31,815△ 11.5Grains111,890
1.2
Processed food products
514,095
1.6
Oils and fats, and other animal and plant products
207,278
6.1
Miscellaneous manufactured products
520,955
7.8
Iron ore
125,250△ 17.2Mineral fuels, etc.
3,111,346
3.7
Mineral fuels
2,925,850
3.0
Coal
130,802△ 7.5
LNG
146,625
10.5
Petroleum and petroleum products
2,413,870
3.4
Crude oil
1,459,445
3.5
Textiles and textile products
730,130△ 2.7
Synthetic fibers and textiles
85,063△ 7.0
Clothing
402,750△ 1.0
Base metals and base metal products
1,237,521
△ 7.3
Steel
714,823△ 6.7
Primary products of steel
416,047△ 11.5
Steel products
298,775
0.8
Copper ingots
68,805△ 9.8
Nickel ingots
14,918△ 1.9
Aluminum ingots
50,607△ 13.9
Lead ingots
5,452△ 18.2
Notes: Total value for 2012 and total growth rate follow JETRO estimates.

（US$million, %)
Share
100.0
36.7
11.5
12.0
9.9
3.3
12.9
8.7
2.6
4.2
6.5
0.5
0.2
0.6
2.9
1.2
2.9
0.7
17.3
16.3
0.7
0.8
13.4
8.1
4.1
0.5
2.2
6.9
4.0
2.3
1.7
0.4
0.1
0.3
0.0

Contribution
0.0
0.3
△ 0.0
0.1
0.1
0.1
△ 0.3
△ 0.2
△ 0.0
△ 0.1
△ 0.0
△ 0.0
△ 0.0
0.0
0.0
0.1
0.2
△ 0.1
0.6
0.5
△ 0.1
0.1
0.4
0.3
△ 0.1
△ 0.0
△ 0.0
△ 0.5
△ 0.3
△ 0.3
0.0
△ 0.0
△ 0.0
△ 0.0
△ 0.0

Source: Statistics from individual countries/regions.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Larger share for both exporters and importers in emerging and developing countries
With regard to the share of total world trade that emerging and developing countries contribute to, exports grew from 24.4% in 2000 to 40.6% in 2012, while
imports increased from 22.4% to 38.8%. The ratio of exports from emerging and developing countries grew significantly for “white goods” such as airconditioners and refrigerators, and IT final goods such as computers. While developed countries continue to make up the larger share for exports such as machine
tools as well as passenger cars, the ratio of export destinations to emerging and developing countries is on the rise.
Figure I-8: Changes in the percentage of world trade (export) for developed/emerging and developing countries
5.5

5.7

6.1

6.6

7.6

8.7

9.5

10.5

22.0

22.9

22.7

12.0

11.9

23.6

22.7

13.2

90%

18.9

18.9

19.1

80%
70%

16.8

17.3

17.6

19.6

18.1

60%

20.3

18.4

18.6

18.8

19.7

14.3

60

15.0

23.7

24.1

21.6

21.6

58.7

58.1

57.3

55.7

53.7

50.8

48.8

47.1

21.3

20.9

44.0

44.1

41.5

40.0

38.5

10%
0%
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(Year)

Emerging and developing countries to emerging and developing countries
Emerging and developing countries to developed countries
Developed countries to emerging and developing countries
Developed countries to developed countries

Source: Statistics from individual countries/regions.

Figure I-9: Comparison of exports by product for developed/emerging anddeveloping countries (2012)
100%
90%

3.7
3.7

15.0

9.4

19.1

25.6

50.6

60%
50%

5.2
7.6

23.6

80%
70%

7.0

25.9

34.4

27.9

9.9

30.1

30.5
33.9

20.9
19.4

40%

5.5

8.5
16.2

10%

41.7

38.9

IT
parts
Precisionequipment

61.2
33.0

47.6

Automobile
parts

Airconditioners
Washing
machines

Electric
equipment

TextilesMineralfuels, etc.

Refrigerators
Passengercars

30
IT final
goods

Pharmaceuticals

20

10

(%)

0
47.4

Two-wheeledvehicles

0

17.7

35.6

Base metals andbase metal
products

40

10

71.4

42.0
27.1

22.9

2000
2000年

30.0

8.1

30%
38.5

23.8
20.0

16.5
20%

3.9
4.7

15.2

25.9

38.1

凡例
Legend
2012年
2012Mining andconstruction
machinery

25.6

40%

20%

(%)

50
20.3

50%

30%

Figure I:10: Changes in exporters and export destinations over time (by product, from 2000-2012)

Machine tools

Proportion of emerging/developing countries as aratio of all export destinations

100%

49.4

12.2

20

30

40

50

60

70

Proportion of emerging/developing countries as a ratio of all exporting countries

14.8

Source: Statistics from individual countries/regions.

33.1
22.3

23.4

0%

Emerging and developing countries to emerging and developing countries

Emerging and developing countries to developed countries

Developed countries to emerging and developing countries

Developed countries to developed countries

Source: Statistics from individual countries/regions.

8

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Analysis by “trade in value added” method spreads
Trade in value added differs from conventional trade statistics that are based on the movement of “things.” Rather, it is an analytical method that capturesinternational trade based on the value that is added during the production process. It is possible to extract value added of other countries as a proportion of the totalexports of the countries in question, enabling analysis that corresponds to the actual situation of production activities in our era, which has achieved advancementsin the international division of labor. In June 2011, WTO and IDE-JETRO released the research results for trade in value added, which were based on the use ofinternational input-output tables. Consequently, the release of this data contributed to an acceleration in analysis and the development of data by otherinternational institutions.
Figure I-11: Sources of value added included in US bound exports for Thai
industrial products (2005)

Japan
9%

Figure I-12: Contents pertaining to trade in value added, published by international institutions
Oraganization

Contents

Date of publication

World Trade Organization (WTO), IDE-JETRO

Trade in value added was measured and analyzed based on
International Input-Output Table for Asia, drawn up by IDEJETRO. The result of joint research was published in English
and Japanese in a report "Trade patterns and global value
chains in East Asia: From trade in goods to trade in tasks."

June 2011

European Union (EU)Disclosure of the database for International Input-Output
Tables for 40 countries including EU member states(WIOD).
Time series data over the long-term, from 1995 to 2009, canbe obtained.

April 2012

Organisation for Economic Co-operation andDevelopment (OECD), WTO

In January 2013, OECD began to distribute its indices for tradein value added, drawn up using its International Input-Output
Tables. Data for 18 types of industries, for the years 1995,
2000, 2005, 2008, and 2009 are available. Data analysis
results are available on the website.

January 2013
(Release of latest data in June
2013)

United Nations Conference on Trade andDevelopment (UNCTAD)"World Investment Report 2013" contained the analysis results
for trade in value added, with a focus on developing countries.
It is based on data from the Eora Project (The University ofSydney), which has expanded its coverage by drawing
connections with existing International Input-Output Tables.

June 2013

China
4%
United States
6%
Other East Asian
countries
7%
Thailand74%

Source: International Input-Output Table for Asia, 2005
Source: Publications from the respective institutions.

9

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)World trade in services
 There was little growth in world trade in services for 2012 associated with goods trading and direct investment. With regard to individual service categories, “other business services” areexpanding year after year.

 The balance of payments structure for services in major economies has not changed significantly in the past five years. For the most part, there are limitations with respect to the ability tocapture only a portion of trade in services as a part of the balance of payments.

Figure I-13: World services exports
2011

Figure I-15: Trade balance for services and breakdown for major economies (2012)（＋: surplus, －: deficit）（Unit: US$ million)

Balance of payments for services
TransTravel Other services

2012
GrowthContribution
rate
100.0
1.6
1.6
20.1
1.5
0.3
25.0
3.6
0.9
54.8
0.9
0.5

portation

Share
Value of world's services exports
Transportation
TravelOther services

4,353,400 4,423,200
873,900
887,400
1,067,900 1,106,300
2,403,500 2,425,400

United States
EU27
United Kingdom

Note: The total of the 3 items in the "value of world's services exports" may not tally as the figures follow WTO's own estimates.

Germany

Source: Figures I-13,14 and 15 are based on WTO.

FranceFigure I-14: Changes in world services exports, by service category

90%
80%
70%
60%
50%

Italy

8.9 9.3 10.2 10.5 10.0 9.5 9.9 9.7 9.9 10.8 10.0 9.7 9.6South Korea

21.5 22.3 22.4

23.2 23.0 23.7 24.0 24.3 24.2 25.6 25.5 25.9 25.9

3.0 3.5
6.1 6.0 3.7 4.0 4.2 4.2 4.5 4.6 5.1
5.5 5.6 5.7 6.0
6.1 6.2 6.2 6.3 6.0 5.9
5.9
6.3 6.0
6.7 6.6 6.7 6.5
6.0 6.3 6.6 7.0
7.7 8.5 7.6
7.4 7.2 7.2 6.8

40% 31.3 30.6
29.8 28.7 28.2 27.3 26.1 25.0 24.5
24.5 24.3 24.5 25.0
30%

10% 22.8 22.3 21.7 21.1 21.8 22.1 21.9 22.0 22.7 19.4 20.5 20.1 20.1

China

Other businessservices

India
RussiaComputer/information

BrazilFinancial
TravelTransportation
00 01 02 03 04 05 06 07 08 09 10 11 12(year)

+
+
+
+
+
-

+
+
+
+
+
+
-

+
+
+
+
+
+
+
+
-

Financial

+
+
+
+
+
+
+
+
+
+
+

+
+
+
+
+
+
+
+
+

Computer/information

+
+
+
+
+
+
-

fees

Other
business
services

+
+
+
+
+
-

+
+
+
+
+
+
+
+
+
-

Royalties
and license

Notes: (1) Cells highlighted in grey are items which the balance of trade in services reversed between 2008 - 2012.
(2) Cells in bold frames are the top 2 items contributing to balance of trade in services for each country in 2012.

Royalties andlicense fees

20%

0%

Japan

Other

(Unit: US$ million)

Figure I-16:
Trade inservices for theUnited States(2010)

Service recipients
U.S. residents
Non-U.S. residents

Service providers

100%

Spain

+
+
+
+
+
+
+
-

Construction(Provision of services in United (Provision of services byStates by subsidiaries of foreign companies based in the United

U.S. companies based in the United States to other countries =residents States)
Service exports)
696,023537,740
Non- (Provision of services to U.S. (Provision of services overseas
residents by companies located by subsidiaries of U.S.
U.S. overseas = Service imports)
companies based overseas)
residents
368,044
1,130,505

Note: Transactions between residents and between non-residents are not included in10

the international balance of payments.
Source: The U.S. Department of Commerce.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japan incurs trade deficit for the second consecutive year In trade on a customs clearance basis in 2012, Japan exported US$801.3 billion, down 2.4% from the previous year, and imported
US$888.6 billion, up 4.2%. Japan incurred a trade deficit for the second consecutive year, with a trade balance in the red by US$87.3
billion.
 In the current account balance for 2012, despite an expansion in the income balance surplus, the current account surplus shranksignificantly due to the impact of an increase in the trade deficit.
Figure I-17: Japan’s trade (2011 – June 2013)

Figure I-18: Japan’s balance of payments(Unit: US$ million, billion yen, %)Dollar-based

2011
Total exports(Percent change)
Total imports

Yen-based(Percent change)
Trade balance(Year-on-year difference)
Total exports(Percent change)
Total imports(Percent change)
Trade balance(Year-on-year difference)
Export volume index(Percent change)
Import volume index(Percent change)
Crude oil import price($/barrel, percent change)
Exchange rate (yen/dollar)(yen appreciation, %)820,7937.0
853,070
23.4△ 32,277△ 107,854
65,546△ 2.7
68,111
12.1△ 2,565△ 9,199
98.4
△ 2.9
103.7
3.2
108.7
37.3
79.8
10.0

2012

Jan-June
801,335
358,085△ 2.4△ 12.6
888,584
410,782
4.2△ 7.9△ 87,250 △ 52,697△ 54,973 △ 16,085
63,74833,957△ 2.7
4.2
70,68938,804
3.8
9.2△ 6,941△ 4,847△ 4,376△ 1,930
93.9
88.1
△ 4.6
△ 8.3
105.9
102.2
2.2
△ 2.2
114.8
110.5
5.6
△ 7.6
79.8
95.6
0.0
△ 16.6

JanJan
54,866△ 6.2
73,864△ 4.9△ 18,999
187
4,799
6.3
6,432
7.1
△ 1,634
△ 143
75.7
△ 5.9
108.7
△ 1.1
111.9
△ 1.2
89.2
△ 13.7

Feb
Feb
57,651△ 18.3
66,293△ 5.6△ 8,642△ 8,969
5,283
△ 2.9
6,064
12.0
△ 781
△ 807
82.1
△ 15.8
96.0
△ 0.1
113.2
△ 2.7
93.2
△ 15.8

2013
Mar
Mar
66,592△ 12.970,556△ 9.0△ 3,964△ 2,917
6,271
1.1
6,638
5.6
△ 367
△ 285
97.4
△ 9.8
102.8
△ 5.5
115.6
△ 4.7
94.8
△ 13.0Apr60,179△ 11.069,462△ 5.9△ 9,283△ 3,089
5,777
3.8
6,661
9.5
△ 885
△ 366
92.3
△ 5.3
105.1
2.0
111.3
△ 12.397.7△ 16.6

May
57,986△ 11.1
68,098△ 10.9△ 10,112
1,089
5,767
10.1
6,765
10.1
△ 998
△ 90
88.2
△ 4.8
105.2
△ 2.4
106.5
△ 14.4101.1△ 21.2(Unit: US$ billion)

300

Jun
Current-account balance
60,811250△ 14.562,509200△ 11.3150△ 1,698
Income balance△ 2,387
100
6,061
7.4
50
6,243
Trade balance
11.8
0
△ 182
Balance of services
△ 238
△ 50
93.0
Current-account transfers
△ 7.3
△ 100
96.0
△ 5.3
△ 150
104.6
00 01 02 03 04 05 06 07 08 09 10△ 9.3
97.4 Sources: "Balance of Payments" (Ministry of Finance and Bank of Japan) and△ 18.6 "Foreign Exchange Rates" (Bank of Japan).

11 12(Year)

Notes: (1) The dollar conversion rate was calculated based on rates posted by Japan Customs, using the method announced by the Ministry of Finance until
March 1996. (2) For volume indices, year 2005=100. (3) The exchange rates are interbank rate averages for each period. (4) Percent change for quarterly and monthly
data are year-on-year comparisons. (5) Figures of imports in June are nine-digit provisional.
Sources: "Trade Statistics" (Ministry of Finance) and "Foreign Exchange Rates" (Bank of Japan).

11

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Sluggish export activities except for automobiles
 Automobile exports grew in tandem with the recovery of the US economy, and exports to ASEAN countries also rose steadily. For other exports,
growth was recorded for general equipment to Thailand on the back of demand related to reconstruction after flood damages. On the other hand,sluggish growth in China and the European debt crisis contributed to a decline in demand, which in turn led to sluggish activities for exports on
the whole.
 In 2012, the prices of resources stayed high, and mineral fuels continued to boost the amount of imports. There was an urgent need to secureliquefied natural gas (LNG) as fuel for thermal power plants, resulting in an increase in imports from Qatar, as well as Africa and Europe. There
was thus greater diversification in the sources of LNG supply.
Figure I-19: Japan’s exports by product (contribution as comparedto the previous year, US$)

Figure I-20: Share of LNG imports to Japan by supplier (volume)(Unit: %)（Year-on-year comparison，％）

2000

20.0
15.0

Other

Steel

Chemicals

General equipment

Electric equipment

Transport equipment

Year-on-year comparison

10.0
5.0

0.0
△ 5.0
△ 10.0△ 15.0△ 20.0
1
2012

2

3

4

5

6

7

8

9

Source: "Trade Statistics" (Ministry of Finance).

10

11

12

1

2

3

4

5

6

2010

Asia
64.5
46.5
Malaysia
20.4
19.9
Indonesia
33.5
18.3
Brunei
10.6
8.4
Australia
13.5
19.0
Middle East
19.7
22.5
Qatar
10.9
10.9
UAE
8.7
7.4
Africa2.4
Nigeria
0.9
Europe
8.6
Russia8.6
United States
2.3
0.8
Central & South America
0.2
World
100.0
100.0
Source: "Trade Statistics" (Ministry of Finance).

2011
39.0
19.1
11.9
8.1
17.8
27.3
15.1
7.0
5.4
2.5
9.3
9.1
0.4
0.9
100.0

2012
30.6
16.7
7.1
6.8
18.2
29.2
17.9
6.3
10.1
5.5
10.4
9.5
0.3
1.3
100.0

（Year/Month)12

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Trade balance for capital goods and parts worsens in 2012
 In Japan’s trade balance, deficits in raw materials and consumer goods were compensated for by surpluses in parts and capital goods. The greatest
deficit was recorded for raw materials such as fuels.
 The deterioration in trade balance in 2011 was mainly brought about by the steep rise in prices of resources and energy-related factors such as the
rapid growth in LNG imports. In 2012, in addition to energy-related factors, the trade balance for capital goods and parts worsened. The fall inthe balance for capital goods was particularly large for East Asian countries including China, South Korea, and Taiwan, as well as for European
countries including Germany and the United Kingdom. With respect to parts, China had a significant impact.
Figure I-21: Changes in Japan’s trade balance by type of goods

Figure I-22: Trade balance for 2011 and 2012 by type of goods（Unit: US$ billion)（Unit：US$ billion, %)

300

2011

2012
Ratio to year-

200

Trade
balance

Final capital goods

Year-onon-year
difference ofyear
difference total tradeTradebalancebalance (%)

Other
100

Intermediate goods(parts)Final consumer
goods

Final capital goods
0

Total trade balance△ 32.3△ 107.9

100.0△ 87.2△ 55.0100.0

China（△22.3）

Raw materials△ 235.6△ 54.950.9△ 237.8

△ 2.2

4.0

Saudi Arabia（△3.4）△ 173.1△ 43.240.1△ 182.1

△ 9.0

16.4

Saudi Arabia（△3.4）

Intermediate goods

117.3△ 30.828.6

90.2△ 27.249.4

China （△9.2）

Processed goods△ 27.4△ 39.937.0△ 46.8△ 19.435.2

Qatar（△4.4）△ 83.8△ 29.1

27.0△ 105.3△ 21.5

39.1

Qatar（△4.4）

Parts

144.7

9.1

△ 8.4

136.9

△ 7.8

14.1

China（△8.5）

Final goods

73.4△ 22.721.0

50.4△ 23.041.8

China（△14.0）
China（△12.0）

Fuels and lubricants (primary)Fuels and lubricants (processed)
Intermediate goods(parts)△ 100

Intermediate goods(processed goods)

Raw materials

Raw materials△ 200
Trade balance

Intermediate goods(processed goods)

Ratio to year- Countries with the largest
Year-ondecline in the trade
on-yeardifference of balance for each type ofyear
difference total trade goods (figure in brackets
balance (%)
is the amount of decline)

Capital goods

124.4

6.9

△ 6.4

102.1

△ 22.3

40.5

Consumer goods△ 51.0△ 29.627.5△ 51.8△ 0.7

1.3

China（△2.0）

Passenger cars

78.7

△ 5.1

4.8

86.4

7.7

△ 14.0Germany（△1.1）

Consumer durables△ 12.2△ 2.8

2.6△ 11.11.1△ 2.0

Hong Kong（△0.5）

Semi-durables△ 47.3△ 7.1

6.6△ 51.3△ 4.0

7.2

China（△2.7）

Non-durables△ 29.0△ 6.8
6.3△ 32.9△ 3.8
7.0 United States（△0.7）
Notes: (1) Refer to Figure I-21 for classification of goods. (2) Trade balance includes "Other."(3) Highlighted cells are middle classification with ratios of more than 10% for year-on-year difference of total trade balance.
Source: "Trade Statistics" (Ministry of Finance).

△ 300

Final consumer
goods
△ 400
2007

2008

2009

2010

2011

2012

Notes: (1) The classification of goods is based on Broad Economic Categories (BEC) from RIETITID. (2) "Other" includes items not included in the above classifications (such as special goods).
Source: "Trade Statistics" (Ministry of Fiannce).

13

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japan shows its underlying strength in export
 A large number of Japanese manufacturing industries enjoy a comparative advantage in exports. In particular, transport equipment, generalmachinery, and iron and steel are highly competitive. While some electric equipment are becoming less competitive as a result of generalization,
Japan has retained its competitiveness in the areas such as integrated circuits and measuring instrument and meters.
 With the depreciation of the yen in the second half of 2012, export volumes grew for approximately 30% of all exports, reflecting the advantagesof a cheaper yen. Specific products include passenger cars, parts and peripherals such as printers and storage devices (RAM, ROM, etc.), andshovel loaders.
Figure I-24: Products with increased exports under yen depreciation

Figure I-23: Japanese export competitiveness by product (2000 to 2012)(Unit：US$ million, %)200

Revealed Comparative Disadvantage Index (RCDA)

Value of exports

・Revealed Comparative Advantage (RCAij)= ((Xij/Xj)/(Xiw/Xw)-1)×100
・Revealed Comparative Disadvantage (RCDAij)= ((Mij/Mj)/(Miw/Mw)-1)×100
X(M)ij：Country j's exports (imports) of Product i, X(M)j：Country j's total exports (imports),
X(M)iw：Worldwide exports (imports) of Product i, X(M)w：Total worldwide exports (imports)

凡例
Legend2012
2012年(Accumulated total from Sep '12 to Mar '13)

Increase invalue of
Share ofexports
export value
for each
under yenproduct
depreciation(1)

Comparative
disadvantage

2000
2000年

100
Mineral fuelsComparativeadvantage
Food

Total export

439,850

123,064

28.0

Raw materials

6,136

3,291

53.6

Intermediate goods

245,705

79,330

Processed goods

120,275

41,333Parts

125,430

37,99732.3 Unprocessed gold such as ingots, flat-hot-rollediron products (width above 600mm, thickness
34.4 below 3mm), electronics industry elements(silicon, etc.), printer parts and accessories,
30.3 memory (RAM, ROM, etc.) IC parts

Final goods

175,438

40,44223.1

102,01428,944

Shovel loader, dump trucks, horizontal lathe
28.4 (numerical controls), passenger cars (<3000cc,

Audio equipment
Measuring equipment
Textiles andtextile products

0Electrical equipment

Communications
equipment
Oils, fats, and otheranimal and vegetableproducts

Integrated circuits
Video equipment
Generalequipment

Chemicals

Transport

equipment

Capital goods

Automobiles

Steel
Auto parts andaccessories

△ 100
△ 100

(RCA:218
RCDA:△71)

0100
Revealed Comparative Advantage Index (RCA)

200

Notes: (1) The definition of products follows JETRO classification. (2) The solid line indicates broad categories, while the dotted line indicates individual
products included under the broad categories. Classifications are distinguished by the shape of the marks.
Source: Trade statistics of each country.

14

Scrap iron such as stainless steel, scrap gold,
scrap plastic

15.7 and >2500cc for diesel engine cars), outboard
engine motors for ships, motorbikes (>800cc)
Passenger cars
52,423
6,981
13.3
Notes: (1)Of the products with exports exceeding US$10 million in 2012 (products for which data is consolidated forvalue and quantity based on 6-digit HS codes), products that satisfy the following criteria when exports for Sep '12
and Mar '13 were compared. i) Unit price in yen remained the same or increased, ii) Unit price in US$ fell, iii) Export
volume increased.
(2) Refer to Figure I-21 for classification of goods. Total value of exports includes other goods.
Source: Trade Statistics (Ministry of Finance).
Consumer goods

Mining and construction
equipment

Main products

73,424

11,499Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japanese consumer goods penetrate the global market
 Japanese consumer good exports are performing well with the exception of passenger cars. These range from expensive products such as leisure boats,
to relatively cheap products such as ballpoint pens, playing cards, and fishing rods. Many of these are products that stand out for their superior quality,
functionality, or design.
 Expensive products are doing well among exports to the US. Exports to China include educational and leisure goods such as upright pianos, and daily
necessities, while exports to ASEAN have grown in areas such as passenger cars, digital cameras, cosmetics, and food products including flavoring suchas miso (ranked 11) and rice sweets such as arare (ranked 17). These trends reflect the diversity of consumption.

1300490

Pharmaceutical products, not containing antibiotics and hormones

2960810Ball point pens

U.S.

MexicoFrance3030799Sea urchin, jellyfish, sea cucumber, frozen, dried or salted

China

VietnamU.S.

4481151

Paper & paperboard coated with plastic, wt>150g/㎡

Netherlands

U.S.

China

5

890399

Yachts, etc. for pleasure or sports, except sailboats or motorboats

U.S.

RussiaChina

6920110Upright pianos

China

VietnamU.S.

7950440Playing cards

Macau

Singapore

Hong Kong

8340590Polishes and creams, except for footwear, furniture, and cars

TaiwanU.S.

Malaysia

9630790Made-up textile articles, except articles for indoor home
products, for packaging, and for outdoor products

China

BelgiumU.S.

10950710Fishing rods

China

Hong Kong

U.S.

11

340220Preparation detergents put up for retail sale

Australia

China

Hong Kong

12210410Soups and broths and preparations therefor

U.S.

South Korea

Taiwan13220300Beer made from malt

South Korea

TaiwanU.S.

14030341

Albacore or long-finned tuna, frozen

Thailand

VietnamAmerican Samoa

15330410

Lip make-up preparations

Hong Kong

TaiwanGermany

Notes: (1) Refer to Figure I-21 for classifications of consumer goods. These include only products that have been
exported since 2010 at the HS 6-digit code level.
(2) Of the products with growth in export volumes in 2011 and 2012 consecutively (including some products with thesame export volume), the top-ranking products in 2012 in terms of export value.
Source: "Trade Statistics" (Ministry of Finance).
15

Outboard motors of marine propulsion engines
Motorcycles, cylinder capacity >50cc, ≦250cc
Yachts, etc. for pleasure or sports, except sailboats or motorboats
Ball point pens
Motorcycles, cylinder capacity >250cc, ≦5000cc
Color television
Sea urchin, jellyfish, sea cucumber, frozen, dried or salted
Paper, paperboard, cellulose wadding and webs of cellulose fibres,
except coated and thermal paper
Semi or semi-precious stones
Printed books, except dictionaries and encyclopaedia
Sea urchin, jellyfish, sea cucumber, frozen, dried or salted
Glues or adhesives, put up for retail sale, not exceeding a net
weight of 1 kg
Upright pianos
Compression-type refrigerators, househole typeParts and accessories of musical instruments, except parts forstrings, piano, string instruments, and electric instruments
Fishing rods
Polishes and creams, except for footwear, furniture, and cars
Watches with opto-electronic display only, battery operated
Fungicides
Preparation detergents put up for retail sale
Passenger motor vehicles, cylinder capacity >1000 cc, ≦1500 cc
Digital cameras
Articles of plastics, except for office use, accessories attached toapparel, furniture and cars
Passenger motor vehicles, cylinder capacity >3000 cc
Passenger motor vehicles, with diesel engine, cylinder capacity>2500 cc)
Beauty & skin care preparation, not compressed
Pharmaceutical products, not containing antibiotics and hormones
Motorcycles, cylinder capacity >800cc
Sea urchin, jellyfish, sea cucumber, frozen, dried or salted
Albacore or long-finned tuna, frozen
Notes and sources are the same as for Figure I-25.
United States

Product

China

Top 3 export destinations(2012, volume basis)
South Korea Hong Kong
China

HS CodeFigure I-26:
Top 10 consumer goods with growth in export volume

ASEAN

Figure I-25: Popular exports of Japanese consumer goods

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)World FDI drops for the first time in three years
 In 2012, global inward FDI declined by 18.2% to US$1.351 trillion. This was the first decline recorded in three years, resulting from the economic downturn in developed economies.
 Investment in developed economies dropped significantly by 31.6% to US$561 billion. On the other hand, investment to emerging/developing economies remained at about the samelevel as 2011 with a 5.0% fall to US$790 billion. As a result, investment in emerging/developing economies as a proportion of world investments reached a record high of 58.5%.

Figure I-27: FDI for major countries/regions (balance of payments basis, net flows)(Unit: US$ million, %)Inward FDI
Outward FDI
Percent
Percent
Value
Share
Value
Share
changechangeUnited States
167,620△ 26.1
12.4
328,869△ 17.1
23.6
Canada45,375
9.6
3.4
53,9398.2
3.9EU27
258,514△ 41.519.1
323,131△ 39.823.2
United Kingdom
62,351
21.9
4.6
71,415△ 33.1
5.1
Ireland29,318155.7
2.2
18,966
1.4
Luxembourg
27,87825.8
2.1
17,273
88.4
1.2
Spain
27,750
3.5
2.1△ 4,869
France25,093△ 34.91.937,197△ 37.5
2.7
Australia
56,959△ 12.8
4.2
16,141
13.0
1.2
Japan
1,731
0.1
122,551
13.9
8.8
East Asia
320,067△ 5.1
23.7
274,806
1.3
19.8
China
121,080△ 2.3
9.0
84,220
12.8
6.1
Hong Kong
74,584△ 22.4
5.5
83,985△ 12.4
6.0
South Korea
9,904
△ 3.3
0.7
32,978
13.7
2.4
Taiwan3,205
0.2
13,031
2.1
0.9
ASEAN
111,294
2.1
8.2
60,5922.8
4.4
Singapore
56,651
1.3
4.2
23,080△ 12.1
1.7
Indonesia
19,853
3.2
1.5
5,423
△ 29.7
0.4
Malaysia
10,074△ 17.40.7
17,115
12.2
1.2
Thailand
8,607
10.7
0.6
11,911
45.0
0.9
India
25,543△ 29.41.9
8,583△ 31.1
0.6
Central and South America
166,136
4.3
12.3
49,072
17.1
3.5
Brazil
65,272△ 2.1
4.8△ 2,821Chile
30,32332.2
2.2
21,0903.5
1.5
Colombia
15,823
17.8
1.2
△ 248
Mexico12,659△ 41.1
0.9
25,597
110.9
1.8
CIS
82,281△ 6.5
6.1
55,174△ 23.84.0
Russia51,416△ 6.7
3.8
51,058△ 23.6
3.7
Middle East
47,119△ 4.0
3.5
23,941△ 8.6
1.7
Turkey12,419△ 22.6
0.9
4,073
73.4
0.3
Africa50,041
5.1
3.7
14,296165.9
1.0
38 developed economies
560,718△ 31.641.5
909,383△ 23.1
65.4
Emerging/developing economies
790,208△ 5.0
58.5
481,573
△ 2.7
34.6
World
1,350,926△ 18.2100.0
1,390,956△ 17.1100.0
Notes: (1) The definition of developed economies follows UNCTAD. The figures for emerging//developing economies are obtained by substracting the developed economies from the total.
(2) East Asia figures are the sum of China, South Korea, Taiwan, Hong Kong, and ASEAN.
(3) Figures for Japan are based on UNCTAD and thus do not correspond to the "Japan's FDI"
presented later.
(4) "-" denotes figures that could not be calculated.
Source: UNCTAD.

16

Figure I-28: Global inward foreign direct investment(US$ billion)
2,200
FDI in developed economies
FDI in emerging/developing economies
2,000
Cross-border M&As
1,800
Greenfield investments
1,600
1,400
1,200
1,000
800
600
400
200

0
2003
04
05
06
Note: FDI is inward based.
Sources: UNCTAD and Thomson Reuters.

07

08

09

10

11

12

(Year)

Figure I-29: Contribution to inward FDI by region
60.0(Percent change, YoY)
40.0

20.0

0.0

△ 20.0△ 40.0△ 60.0
2000

01

02

03

Other emerging/developing economies
Asian emerging/developing economies
EU
World

04

05

06

07

08

09

10

11

12 (Year)Central and South American emerging/developing economies
Other developed economies
North America

Note: North America refers to United States and Canada. Other developed economies cover 36 countries and regions excluding these two countries.
Source: UNCTAD.
Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Global cross-border M&A drops 30%; slowdown in acquisition by companies in developed economies
 The value of global cross-border M&A for 2012 fell 28.8% over the previous year to US$696 billion. There was also little momentum for M&A in the first halfof 2013, which fell by 7.0% to US$276 billion. This was brought about chiefly by a slowdown in activities among companies in developed economies whichmake up the core of M&A.
 By industry, the ratio for the resource sector, which had grown after 2005, declined. On the other hand, there was a growth in the share for the manufacturingindustry, such as machinery and equipment, and for the service industry, such as commerce.
Figure I-30: Global cross-border M&As (completed)

Figure I-31: Inter-regional contribution to cross-border M&As

(US$ billion)(No. of deals)
3,500

600

Value of M&A
500

3,000

No. of deals (right axis)

100.0(Percentage change, YoY)

80.0
60.0

2,500

40.0

400
2,000

20.0

300
1,500

0.0
△ 20.0

200
1,000
100

500

0

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2006

07

08

09

10

11

12

13
(Year/quarter)

Source: Thomson Reuters.

Figure I-28: Top 10 cross-border M&A deals (2012)
Acquiring company

Country

Industry△ 40.0△ 60.0△ 80.0
2000

01
Other

02

03

04

05

06

07

08

09

Deals between companies from developed economies

10

11

12

(Year)

Total

Note: Definition for developed ecomonies follows UNCTAD.
Source: Thomson Reuters.

(Unit：US$ million, %)Acquired company

Country

Industry

Value

Ownweship% aftertransaction

Electricity, gas and water International Power PLC
Electricity, gas and water
Jun
GDF Suez SA
FranceU.K.
12,856
100.0
Nov
Eaton Corp
U.S.
General equipment Cooper Industries PLC
IrelandGeneral equipment
12,240
100.0
Nov
Nestle SA
Switzerland Food products
Pfizer Nutrition
U.S.
Food products
11,850100.0
Agricultural, forestry and fishery
Dec
Glencore International PLC
Switzerland Wholesale
Viterra Inc
Canada
7,362
30.0
Aug
Walgreen Co
U.S.
RetailAlliance Boots GmbH
Switzerland Retail
6,665
100.0
Nov
Investor Group
CanadaInvestment
Cequel Communications LLC
U.S.
Broadcasting
6,579
100.0
Jun
LAN Airlines SA
Chile
Transportation
TAM SA
BrazilTransportation
6,502
100.0
Oct
Watson Pharmaceuticals Inc
U.S.
Pharmaceuticals Actavis Group
Switzerland Pharmaceuticals
6,003
100.0
Dec
Petronas Carigali Canada Ltd
Malaysia
Oil and natural gas Progress Energy Resources Corp Canada
Oil and natural gas
5,866
100.0
Aug
Ageas SA/NV
Belgium
Insurance
Ageas NV
Netherlands Insurance
5,566
45.0
Notes: (1) Month indicates that when the deal was completed. (2) Country of the acquirer is that of its ultimate parent company.
(3) The definition of M&A follows Thomson Reuters. (4) The ranking is based on the value of a single deal.
17
Copyright (C) 2013 JETRO. All rights reserved.
Source: Thomson Reuters.

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

Japan External Trade Organization (JETRO)

Spurt in greenfield investments by companies from emerging/developing economies
 Inward FDI from emerging/developing economies grew with the increasing diversity of their destinations. In contrast with M&As led by companies in developed
economies, we can see a gradual strengthening in the presence of emerging/developing economies in greenfield investments.
 The proportion of resource-related investment shrank, while investment in the manufacturing and service industries grew. In particular, the share of the service
industry has been on the rise after 2010. In addition to the expansion of production bases, investments to meet local demands are also believed to be on the rise.
Figure I-33: Source countries/regions of greenfield investment

Figure I-35: Greenfield investments by major industry (2012)（Unit：US$ million)(% share of total value of investments)
45.0
WesternEurope40.0

Industry Month

Destinations
CountryJul
Sime Darby
Malaysia
U.K.
Real
CapitaLand
SingaporeChina
estate Sep
Aug DreamWorks Animation
U.S.
China
Jul
Adani Enterprises Ltd (AEL) India
Australia
Oil andSep
Qatar
Petroleum
International
Qatar
Egypt
natural gas
Jul
Esso Exploration Angola
U.S.
AngolaMay United Energy Group
Hong Kong Pakistan
Renewable
Beijing DQY Agriculture Technology China
U.S.
energy Feb
Aug Filasa International
FranceRomania
Nov Qatar Steel Company (QSC) Qatar
Algeria
Metals May Pohang Iron & Steel (POSCO) South Korea India
Mar Essar Global
India
Zimbabwe
Mar Fiat
Italy
BrazilTransport
DaimlerChrysler Automotive GermanyChinaequipment Sep
Aug General Motors (GM)U.S.
RussiaJan Korea Gas Corporation (KOGAS) South Korea Uzbekistan
Chemicals Jan
Samsung Total Petrochemicals France
South Korea
Feb Formosa Plastics Corporation Taiwan
U.S.
Source: "fDi Markets" (FT).

Asia-Pacific(Other thanJapan)
North
America

35.0

30.0

Middle East

25.0

Other Europe

20.0

Central andSouthAmerica
Africa

15.0

10.0

Japan

5.0

0.0
2003

04

05

06

07

08

09

10

11

12

(Year)

Note: Regional classification follows FT.
Source: "fDi markets" (FT).

Figure I-34: Greenfield investments in the world, share by industry
100%
90%

(Share of total value of investments)

17.5

12.2

7.7

7.7

8.7

43.5

40.4

15.9

11.2

6.7

8.3

52.2

49.5

41.0

42.2

10

11

4.1

80%

43.1
70%

48.3

60%

52.0

47.0

35.8

37.1

04

05

38.9

Investor

51.8
50%
40%

Value
12,652
3,356
3,148
4,500
3,600
2,500
3,000
1,800
1,762
2,000
1,500
1,500
3,071
2,384
1,000
4,000
1,800
1,700

30%
43.9

20%
30.7

48.8

50.9

52.8

49.9

10%
0%
2003

Primary

Manufacturing

06

07
Services

08

09

Note: Classification of industries follows UNCTAD.
Source: UNCTAD.

12 （Year）

18

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japan’s outward FDI for 2012 registers growth for second consecutive year
Figure I-37: Changes in Japan’s outward FDI by type

 Clear recovery of outward FDI
Japan’s outward FDI for 2012 (balance of payments basis, net flows) rose by 12.5% to
US$122.4 billion year-on-year. This was the second consecutive year that it had registered agrowth in outward FDI, and ranked second after the historical high achieved in 2008
(US$130.8 billion). The trend toward recovery from the lowest point in 2010 became evenclearer in 2012. A key reason behind the growth was an expansion in reinvested earnings.

(US$million)
140,000
Other
120,000

Europe100,000

Central and SouthAmerica
North America

80,000 Investment in the US double
Looking at Japan’s outward FDI by country, we can see that investment in the US grew 2.2
times year-on-year to US$32 billion. This made the US the largest investment partner forJapan for the third consecutive year. The growth was led by service industries (including
telecommunications, wholesale/retail, finance/insurance, etc.), which made up more than
60% of Japan’s investments in the US. Investment in China exceeded US$10 billion markfor the second consecutive year. There was also an increase in investment in the mining
industry in Australia. Investment in ASEAN fell significantly as a result of the impact offloods in Thailand, and investment in Europe also declined as a result of the economic crisis.

Asia

60,00040,00020,0000
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

12 13
1-5 1-5△ 20,000(year)
Note: (1) The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank
rate, and then the annual total is calculated. (2) Figures for Jan.-May 2013 are preliminary.
Source: "Balance of Payment Statistics" (Ministry of Finance, Bank of Japan).

Figure I-36: Japan’s outward FDI by country and region (balance of payments basis, net flows)(Unit：US$ million, %)22,131
7,252
8,930
2,864
9,016
9,193
5,346

39,492
12,64919,6452,326
15,166
14,73011,28733,477
13,47910,6752,802
35,76831,974
10,454

Percentchange27.4 △ 15.2
11.0
6.6
8.7 △ 45.7
2.3
20.5
29.2
135.8
26.1
117.1
8.5
△ 7.4

4,316
6,407
6,371
15,043
8,359
57,223

8,290
8,767
8,149
39,841
36,052
108,807

4,113
11,075
10,89031,01729,023
122,355

3.4
9.1
8.9
25.3
23.7
100.0

2010
Asia
China
ASEAN
India
North America
United States
Central and SouthAmerica
BrazilOceania
Australia
Europe
EU
World

2011

2012

Share

△ 50.426.3
33.6△ 22.1△ 19.512.5

2013
Jan～May
15,232
4,215
8,249
763
10,377
9,429
4,140

31.9
8.8
17.3
1.6
21.7
19.7
8.7

Percentchange52.5△ 25.3604.0
34.0△ 35.7△ 35.6
85.2

1,811
2,800
2,678
15,803
14,296
47,791

3.8
5.9
5.6
33.1
29.9
100.0

0.2
△ 48.6△ 50.4
28.3
27.4
2.4

Share

Notes: (1) The yen-based quarterly value is converted to dollars, using the average quarterly Bank of Japan interbank rate.
(2) Some Data for January-May 2013 are provisional.
Source: "Balance of Payments Statistics" (Ministry of Finance, Bank of Japan).

Figure I-38: Japan’s top outward Greenfield investment deals (2012)(Unit: US$ million)

PeriodValue

Description

Oct-12MarubeniIndonesia

850

Aug-12J-POWER

China

760

Nov-12

Mitsubishi Estate722

Development of office building of area 22,295㎡ in London

Jul-12

Suzuki

UnitedKingdom
India

717

Mar-12

Bridgestone

Thailand614

Aug-12

DOWA Holdings

Indonesia

558

Mar-12

Sumitomo ElectricIndustries

Indonesia

543

Establishment of new plant for four-wheel vehicles, withannual production of 250,000 units, in Gujarat
Construction of new tire plant for construction and mining
vehicles in Rayong Province
Construction of heat processing plant in Karawang Province,
West Java
Construction of new plant for the production of wire harnesses
for automobiles, in Purwakarta, West Java

Oct-12

Toyota Motor
Corporation
Toyota Motor
Corporation

Thailand504

Enhancement of diesel engine plant in Chonburi Province

Brazil495

Construction of engine plant with an annual production of
approximately 200,000 units, in Porto Feliz, San Paolo

Mitsubishi
Corporation

Nigeria462

Construction of production plant for ammonia, urea, and otherchemical products in On'ne, Rivers State

Aug-12
Apr-1219

Investor

Recipientcountry

Construction of a 660MW coal-fired power plant in Cirebon
district in the west part of Java island.
Construction of ultra-supercritical coal-fired power plant (2million KW) in Hezhou, Guangxi Province

Source: fDi M arkets (Financial Times), website of respective companies.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japanese investment in ASEAN accelerates in 2013
 Against the backdrop of rising Chinese country risk, investment in ASEAN countries by Japanese companies picked up speed at the beginning in 2013.
There was a clear gap between the value of investment for ASEAN and China.
 In light of the hike in personnel costs in China, a trend in re-shoring of production bases from China were also observed in the US.
Figure I-39: Japan’s outward FDI – Comparison between China and ASEAN (net flows)

Figure I-40: Examples of companies re-shoring from China
U.S. company

18,000(US$ million)

Peerless
Industries

16,00014,000

NCR

ASEAN

China

12,000

Farouk Systems

10,000The Outdoor
Greatroom
Company

In 2010, it moved a part of its manufacturing processes for camping stoves and outdoor tentsfrom China back to the United States. When placing orders with Chinese corporations, it had toplace orders nine months earlier than when it manufactures in the United States. This caused
problems with inventory management.

Sleek Audio

In 2010, it moved the production of its high sensitivity headphones from China to its plant inManatee Country, Florida. The company had faced problems with the poor quality of products
produced by its sub-contractor in Dongguan, Guangdong Province since 2007.

8,000

6,000

Description
In 2009, it consolidated all its AV system production in the state of Illinois, and switched fromproduction in China to domestic production. Its aims were to: (1) Reduce lead time fromdevelopment to production and sale; (2) Strengthen integrated management of its production
processes; (3) Focus on manufacturing in an efficient facility; and (4) Strengthen its
countermeasures against counterfeit products.
In October 2009, it decided to transfer the production of ATM from China, India, and Hungary
to its plant in Columbus, Georgia. In March 2012, the company announced its plans to expand
this plant, and the number of employees is expected to increase from the existing 500
employees to 870 staff by 2014.
In July 2009, it transferred the production of hair care products, such as hair-dryers, from China
and Korea to Texas. Furthermore, it expanded its facility in 2011. Its aims were to: (1)Strengthen management of production and transportation processes, which had weakened
during offshoring; and (2) Reduce costs of taking measures against counterfeit products, which
had cost an annual US$6 million. It is expected to employ 4,000 people in the next three to four
years.

In February 2011, the company demolished its plant in Shanghai, China, and began to construct
Neutex Advanced
a Neutex Lighting plant for the production of LED. It remodeled an old hospital in northern
Energy Group
Houston, consolidating its headquarter functions, R&D facilities, and production facilities.

4,000

SuarezCorporation
Industries

In May 2011, the company announced its plans to transfer the production of home heaters from
China to North Canton, Ohio. In the fall of 2011, it entered a peak period in its production
activities, and employed more than 400 people in the state of Ohio.

Ford

In October 2011, it concluded a new labor collective agreement with United Auto Workers(UAW), effective till 2015. Based on the agreement, the company is expected to employ morethan 12,000 man-hours worth of labor in the United States by 2015. A part of the employees
are expected to be transferred from Mexico and China. The production of medium-sized trucks,
which the company had been producing in Mexico, will be moved to a plant in Avon Lake,
Ohio.

GE

In February 2012, the company established a new manufacturing plant for a new water-heatermodel, in Louisville, Kentucky. The previous model had been manufactured in China. In 2009,
the company laid out the plan of investing US$1 billion and creating employment for more than
1,300 in the United States by 2014. This investment in the new plant and product, costing inexcess of US$38 million, is a part of this plan.

2,000

0
2005

2006

2007

2008

2009

2010

2011

2012

Jan-May Jan-May
2012
2013

Note: Figures exclude investment in Thailand in the finance and insurance sector due tothe floods in the country (Q4, 2011: US$3,924 million. Q1, 2012: △US$3,674 million)
Source: “Balance of payments” (Ministry of Finance, Bank of Japan).

20

Sources: Website of respective companies, White House documents, and various reports.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Largest number of outward M&A deals ever recorded
 Year-on-year fall in the value of M&A deals
The number of outward M&A deals by Japanese companies in 2012 was 485, which was the largest number ever recorded. The total value of these deals fell 24.4%
year-on-year to US$50.6 billion. The high value of outward M&A deals, following the same trend from the previous year, could be attributed to the expansion in thescale of acquisition deals. From 2012 to the first half of 2013, there was a spate of large-scale M&A deals exceeding US$2 billion, such as Dentsu and Daikin
Industries. Looking at Japan’s outward M&A by the nationality of the companies acquired, the largest acquisition value was in the US (US$22.6 billion). This wasfollowed by the United Kingdom, Australia, Canada, and France. With respect to industry, oil and natural gas ranked top at US$7.1 billion, followed bypharmaceuticals, insurance, and precision equipment. The momentum for M&A slowed down in the first half of 2013 with an M&A value of US$16.8 billion. This
was a 29.4% drop from the same period in the previous year. In July, Softbank acquired major US mobile phone company Sprint Nextel at approximately US$21.6
billion.

Figure I-41: Value of Japan’s outward M&A, and number of deals(No. of deals)(US$ million)
80,00070,000600
United States

United Kingdom

Australia

Figure I-42: Top deals for Japan’s outward M&A, ranked by value (2012-June 2013)
Deal
completedMar-13

Others500

Nov-1260,000400
50,000No. of deals →40,000300

May-12
Apr-12
Dec-1230,000200

Apr-12Acquiringcompany

Acquired company
Industry

UnitedKingdomToyota Tsusho
Asahi Kasei

1000

Sep-12

Mitsui & CO.,Ltd., Mitsubishi
Corporation

Apr-13

ITOCHU
CorporationOct-12

Toshiba

Dec-12The Bank ofTokyoMitsubishi UFJ096 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: Thomson Reuters.

12 13
1-6 1-6(Year)

Industry

Other
advertising
GeneralUnited States equipment (airconditioning)

Ownership% aftertransaction

4,311

100

3,700

100

United States Insurance

2,648

100

United States Pharmaceuticals

2,630

100

CFAO

France

2,288

97.8

Chemicals

ZOLL medical

MedicalUnited Statesequipment

2,122

100

Petroleum andnatural gas

Interests in the
Browse LNG
project operated by Australia
Woodside (approx.
14.7%)Petroleum andnatural gas

2,000

14.7

United States

Other food
manufacturing

1,685

100

United States

Electronic/electr
ical equipment

1,589

87.0

1,515

100

Trading

20,00010,000Country

Advertising
DentsuAegis GroupagencyGeneralDaikin Industries equipment (air- Goodman
conditioning)
Tokio Marine
Delphi Financial
Insurance
Holdings
Group
Dainippon
Pharmaceuticals Boston Biomedical
Sumitomo Pharma

Value
(US$
million)Wholesale ofDole Foodother consumer
Company
durablesElectronic/electr Westinghouse
ical equipment ElectricBanking

Pacific Capital
Bancorp

Trading

United States Banking

Notes: (1) Year and month indicate the completion date of the deal. (2) The definition of M &A follows Thomson Reuters. (3) Ranking isbased on the value of a single deal.
Source: Thomson Reuters.

21
Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Total outward FDI stock exceeds US$1 trillion
 Increase in share of the Asia Pacific region
Japan’s outward FDI stock (assets) as of the end of 2012 increased 8.6% year-on-year to US$1.0405
trillion. This was the first time it had exceeded the US$1 trillion mark. The proportion of outward FDI
stock by industry was 47.2% for manufacturing industries, and 52.8% for non-manufacturing industries.
Since the end of 2008, non-manufacturing industries (including finance/insurance, wholesale/retail, etc.)
have outperformed manufacturing industries. This trend became even stronger in 2012. In outward FDI
stock by region, the share for North America and Europe shrank, while that for the Asia and the Pacificregions grew. Significant growth was recorded for transport equipment in Asia, and the mining industry
in the Pacific region.
 Rate of return on outward FDI at 6.6%
The rate of return on Japan’s outward FDI for 2012 remained at the same level as the previous year, at
6.6%. The rate of return by investment destination showed a high level in China and ASEAN over thatfor Europe and America. In ASEAN, the rate of return declined due to the major impact of floods inThailand. The rate of return in Europe and America showed signs of recovery from the lowest point
registered in 2010. Comparing Japan’s rate of return on outward FDI with that for other major economies,
Japan attained an average of 6.8% for 2006 to 2011, coming after the US (9.5%), United Kingdom (9.1%),
and China (7.1%). By achieving comparable rates of return with the US, outward FDI could contribute to
the expansion of gross national income (GNI) in Japan.

Figure I-44: Japan’s outward FDI rate of return by majorcountries and regions
(%)

15.0

10.0

5.0

0.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
World

EU

China

ASEAN

(Year)

Notes: (1) Rate of return on outward FDI ＝FDI earnings in the term / Average of outward FDI balances at thestart and the end of the term x 100 (%).
(2) The EU comprised 15 countries by 2003, 25 countries in 2004-2006, and 27 countries in 2007 onward.
Source: "Balance of Payment Statistics" (Ministry of Finance, Bank of Japan).

Figure I-45: Comparison of Japan’s rate of return on
outward FDI with other countries (averages for 2006-2011)

Figure I-43: Changes in Japan’s outward FDI stock(US$ million)
12,000

0.0(%)
Others

10,000

U.S.

2.0

4.0

6.0

Japan

8.0

10.0

6.8

EuropeU.S.

Central and South America

9.5

8,000
North America

U.K.

9.1

Asia

6,000

Germany

5.4

4,000

France

4.6

2,000

Korea

2.4

0
96

97

98

99 2000 01

02

03

04

05

06

07

08

09

Source: "Balance of Payments Statistics" (Ministry of Finance, Bank of Japan).

10

11

12

(Year)

China

22

7.1

Source: "BOP" (IMF).

Copyright (C) 2013 JETRO. All rights reserved.

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

Overseas sales ratio increases to almost 60%
 The ratio of overseas sales for the top 50 Japanese companies in the processing manufacturing industry (transportation equipment, electrical equipment, machinery, precision equipment), ranked by sales,rose from 56.2% in FY2011 to 58.8% in FY2012.
 In the overseas sales ratio by industry, the ratio was 65.3% for transportation equipment (19 companies), 50.8% for electrical equipment (20 companies). The overseas sales ratio for the sale oftransportation equipment to the Americas was high (25.2%), while that for the sale of electrical equipment to the Asia Pacific region was high (20.1%). For the period ending March 2013, the seven major
automobile companies showed a stronger tendency toward gaining earnings in Asia, with an overseas operating profit of 49.2% for Asia and 35.5% for North America.

Figure I-46: Overseas sales by region for the Japanese manufacturing industry

Figure I-47: Overseas sales by region for transportation and electrical equipment

100%

100%

90%

80%

90%

Domestic
43.8%

80%

41.2%

70%

60%
9.3%

9.6%

40%

11.3%

10.3%

30%

Europe

19.6%

12.7%

50%

8.6%

America

19.1%

0%FY2011FY2012

Americas

25.2%

12.8%

20%
10%

19.6%

Europe

6.6%
12.2%

40%

20%
10%

Other overseas regions

60%

30%

17.9%

49.2%

70%

Other overseas regions

50%

Domestic

34.7%

Asia PacificAsia Pacific
17.8%

20.1%

Transport equipment

Electrical equipment0%
Note: The computation method is the same as for Figure I-46. Sales coverage rate for the top 19 transport
equipment companies was 88.5%, and that for electrical equipment companies was 76.6%.
Source: Same as for Figure I-46.

Note: A total of 610 companies from the processing manufacturingsector (equipment and machinery, electrical equipment, transport
equipment, and precision equipment industries) were extracted fromlisted Japanese companies that had released their operating results forfiscal 2012 by June 19, 2013. The consolidated sales for each region
for the top 50 companies (sales coverage rate of 77.5% of allprocessing manufacturers) was aggregated.
Source: Aggregates were drawn up based on the summary of financial
results and financial reports of each company.

Figure I-48: Operating profit of 7 major automobile companies by region
Asia
Period ended Mar '13

49.2%

Period ended Mar '12

23

North America

35.5%

41.8%

0%

20%

Europe

40.6%

40%

60%

Others

2.8%

3.2%

80%

12.6%

14.5%

100%

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

Japan’s inward FDI registers net inflow for the first time in three years
Japan’s inward FDI (balance of payments basis, net flows) registered a net inflow of US$1.761 billion in 2012. Following a two-year net outflow lasting until the previous
year, this was the first reversal toward a net inflow in three years, although the margin of inflow was small. With respect to countries and regions, net inflows from Asia
have been recorded continuously after 2007. For 2012, it increased 2.1 times over the previous year to US$2.9 billion. Inward FDI stock grew marginally by 1.5% to¥17.8079 trillion. The ratio of inward FDI stock to nominal GDP remained unchanged at 3.7%. Investments from Asia were significant in the tourism, pharmaceuticals, IT,
electrical equipment, and real estate industries.
Figure I-49: Changes in Japan’s inward FDI by region

Figure I-51: Noteworthy investments by Asian companies in Japan for 2012

(US$ million)
Country

30,000Company

Industry

Form of investment

Description

Asia

Haier

Electric
equipment

Establishment ofbase

Established R&D base for "white goods" in Kumagaya, Saitama. Together with its
existing base, this brings its technological development department to a scale of 300
employees.

Shanghai Spring
International
Travel Services*

Tourism

Establishment ofcompany

Major travel agency with an airlines arm. Established a company in Tokyo thatspecializes in "local arrangements," such as accommodations and transportation for
Chinese travellers visiting Japan.

10,000Juneyao Airlines* Tourism

Establishment ofbranch office

Established first Japanese branch office in Okinawa. Undertaking preparations tolaunch a regular route between Shanghai and Naha.

5,000

HuaweiTechnologies*

Establishment ofbase

Scheduled to establish an R&D base for smartphones and communication facilities inJapan

25,000

North America
Central and South America

20,000EuropeOther

15,000

World

China

0

Information andcommunications

Samsung Electro- Electric
Mechanics
equipment△5,00097

98

99 2000 01

02

03

04

05

06

07

08

09

10

11

12

Tourism

Establishment ofbranch officeFirst budget carrier (LCC) established in Korea. In tandem with the launch of flightsfrom Fukuoka, it established a branch office in Fukuoka.

POSCO

Steel

Establishment ofcompany

Established a new company in Yokkaichi, Mie, to undertake the processing
automobile parts. It invested 650 million yen into the facilities, which are scheduled tocommence operation at the beginning of 2014.

Hyundai
Pharmaceutical
Company

Pharmaceuticals

Establishment ofcompany

Establish a Japanese company in Osaka, in order to find a Japanese partner company
and expand its business.

Global Logistics
Properties

Logistics

M&A

Together with Chinese government-related fund, it acquired 15 logistics facilities inJapan (US$1,570 million), owned by a U.S. real estate investment company.

Real estate

M&A

Acquired a large-scale shopping facility in Kinshi-cho at US$300 million.

Real estate

M&A

Acquired seven logistics facilities from Australia's Goodman Japan at approximately
US $200 million.

Korea

12 13
(Year)
1-5 1-5Note: The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank rate,
and then the annual total is calculated.
Source: "Balance of Payment Statistics" (Ministry of Finance, Bank of Japan).

Figure I-50: Japan’s top inward Greenfield investment deals (2012)
PeriodInvestor

Sep-12 Goodman Group
Apr-12 Simon Property Group
Mar-12 Canadian Solar
Oct-12 Gestamp GroupJun-12 Goodyear
Jul-12 Seminole Tribe of Florida
May-12 Yingli Green Energy Holding
Feb-12 Intelligent Energy
Mar-12 Rosatom
Nov-12 Realtime System Group (RTS)
Source: "fDi Markets" (Financial Times).

Industry
Country(medium category)
Australia
Real estate
United States Real estate
CanadaRenewable energy
Spain
Renewable energy
United States Rubber
United States Hotel, tourism
ChinaElectrical equipment
United Kingdom Electrical equipment
RussiaCoal, petroleum, natural gas
Germany
Telecommunications(Unit: US$ million)
Classificati
Valueon
395 New
372 New
284 New
281 New
250 Expansion
206 New
180 New
180 New
156 New
128 New

Singapore CapitaMalls Asia
Mapletree

IT consulting,softwaredevelopment
IT consulting,
Tata Consultancy
softwareServices
development
IT consulting,
Synoverge
softwareTechnologies*
development

Infosys*

India

Announced the acquisition of HDD motor manufacturer Alphana Technology, inFujieda, Shizuoka, for 147.2 billion won (approx. 11 billion yen).

T'way Airlines*△10,000
96

M&A

Establishment ofbranch office

Established a branch office in Nagoya in order to provide support to existingcustomers in the Chubu region, and to further expand its customer base.

Establishment ofcompany

Established a joint venture company with Mitsubishi Corporation to engage in thebusiness of IT services, such as information systems and software development.

Establishment ofcompany

Established its first overseas base in Tokyo in order to expand services to Japanesecustomers and explore new customer bases.

Zydus Pharma

Pharmaceuticals

Expansion

Doubled the capacity of its generic drug packaging plant for the Japanese market inOme, Tokyo. Generic drugs manufactured at its Ahmadabad plant in India arepackaged and shipped from the Tokyo plant.

Lupin
Pharmaceuticals

Pharmaceuticals

ExpansionIts subsidiary, Kyowa Pharmaceutical Industry, completed the construction of
additional facilities for an existing plant in Sanda, Hyogo.

Note: Companies denoted by an asterisk * receive support from JETRO.

24

Source: various reports, news articles.

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

Value of M&A deals in Japan remains at same level as previous year Increase in number of M&A deals
M&A deals in Japan for 2012 fell 0.5% to US$13.6 billion, maintaining the same level as that for the previous year. The number of deals increased year-on-year to
129 (107 deals last year). Looking at the industries, the value of acquisitions was the highest for the commercial sector (wholesale, retails, restaurants, etc.), making
up 57% (US$7.764 billion) of the total value of acquisitions. In addition, the value of acquisitions in the machinery and equipment sector, such as electronic andelectrical equipment, as well as the transportation sector, was high. There were 43 M&A deals in Japan for the first half of 2013, valued at a total of US$3.6 billion.
 Highest value and largest number of deals from the US
Ranking M&A deals in Japan by country, the US came out on top for both value (US$7.6 billion) and number of deals (37). TonenGeneral’s acquisition of an
Exxon Mobil subsidiary contributed to this result. M&A deals by Asian companies were characterized by (1) investment in the manufacturing industry by
Taiwanese companies, and (2) real estate investment by Singaporean companies.
Figure I-53: Top M&A deals in Japan (2012-June 2013)
Figure I-52: Changes in value of M&A deals in Japan(US$ million)(No. of deals)

30,00025,000Deal
completed

Acquired company

Jun-12ExxonMobil

Petroleum and natural gas TonenGeneral GroupFeb-12

LaSalle Investment Management Real estate investment

China Investment Corporation(CIC), Global Logistics
Properties (GLP)

Sep-12

Akindo Sushiro

Restaurants

PermiraJul-12

Jupiter Shop Channel

Other services

Bain Capital Partners

Jul-12

Sharp Display Products(Operations company for Sakai
Plant, the main base for the
production of Sharp's LCD)Electronic and electricalequipment

Hon HaiOct-12gloopsApr-12Caterpillar Japan

Feb-13

Prologis Park Ichikawa 1

Nov-12

DiverseyFeb-13

Prologis Park Zama 1

250
Value
No. of deals (right axis)

200

20,000150
15,000100

10,000
50

5,000

0

0
96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12
Source: Thomson Reuters (data as of July 1, 2013).

12 13
1-6 1-6 (Year)

Value (US$million)Ownership% aftertransaction

Petroleum and natural gas

4,966

99

Government-linked
China,
investment company,
Singapore government-related
logistics facilities operator

1,572

100.0

1,151

100.0

1,089

50.0

Electronic and electricalequipment

793

46.5

Software (online games)

468

100.0

Investment

450

100.0

Acquiring company
Industry

Software (mobile gamedevelopment)
General equipment(construction equipment)
Building management(excluding residentialbuildings)
Chemicals (industrial
detergents ,etc.)
Building management(excluding residentialbuildings)

NEXON
Caterpillar

Country

Industry

UnitedStatesUnitedInvestment
Kingdom
UnitedInvestment
StatesTaiwanSouth
Korea
UnitedStatesNippon ProLogis REIT

UnitedStatesReal estate investment
trust

381

100.0

Carlyle Japan Partners II

UnitedStatesInvestment

377

100.0

Nippon ProLogis REIT

UnitedStatesReal estate investment
trust

314

100.0

Notes: (1) Industries are classified according to Thomson Reuters classification. (2) The name of acquiring company are the final parent company of the acquiring company.
(3) Ranking for a single transaction.
(4) The Exxon Mobil/Tonen General deal is the acquisition of 99% of the Exxon Mobil Corporation holding stocks by Tonen General from the parent company Exxon Mobil in the
United States.
Source: Thomson Reuters.

25

Japan External Trade Organization (JETRO)

Chapter 2
Trends in the development of world trade rules

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 2 Section 1: Necessity of multilateral trade rules, and related issues

Japan External Trade Organization (JETRO)

Doha Round enters crucial stage towards WTO 9th Ministerial Conference; Progress made in plurilateral negotiations
 At the WTO Doha Round, which have reached an impasse, delegates aim to come to a prior agreement in some areas (early harvest), ahead of the 9th Ministerial Conference
scheduled for December 2013.
 Plurilateral negotiations are making steady progress. Negotiations to expand the scope of the Information Technology Agreement (ITA) are aimed to be completed before the
Ministerial Conference. The Trade in Service Agreement (TISA) is also an important initiative for Japan in view of the significant potential for expanding service exports.
Bringing in non-participating countries/regions to the talks remains a critical issue.

Figure II-1: Expected outcome at the 9th Ministerial Conference
SectorContents

Progress situation
Based on the 30page provisions with 20 articles, negotiations are carried out among relevant countries for eacharticle. As of July, more than 500 brackets remain. Developing economies have declared their inability to fulfill
the obligations without commitment to technological and financial assistance.

Tradefacilitation

Streamlining and speeding up customs procedures, related support to developming
economies

Agriculture
issues・G20 proposal (Brazil): Elimination of tariff quota (with exception for developing
economies).
Developing economies have selected some issues from the current Chairperson's texts. While many countries
・G33 proposal (India): Allowing developing countries to classify purchases of food are relatively positive with regard to G20 proposal, developed economies have criticized G33 proposal, as being a
stocks at subsidized prices to be classified as "green box" subsidies.
selfcentered tool to increase developing economies' subsidy expenditure.
・Reducing/eliminating export subsidies

Prolonging the deadline for LDCs under the TRIPs agreement,
WTO members agreed to extend until 2021 the deadline for LDCs to protect intellectual property under the
Trade and
implementation/enhancement of preferential treatment for developing economies,
TRIPs agreement (June 2013). With regard to the expansion of dutyfree and quotafree for LDCs and reduction
development expanding dutyfree and quotafree for LDCs, reducing cotton subsidies, specificof cotton subsidies, there are sensitive elements for developed countries.
service waivers for LDCs.
Note: Agricultural negotiations include G20 group which comprises major developing economies, G33 group which is highly inclined to S&D, and the Cairns Group made up of food exporters.
Sources: WTO Reporter (Bloomberg BNA), information from various seminars.

Figure II-3: Scale of service trade for major economies, including
countries/regions involved in TISA talks (2012)

Figure II-2: Estimates of expanding ITA trade value(US$ million)

Mexico, Brazil, South
Africa, etc.

30,000Vietnam, India,
Indonesia, etc.

Other current ITA members

25,000

U.S.
China
EU

15,00011,6099,209

10,000

7,522
6,505

6,174

6,413

10,138Hong Kong

BRICs

Participnts in ITA expansion talks

19,580

Costa Rica

EU

Real Good Friends

0.4

20,985Japan

20,00026,426

23,63522,882Other participants in ITA expansion talks

26,034

Trade specialization coefficient(%)

Non-ITA members

0.6

Turkey1,838,857
SwitzeParaguay

PanamaIsrael0.2
Taiwan
Korea

India

0.0
Chile

△ 0.2

United States

633,028

Australia

China

CanadaJapan

Russia190,939

59,055

Brazil

39,864

Colombia△ 0.4

NorwayPakistanPeru

MexicoIceland148,128

NZ

142,855

5,000
△ 0.6
0.0

0
2000
01
02
03
04
05
06
07
08
09
10
11
12 (Year)
Notes: (1) The product definition of ITA expansion is based on the list of 357 items that were subject to consideration when negotiations commenced. (2) The
figures are the total for 49 out of 51 countries/regions participating in negotiations for ITA expansion as of July(Australia, Canada, China, Costa Rica, El
Savadore, EU, Guatemala, Hong Kong, Iceland, Israel, Japan, Malaysia, Mauritius, Montenegro, New Zealand, Norway, Philippines, Singapore, South Korea,
Switzerland, Taiwan, Thailand, Turkey, United States) with the exception of Mauritius and Montenegro, for which data was unavailable.
Source: Trade statistics of each country.

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Proportion of services as a fraction of goods and services exports (%)

27

Notes: (1) Trade specialization coefficient = (Services exports - Services imports) / (Services exports + Services imports). (2) The size and numerical valueof each bubble represents the value of services exports (in US$ million). (3) Real Good Friends refers to Australia, Canada, Chile, Colombia, EU, Hong
Kong, Costa Rica, Iceland, Israel, Japan, New Zealand, Norway, Mexico, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan, Turkey, andUnited States.
Source: WTO.

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 2 Section 1: Necessity of multilateral trade rules, and related issues

Japan External Trade Organization (JETRO)

Need to remain vigilant with regard to protectionist measures
Figure II-5: Number of trade remedy investigation cases,
and proportion of developing countries among all With the slowdown in world trade, concerns about protectionism
are emerging once again. Tariff hikes and trade remedies were
the often implemented after the end of 2012.

500

80.0
(%)

(No. of cases)

400

 The number of trade remedies increased by 26.7% in 2012 overthe previous year. The developing economies are becoming
active users of these measures.

70.0

300
60.0

 On the other hand, WTO dispute settlements have contributed tothe prevention of protectionism. There was a sharp rise in thenumber of cases brought to the dispute settlement body in 2012.
There has been a particular increase in the number of disputes
between the US/EU and China, but WTO rules become moreclarified through the accumulation of precedents.

200

50.0
100

0
95

96

97

98

99

2000

01

02

03

04

05

06

07

08

09

10

40.0
12 (Year)

11

Total number of trade remedies
Proportion of developing countries as a fraction of investigating countries (right axis)
Note: Definition of developing countries follows WEO (IMF).
Source: WTO.

Figure II-4: Protectionist measures by G20 countries, based on WTO reports
140

Figure II-6: Number of WTO disputes and China related cases(No. of cases)(No. of cases)

Others120(No. of cases)

60

Export restrictions

8

Import restrictions (tariff/non-tariff measures)
100

7

No. of cases of disputes

7

50

China as petitioning country (right axis)

50

Trade remedies

China as responding country (right axis)
40

80

6

41

39

37

5

5

34
30

60

30

40

4

26

25

3

19

20

20
12

20

4

4

4

27

23
3 3

3

19

17
14

13

2

2

1

1

8

10
1

1

1

1

1

0
1st edition
2nd edition 3rd edition
4th edition
5th edition
6th edition
7th edition
8th edition
9th edition(09/04-09/08) (09/09-10/02) (10/03-10/05) (10/05-10/10) (10/10-11/04) (11/05-11/10) (11/10-12/05) (12/05-12/10) (12/10-13/05)

Note: Periods indicated in brackets ( ) refer to periods during which measures were tallied.
Source: WTO.

(Month/year)

28

0

0

95

96

97

98

99

2000

01

02

03

04

05

06

07

08

09

10

11

12

Note: The number of cases refers to the number of cases that applied for conflict resolution in the period under review.
Source: WTO.

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 2 Section 1: Necessity of multilateral trade rules, and related issues

Japan External Trade Organization (JETRO)One year since Russia’s accession to the WTO; growing number of WTO members
 While the reaction to Russia’s entry into WTO was comparatively milder than the reaction during China’s accession, there were also Japanese companies thatpointed out problems in the implementation of WTO rules on Russia. On the other hand, reports from other Japanese companies have also pointed to signs ofimprovements in Russia’s business environment in recent years, including smoother import clearance procedures.
 In 2013, Laos and Tajikistan became new members of the WTO. Among countries that have not entered the WTO, there are countries such as Iraq and Kazakhstan
where there are significant business opportunities for Japanese companies. Accession to the WTO not only removes the barriers to trading with these countries, but
is also expected to improve the stability of their business environments. As such, it would be ideal for these countries to enter the WTO as soon as possible.
Figure II-9: Recent new entries into WTO; trade situation for major nonmember states

Overview/Issues
The mixed tax rate (selection of ad valorem tax/specific duty) applied tosome products such as home refrigerators and meat is higher than the
WTO bound rate.

Raise in applied tariff
rates

Raise in applied tariff rate within the range of bound tariff rate, for flatscreen TV. In addition to significant impact on business, transparency is
an issue.

Internal taxes
and fees

In practice, only imported cars are subject to the fees. National treatment
Automobile recycling fee is the major issue (toward revisions of law). The implementation ofvehicle recycling system in the country is also an issue.

Standards/
certification

Customs Union
Technical Regulations

Intellectual
propertyrightsPrivate recordings
compensation system

New WTO members

Tariffs

Measures
Applied tariff rate
exceeding WTO boundrates

In making the transition from the conventional regulations (GOST-R) to
a new common mandatory regulatory system for the three Customs
Union member countries, there is a lack of transparency inimplementation, delays in accreditation, and impact on customs
procedures.
(1) In addition to infringement with national treatment obligations,(2)There are also problems in implementation as home appliances
without duplicating functions are also subject to the system.

Major non-member states

SectorClassification

Figure II-7: Problems with the implementation of WTO commitments on Russia

Source: Based on the results of interviews.

Figure II-8: Comparison of WTO commitments between Russia and China
Key points

RussiaBy the mid-2000s, it has completed
Need to revise domestic
work on revising the main domestic
laws after WTO
laws to make them consistent withaccession
WTO regulations.
No stipulations with regard to
Accreditation as nonmembership commitments.
market economy
Commitments on export
restrictions

Binding commitment for export duties
for approx. 700 items.

China
After membership, it has carried out reforms of
its domestic systems, including opening up"trading rights."
As "a non-market economy" until the end of
2016, it faces disadvantageous treatment such as
the imposition of anti-dumping measures.
Commitment not to establish export taxes otherthan for the 84 items for which binding rate has
been set for export duties.

Sources: Results of interviews, and WTO accession documents.

CountryWorld
exports（US$ million)

Per capita
Average Populatio
Exports to Imports
nominalJapan
from Japan tariff rate n（US$ million)（US$ million)（Million people） GDP
(%)
（US$）

RussiaVanuatu *Montenegro
Samoa *
Laos *
Tajiskhan
Iran
Iraq
Libya
Syria
Kazhakstan
BelarusUzbekistan
Yemen
Ethiopia *SerbiaBosnia/Herzegovina

352,536
251
403
158
3,444
1,030
102,496
83,27551,39911,08863,46545,955
5,374
7,238
2,169
11,055
4,019

20,772
58
2
0.35
123
11
7,958
2,822
247
3
582
21
106
374
62
48
5

12,599
77
5
15
137
7
654
359
115
114
542
39
98
298
131
29
2

9.4
15.5
4.9
21.1
18.8
7.8
26.6
n.a.
n.a.
6.7
9.6
9.8
11.8
7.1
17.3
7.4
6.6

141.92
0.25
0.62
0.18
6.38
7.96
75.90
33.70
6.41
22.40
16.68
9.39
29.45
25.88
86.77
7.57
3.89

14,247
3,125
6,882
3,727
1,446
953
7,211
6,305
12,778
2,747
11,773
6,739
1,737
1,377
483
4,943
4,461

Notes:(1) T he asterisk * denotes least developed countries (LDC) based on UN definitions.
(2) Value of trade is for 2012. Exports to Japan are on the basis of Japanese imports, while imports fromJapan are on the basis of Japanese exports.
(3) Average tariff rate is the simple average of applied tariff rate (based on bound tariff rate for Samoa
and Laos).

Sources: DOT /WEO (IMF), Ministry of Finance trade statistics, WT O secretariat materials, World Bank database, etc

29

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Cross-regional FTAs become the mainstream; the era of mega FTAs arrives
 The number of FTAs across the world stands at 252, as of July 1, 2013. After 2000, but with the exclusion of 2001, more than 10 FTAs have come into force every year. In 2013, FTAs
between the following countries came into force: Malaysia and Australia, South Korea and Turkey, Canada and Panama, Peru and Costa Rica, EU and Colombia/Peru, Turkey and Mauritius,and Ukraine and Montenegro.
 As the WTO Doha Round entered a period of stagnation, four mega FTAs were initiated. These were the TPP, Regional Comprehensive Economic Partnership (RCEP), Japan-EU FTA/EPA,
and Transatlantic Trade and Investment Partnership (TTIP) between the US and EU. Japan’s participation in the TPP signaled the arrival of the mega FTA. The FTA between Japan-ChinaSouth Korea and Pacific Alliance are also in progress. States and regions that are presently not a part of the TPP, such as China, South Korea, Hong Kong, Taiwan, India and the EU, are also
taking a proactive stance with regard to FTA initiatives (ECFA, South Korea-Turkey, EFTA-Hong Kong, EU-ASEAN, EU-India, etc.)

Figure II-10: Number of FTAs in force across theworld, by period and region(Unit: No. of cases)
M iddleAsia America
Russia CrossEurope East andPacificsand CIS regional
Africa1955-59
60-64
65-69
70-74
75-79
80-84
85-89
90-94
95-99
2000-04
2005-09
2010-

2
2
3
9
20
10

1

1
1

1

1

1
2
1
4
6
10
9

5
3
5
4
8

Year ofimplementation of
FTA unknown

Total

1
1
2
1
1
1
8
8
4

2
2
6
19
33
22

4
46

35

Japan-EU EPA
2
3
0
4
3
3
5
16
37
51
73
51

EU

U.S.

China
India
Regional Comprehensive
Economic Partnership

4
28

87

252

1

3

1

5

11

1

2

3

9

Free Trade Area of the
Asia-Pacific

1

2

10

*21 APEC members

3

10

6

11

1
1

2

2002

1

2

2

2

2003

3

1

1

2

2004

3

1

1

2005

5

1

2006

4

1

2007

3

2008

6

1

2009

2

2010
2011

1

1

7

15

2

1

9

18

6

10

2

4

13

7

1

7

17

6

1

6

2

16

3

1

10

14

7

14

3

7

1

1

1

2013
1
2
1
Sources: WTO, materials from individual governments.

1
1

Japan-ChinaSouth Korea FTA

South Korea

28

2001

5

U.S.-EU FTA (TTIP)

28

2000

2012

4
16
4
2
2

Total

Figure II-11: Mega FTAs in the world (negotiations underway)

30

ASEAN

Japan

Canada*Singapore, Malaysia, Vietnam, and Brunei
are involved in TPP negotiations.

MexicoColombia
Peru

Australia/NZ

Chile

Trans-Pacific Partnership agreement (TPP)

Pacific Alliance

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Growing presence of Japan in mega FTAs; important role of the new quadrupole The TTIP is a prominent mega FTA with a global share of 45% based on economic scale. The TPP, RCEP, and Japan-EU accord each have approximately 30% of the global share respectively. In terms of
population scale, the RCEP, which includes China and India, has an unparalleled global share of 49%. The TPP, Japan-EU accord, and TTIP each have about 10% of the global share in terms of population
scale. Taking into consideration all three of the mega FTAs that Japan is a member of, the GDP share is 79.4%, while population share is 63.5%. Despite the low figure for existing FTAs, at18.9%, total FTA
coverage stands at 73.5%. Compared to the United States, China, and EU, Japan’s presence in mega FTAs is growing by leaps and bounds.
 As mega FTAs become increasingly important, there is a need for the trade ministers in the new quadrupole (Japan, the US, the EU and China) to engage in active information exchanges and other initiatives inorder to prevent confusion amongst the FTAs about investment and intellectual property rules, as well as the growing complexity of rules of origin.

Figure II-12: Economic and population scale in mega FTAs
Economic scale
Trillion dollars
％
27.6
38.5
21.2
29.6
22.5
31.4

TPP
RCEP
Japan-EU
TTIP（U.S.-EU）

32.3

Mega FTAs that Japan is amember of (TPP＋RCEP＋Japan-EU)
Mega FTAs that the UnitedStates is a member of（TPP＋TTIP）
Mega FTAs that the EU is amember of（Japan-EU＋TTIP）
Mega FTAs that China is amember of（RCEP）
World

Figure II-14: FTA coverage after conclusion of mega FTAs

Population scale
100 million people
％
7.9
11.4
34.0
49.0
6.3
9.1

45.0

8.2

90.0

79.4

44.1

73.5

11.8

9.8

63.8

30.5

16.9

63.5

60.0
44.1

61.5

12.9

18.6

38.2

53.3

9.4

13.5

40.0

21.2

29.6

34.0

49.0

30.0

71.7

100.0

69.4

100.0

20.0

50.0

Figure II-13: FTA coverage for major economies
FTA coverage rate

External trade

Korea
China
India
Singapore
ASEAN
Australia
New Zealand(Unit: %)10.0

Countries/Regions with FTA is in force (Exports + Imports)

Exports+Imports

Exports

Imports

1st

2nd

3rd

18.9
39.4
67.7
81.3
90.9
90.6
73.6
26.9
35.3
16.6
18.3
62.2
59.7
26.9
49.1

19.8
46.4
76.7
91.4
89.3
93.4
75.9
29.8
38.1
13.3
22.2
64.4
59.4
18.7
49.4

18.2
34.7
59.4
71.1
92.8
87.6
71.4
24.2
32.2
20.4
15.9
60.9
60.0
35.3
48.7

ASEAN
NAFTA
NAFTA
NAFTA
China
China
EU
Switzerland
ASEAN
ASEAN
ASEAN
ASEAN
ASEAN
ASEAN
Australia

15.3 India
29.0 Korea
65.4 EFTA
66.6 EU
20.6 United States
17.7 United States63.3 Switzerland
6.8 EEA
12.3 United States
10.3 Taiwan
9.7 Japan
23.0 China
24.5 China
14.5 United States
17.9 China

1.0 Mexico
2.6 DR-CAFTA
1.2 Peru
8.5 Japan
16.7 EU
16.0 EU
2.6 EEA
3.9 Turkey
9.5 EU
4.4 Chile
2.5 Korea
10.3 United States
13.3 Japan
7.6 New Zealand15.9 ASEAN

Notes: (1) FTA coverage rate is the ratio of trade with countries/regions for which the FTA is in force (as of the end of June 2013), as a fraction of total trade.
The rate is based on trade statistics for 2012.
(2) The aconyms stand for: Dominican Republic - Central Agreement Free Trade Agreement (DR-CAFTA) European Economic Area (EEA).
(3) Figures for China do not include Hong Kong (8.8%) and Macau (0.1%).
(4) There are countries in ASEAN for which the FTAs have not yet come into force. However, the amount of trade for all member states were taken into consideration.
(5) Figures for Canada, Singapore, and New Zealand are export statistics that exclude re-exports.
Sources: Materials from individual governments, DOT (IMF), trade statistics.

44.5
36.5

7.5
14.2
3.4

19.0

19.8

39.4

Source: WEO, April 2013(IM F).

Japan
United States
CanadaMexicoChile
PeruTotal trade
EU27

TTIP
Japan-EU
RCEP
TPP
Existing FTA

80.0
70.0

56.9

(%)

26.9

18.9

16.6

0.0

Japan

0.9
1.6
0.5
2.7
15.0
14.7
1.6
3.5
9.3
0.9
2.3
8.6
10.6
3.0
13.2

U.S.

EU

China

Note: FTA coverage as of the end of 2012 is based on two-way trade. Intra-regional trade is excluded for
EU. Hong Kong and Macau are excluded for China. As Japan is included in both the TPP and RCEP, thetotal accumulated values for each FTA do not correspond.

Source: Statistics for the individual country/region.

31

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Active utilization of US-Korea FTA; negotiations commence for notable US-EU FTA
 The US-Korea FTA came into force March 2012. The utilization rate of this FTA, with respect to imports from the US to South Korea, was 24.8% for the 2Q-4Q of 2012 and 22.9% for the
first quarter of 2013. It is important for Japan to pay attention to the developments of this FTA due to the large number of products that are in competition with Japanese products.
 In July 2013, negotiations commenced on the US-EU FTA (TTIP). In addition to tariff reductions, adjustments between the differing regulatory systems in the US and EU have drawn
significant attention. These include measures pertaining to automobiles, chemical products, and sanitary and phytosanitary measures.

Figure II-15: FTA utilization for US imports from South Korea(Unit: US$ million)

2013 applied
2012/2～4Q
2013/1Q
average tariff 2012 M FN
HS
Imports from
FTA
Imports from
FTA
rate for US- average tariff
Item
Code
South Korea utilization South Korea utilization
Korea
rate (%)
rate (%)
rate (%)
FTA(%)
19.1
18.9
0.8
4.5
87 Automobiles/auto
11,405
4,014
12.6
10.8
0.1
3.5
85 Electrical equipment
9,483
3,487
24.0
23.0
0.2
3.5
84 General equipment
8,386
2,456
54.0
43.8
0.0
6.5
27 Mineral fuels
1,957
569
8.4
10.5
0.2
4.8
73 Articles of iron and
2,073
668
78.9
80.1
0.1
3.8
40 Rubber
1,609
471
3.8
3.0
0.1
3.3
72 Iron and steel
1,165
365
80.2
79.7
2.5
5.2
39 Plastic
1,115
381
16.3
24.1
0.5
5.7
29 Organic chemicals
1,006
303
22.7
23.7
0.0
3.0
90 Optical equipment
671
237
24.8
22.9
Total imports to Korea
44,16315,019Figure II-16: Key TTIP proposals from US and EU industries
SectorAutomobiles

Chemicals

Medical equipment

Sources: U.S. International T rade Commission (USIT C) T rade Data Web and U.S. Department of Commerce website Export.gov.

【Reference】 Actual US imports from Japan (highlighted items are Korean products in competition withJapanese products)(Unit: US$ million)

HS
Code
87
84
85
90
88
29
73
40
98
39

2012
Item

Pharmaceuticals
Food products

2013/1Q

Imports from Japan Imports from Japan

Automobiles/auto parts
General equipment
Electrical equipment
Optical equipment
Aircraft/aircraft parts
Organic chemicals
Articles of iron and steel
RubberSpecial categories
Plastic
Total imports to Japan

Source: U.S. Department of Commerce statistics.

51,381
34,037
20,031
6,856
3,259
3,250
2,884
2,712
2,587
2,319
146,388

12,087
7,818
4,468
1,695
948
1,019
578
637
554
546
34,324

Sanitary andPhytosanitary
Measures（SPS）

Insurance services

32

Issues/Recommendations
Implementation as a pilot project for the mutual recognition of fivestandards agreed upon by both parties.
Introduction of the mutual recognition of existing regulations, andexploring the potential for formulating joint processes aimed atshaping the foundations for new regulations.
Establishing cooperative mechanisms and inquiry into theestablishment of new regulations aimed at adjusting approaches toregulations.
Mutual recognition of auditing producer quality management
systems.
If the registration of medical equipment is acknowledged in member
countries under EU laws, it should also be possible to sell theequipment in other member states. However, in actual fact, it isnecessary for other member states to also register again. The
system needs to be improved.
Mutual recognition of inspections for assessments for compliancewith GMP and GCP.
Limits on the use of additives that are widely acknowledged
globally, and easing obligations on the attachment of cautionary
labels.
Imports of tallow, which is highly demanded as a biofuel, from third
countries is prohibited.
Pathogen reduction measures (PRT) for meat products areprohibited. Currently, acknowledgement procedures for PRT
through lactic acid is being promoted. However, it is complicatedand takes time.
Potential for mutual recognition of tolerance values for specified
contaminants and standards for residual agricultural substances.
EU prohibits the import of pork that uses ractopaminehydrochloride. To export to EU, it is necessary to participate in the
Pork for the European Union Program to certify the non-use of
ractopamine hydrochloride.
Permanent forum for discussing equivalence assessments, etc. (Inaddition to U.S./EU regulatory authorities, state authorities from theUnited States are also involved.)

Sources: Open call for feedback on U.S. and EU regulatory issues in October 2012, April 2013 Forumrecommendations, and M ay 2013 public comments.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)FTA negotiations in East Asia pick up speed
 The East Asian region has maintained a high intra-regional trade ratio that reflects intra-regional production network connections. Negotiations commenced on the Regional
Comprehensive Economic Partnership (RCEP) for East Asia in May 2013. If realized, this partnership is expected to bring about further integration of economies in the region. The
targeted date of conclusion for the partnership is at the end of 2015, corresponding with the anniversary of the founding of the ASEAN Community.

 Negotiations for a bilateral FTA between South Korea and China are taking place prior to negotiations for a trilateral FTA between Japan, China, and South Korea. To South Korea, theconclusion of an FTA with China represents a milestone in the proactive FTA measures that the country has been promoting since 2003. As the TPP gains strength and advancements are
made in the ASEAN-led RCEP, China is searching for ways to secure a leadership foothold in Asia.

Figure II-18: Status for trilateral FTA between Japan, China and South Korea

Figure II-17: Changes in intra-regional trade in Asia and major countries and regions(Unit: %)Asia

Europe

Japan

1980

1990

2000

2005

2010

2011

2012

RCEP

33.2

33.0

40.6

43.0

44.1

43.7

43.2

ASEAN

15.9

17.0

22.7

24.9

24.6

24.3

24.5

ASEAN-China

14.9

15.8

20.1

20.7

20.7

20.6

21.2

ASEAN-Korea

15.1

16.1

22.4

23.2

23.9

23.9

24.5

ASEAN-India

15.1

16.5

22.3

23.8

23.4

23.1

23.1

ASEAN-Japan

23.4

21.7

26.4

26.0

26.7

26.6

27.1

Japan-ChinaSouth Korea
Americas NAFTA
EU27

10.3

12.3

20.3

23.7

22.1

21.3

(Unit: %)Asia
Pacific

37.2

46.8

43.0

40.0

39.9

40.2

57.5

65.4

65.1

65.0

64.9

64.4

63.3

Japan-EU

52.6

61.4

59.8

60.5

59.2

58.8

57.4

APEC

57.5

67.5

72.3

69.2

67.0

65.5

65.8

TPP

44.0

50.8

53.9

47.0

41.9

41.3

42.0

U.S.-EU

55.0

61.3

57.9

58.7

57.0

56.6

55.0

China

Share ofexports andimports

Negotiations suspended

15.3 In force (2007)
1.0 In force (2010)
4.4 Under negotiations
0.3 Under negotiations
0.0－－ Negotiations suspended
19.7 Under negotiations
6.1－

12.3 In force (2005)
1.8 (APTA member)
3.0 Under negotiations
0.3 In force (2008)
0.0
－
9.7
－
20.2
－
－ Under negotiations

10.3
1.7
3.0
0.3
0.2
8.5
－
6.6

Under negotiations－
Under negotiations－－

25.8 Under negotiations

29.8 Under negotiations

15.1

Under negotiations

TaiwanPakistan
North, United States
Central Canada
MexicoandSouth Chile
America Peru
Colombia
Costa Rica－

46.9 Under negotiations
4.2
－
0.1
－
12.8 In force (2012)
1.4 Under negotiations
0.9 Under negotiations
0.7 In force (2004)
0.2 In force (2011)
Concluded
0.1
0.1
－

47.1 Under negotiations
2.7 In force (2010)
0.2 In force (2007)
9.5
－
0.9
－
1.1
－
0.7 In force (2006)
0.3 In force (2010)
0.2 Joint research
0.1 In force (2011)

30.4
4.4
0.3
12.4
1.3
0.9
0.9
0.4
0.2
0.2

Europe EU

Other

EFTA
Switzerland
NorwayIcelandTurkeyTrans-PacificPartnership (TPP)－－
Under negotiations
In force (2005)
In force (2007)
In force (2012)
Under negotiations－
Under negotiations－
In force (2009)－－
Joint research
Under negotiations

Gulf Cooperation
Under negotiations
Council (GCC）
Total in force
FTA coverage

33

Share ofexports andimports

Under negotiations

Notes: (1) RCEP refers to ASEAN 10, Japan, China, South Korea, Australia, New Zealand, and India.
(2) TPP is based on 12 countries including Japan.
(3) Intra-regional trade ratio (two-way) is computed as follows:(Value of intra-regional exports + Value of intra-regional imports) / (Value of world exports + Value of world imports) x 100.
Sources: "DOT, May 2013" (IMF) and Trade Statistics of Taiwan.

In force （2008）
In force (2011)

South
Korea

RCEP

20.2

33.2

ASEAN
India
Australia
New Zealand
Mongolia
Japan
China
South Korea
Japan/China/
South Korea

Share ofexports andimports

Provisionallyin force （2011）
1.0 In force (2006)
0.7 In force （EFTA）

－

9.8

9.3

0.2 In force （EFTA）
0.0 In force （EFTA）
0.2 In force (2013)
27.5
－

0.9
－
Signed0.3
0.6 Under negotiations
0.0 Under negotiations
0.5
－
32.4
－

14.1
0.8
0.7
0.2
0.0
0.5
33.2

(19.0)(15.0)

10.8 Under negotiations

11.6 Under negotiations

4.0

18.9

35.3

16.6

Total in force

Total in force(26.2)

Notes: (1) Rates are based on trade statistics for 2012. The upper part of TPP is the share for 12 countries, while the lower part is the sharefor partner countries for which the FTA has not yet come into force.
(2) The individual FTA with each ASEAN country has been omitted. China's FTA coverate rate does not include Hong Kong and Macau.
(3) The Asia Pacific Trade Agreement (APTA), a preferential trade agreeemnt, is in force for China and India, but is excluded from the FTA
coverage rates.
Source: Government materials and trade statistics for each country/region.

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)Japan enters into successive negotiations for mega FTAs/EPAs
 At the beginning of 2013, Japan entered into negotiations for four large-scale FTAs: the Japan-China-South Korea FTA, Japan-EU FTA, RCEP, and TPP. It aims to strengthen traderelations not only with the growing Asia region, which it has enjoyed stronger trade relations with in the past 10 years, but also with the US and EU, which are Japan’s main trade partners.
 If all the FTAs that are currently being negotiated come into force, Japan’s FTA coverage will exceed 80% of its total trade. With regard to trends in FTA coverage by industry, individual
characteristics can be seen for each FTA.

Figure II-19: Scale of exports for Japan’s major FTA partnercountries/regions in 2012 (Amount of trade in 2002 = 100)

Figure II-20: Share of trade among major target FTA countries/regions formain Japanese products(Unit：%)

352

Product（Amount of trade in 2002＝100）

255
232

Exports

ASEAN

565
565

China

Korea

Imports

17,20
Japan
2

EU

134
181

205
Note: The figures are the amount of trade (index) for 2012, taking the amount of trade in 2002 as 100.
Source: "DOT, May 2013" (IMF).

（US$ Million)

In force

China/
South
Korea

EU

RCEP

TPP

Total

Transport equipment

189,906

13.1

8.0

9.0

24.2

42.5

75.6

General equipment

158,795

22.5

25.6

13.0

48.6

30.3

86.5

Electrical equipment

125,871

21.4

30.8

10.7

51.2

26.1

79.4

Chemicals

101,907

15.8

38.6

10.1

54.1

19.0

79.3

Steel products

54,955

33.0

36.2

2.8

67.6

21.4

86.8

Total exports

798,447

19.8

25.8

10.2

45.8

29.6

80.5

Mineral fuels

301,018

16.7

3.6

0.3

31.6

23.4

85.7

Machinery and equipment

220,012

16.8

47.0

14.2

61.6

21.9

92.7

Chemicals

86,325

20.0

22.9

30.6

39.2

24.3

92.5

Foods

81,876

20.3

16.3

12.6

39.0

44.7

85.8

Textile products

41,529

14.6

74.9

5.0

89.6

8.2

96.1

Total imports

885,838

18.2

25.8

9.4

47.9

25.7

88.0

1,684,285

18.9

25.8

9.8

46.9

27.5

84.4

Two-way trade
United States

World

Notes: Transport equipment: HS86-89, general equipment: HS84, electrical equipment: HS85, chemicals: HS28-40,
steel products: HS72-73, mineral fuels HS2701-2705, 2708-2713, 2715, machinery and equipment HS84-91, foods
HS01-24, textile products HS50-63. The amount of trade for 2012 is used as the basis for these figures. The total
includes bilateral FTA negotiations partners.
Source: "Trade Statistics" (Ministry of Finance).

34

Copyright (C) 2013 JETRO. All rights reserved.

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

Japan External Trade Organization (JETRO)

Increase in FTA utilization rate for exports from Japan
 Based on results of the latest JETRO survey, the utilization rate for exports for Japan’s key FTAs that are in force is above the utilization rate for the previous survey. Tariffs arebeing reduced progressively, and the advantages of FTA utilization are growing year after year. An example is the abolishment of tariffs for 80 car part products in 2012, based on
the Japan-Thailand FTA.
 Progress is also being achieved in the utilization of trilateral FTAs between third countries by Japanese-affiliated overseas companies. The range of such FTAs that can be utilized
is expanding as FTAs between the US and South Korea, and the EU and South Korea, amongst others, have come into force.
Figure II-23: Japan’s FTA utilization rate for exports (by capital scale)Figure II-21: FTA utilization rate for exports, for Japan’s key FTAs
50 (%)

Consdering utilizing FTA for exports

45

Utilizes FTA for exports

40

Capital scale

35

11.8

8.9

30

10.2
11.8
12.0
11.5

25

10 million yen or less

7.6
8.8

20

10.4
13.1

15

29.1 30.1

26.3

10

19.4

22.1

17.5

11.3
FY FY
'11 '12Chile
127/
123 companies

FY FY'11 '12Thailand937/
745 companies

FY FY'11 '12Indonesia
687/
575 companies

11.4

Above 50 million yen - 100 million yen

21.2

5
0

15.8

30.1

Above 10 million yen - 50 million yen

FY FY'11 '12Mexico308/
264 companies

Above 100 million yen - 300 million yen

16.0
8.6

FY FY
'11 '12
Vietnam604/
512 companies

12.3

Above 300 million yen - 1,000 million yen
Above 1,000 million yen

FY FY'11 '12India
524/
431 companies

Overall(%)

Company

Are considering the utilization of FTA

Toyota Motor

Are utilizing FTA
15.4

40

Nissan Motor

16.8
19.1

30

13.9

20

12.6

14.0

Honda Motor

20.4
13.8
15.3

37.1

10.7

8.9

18.2

20.3

4.3

Yamazaki Mazak

18.8

Mori Seiki

34.4
22.1

10
0

FY FY
'11 '12AFTA
273/
240 companies

26.6

FY FY
'11 '12ASEAN-China
402/
278 companies

22.7

20.9
FY FY
'11 '12ASEAN-South Korea
191/
150 companies

21.3

18.1

FY FY
'11 '12ASEAN-India
108/
116 companies

14.1

FY FY
'11 '12China-Taiwan
163/
121 companies

FY'12South Korea-U.S.
79 companies

134
252
167
91
96
263
1,003

19.4
22.6
26.3
37.4
43.8
41.4
31.1

16.4
15.9
12.6
14.3
14.6
16.3
15.3

32.8
33.7
36.5
44.0
52.1
49.0
40.8

Figure II-24: Japanese companies that are strengthening trade ties between
the US and South Korea and the EU and South Korea

Figure II-22: Utilization of key third country FTAs by Japanesecompanies

50

368
598
280
143
155
413
1,957

Note: The number of companies is the number of companies that is engaged in import or export activities in morethan one country/region from the 13 countries/regions that Japan has concluded FTAs for as of January 2013.
Source: "FY 2012 Survey on the International Operations of Japanes Firms" (M arch 2013, JETRO).

Note: The number of companies is the number of companies that are exporting from Japan to each of the abovenamed countries (Total for 2012: 1,268 companies, 2013: 1,003 companies)
Source: "FY 2011/2012 Survey on the International Operations of Japanes Firms" (JETRO).

60

(%)

Utilizing or
Utilizationconsidering
No. ofConsidering
No. ofrate forutilization
exportingutilization ofcompanies
export(excludes
companies
FTA
FTA
duplicate
figures)

Toray Industries

FY
'12
South
Korea-EU69
companies

Note: The number of companies is the number of companies with parent companies or subsidiaries that are engaged in trade in the respective countries and regions. South Korea-U.S. andSouth Korea-EU were only included in the survey of fiscal 2012.
Source: "FY 2011/2012 Survey on the International Operations of Japanes Firms" (JETRO).

OutlineExports "Camry" (Sedan) and "Venza" (SUV) produced at the Kentucky plantin the United States to South Korea.
Starting 2014, it will export products from its Pusan plant to 60 countries
including EU and United States.
Released "Civic" with EU specifications from the U.K. plant, and "Accord",from the Alabama plant, into the South Korean market.
Sells NC lathe produced in its plant in Kentucky, United States, to the South
Korean market.
According to reports, it will export industrial machinery produced in its
California plant in the United States to South Korea after summer 2013.
Exports carbon fiber produced in its new plant in Gyeongsangbuk-do, South
Korea, to the United States and other markets.

Note: These do not necessarily reflect verification of FTA utilization.
Source: Press releases and reports.

35

Copyright (C) 2013 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 3
Revitalizing Japan through global business

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 1: Appeal of emerging economies, and the position of Japanese companies

Japan External Trade Organization (JETRO)

Consumer markets in emerging and developing economies show great potential
 As of 2011, the size of consumer markets for all emerging and developing economies was 3.7 times that of Japan’s. The total size for China andIndia was equivalent to that of Japan’s, and the total size of China, India, and ASEAN was 1.4 times that of Japan’s.
 The penetration rate for consumer durables remains low for emerging and developing economies. For instance, the rate for air-conditioners isapproximately 90% for Japan, but remains low among these countries with the exception of Saudi Arabia, ranging from 1.6% (Nigeria) to 53.0%(China). The penetration rate for passenger cars is low even in Asia.

Figure III-1: Scale of household consumer expenditure (nominal)of emerging and developing economies

Figure III-2: Penetration rate of consumer durables
in emerging and developing economies (2012)(Unit：%)

400.0

AirWashing
Mobile Passenger
RegionCountry
Refrigerator
Central and South America (excluding Brazil)
conditioner
machine
phone
car
350.0
Brazil
China
53.0
77.0
73.2
92.2
6.1
Russia
India
9.6
20.7
7.7
44.3
4.4
Asia (Excluding China, India, ASEAN)
300.0
Asia
Thailand
14.6
90.1
55.8
93.9
14.8
ASEAN
India
Indonesia
7.6
30.6
30.5
80.7
7.4
China
Vietnam
9.5
50.0
22.5
86.9
1.5
250.0
China, India, ASEAN
Brazil
13.3
95.9
48.7
82.5
36.8
CentralEmerging and developing economies
Mexico
16.7
82.5
67.5
75.1
45.8
200.0
and South
Chile
16.4
94.6
94.9
95.7
28.8
America
Peru
9.1
39.6
22.2
60.5
21.3
150.0
Russia
8.5
96.9
97.3
97.5
49.8
CIS
Uzbekistan
17.2
74.0
45.2
62.5
26.9
（Japan=100）
Saudi Arabia
84.5
98.6
96.6
97.2
94.2
100.0
Middle Morocco
13.6
80.5
44.1
87.7
13.7
East and Kenya
3.0
7.9
18.9
67.3
6.5
50.0
1.6
18.3
14.8
66.5
8.5
Africa Nigeria
South Africa
17.4
68.2
31.1
90.0
28.3
0.0
Reference Japan
89.6
98.9
99.6
96.3
83.9
96
97
98
99
2000
01
02
03
04
05
06
07
08
09
10
11
(Year)
Source: "Consumers Markets" for each region (Euromonitor International).
Note: The definition of emerging and developing countries follows the UN definition of "developing regions." Some island countries are excluded.
Middle East and Africa

Source: United Nations System of National Accounts (United Nations).

37

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 1: Appeal of emerging economies, and the position of Japanese companies

Japan External Trade Organization (JETRO)

Emerging and developing countries compete with Japanese companies
 The proportion of imports from China to low-income economies exceeds 20%. Imports from India also make up a high proportion at 8.0%, exceeding South Korea (4.8%) andJapan (3.4%). The share of imports from China and India to low-income economies is on the rise as well, while the import share of Japan and the US is on the decline.
 Japan’s outward FDI is focused on Asia, North America, and Europe, while FDI to the Middle East and Africa remains low. China is increasing the ratio of its investment in Asia,
as well as Africa (investments in Central and South America can be explained as investments in tax havens). India’s investment in Africa makes up a large proportion of its total
investments, albeit a significant amount of it is to make use of tax havens.

Figure III-3: Proportion of imports for major economies, by income level ofimporting economies
25.0

(%)

Import share of 34 low-income economies

Asia Pacific

21.7
U.S.

China

South Korea

India

Japan

Japan

20.0

Figure III-4: Outward FDI from Japan, United States, China, South Korea,
and India (by proportion of FDI in each region)

8.0
4.8

5.0

4.4
3.4
0.0
1990s

2000-2004

2005-20092010-2012
India

1980s

Import share of 45 low- and middle-income economies

14.0

13.3

(%)
12.0

Japan
U.S.
China
6.0

32.3

2006

27.0

2011

27.5

2006

12.7
8.7

North America

1.4

33.3

12.7

59.5

2011

47.8

2006

49.8

Europe

1.1

15.5

11.2
6.8

4.0

8.5

2011

14.6

20.0

2.2

2006

16.3

16.9

2.1

2011

18.2

7.0

10%

20%

0%

Middle East and Africa

2.6

28.9
30%

40%

50%

60%

70%

80%

90%

100%

Notes: (1) In the computation for percentages for each region, investments from China in Hong Kong and investments fromSouth Korea in non-specified economies are excluded from the denominator.
(2) Classification of regions follows the Ministry of Finance and Bank of Japan "Balance of Payment Statistics".
Sources: Japan: "Japan's Outward FDI stock (by region/industry)" (Bank of Japan), US: "US Direct Investment Abroad" (Bureau
of Economic Analysis, Department of Commerce), South Korea: "International Direct Investment Database" (OECD), China:"2011 Statistical Bulletin of China's Outward Foreign Direct Investment" (Ministry of Commerce, People's Republic of China),
India: "Coordinated Direct Investment Survey" (IMF).

10.0
8.0

U.S.

10.0

South Korea

China

15.0

2011

Central and South America

6.6South Korea

4.0

4.4
4.1

2.0

1.9

India

Notes: (1) Classification of income levels is based on World Bank as of 2011.
(2) Figures within the brackets refer to the number of target countries/regions.
Sources: DOT (IMF), World Bank.

0.0
1980s

1990s

2000-2004

2005-20092010-201238

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 1: Appeal of emerging economies, and the position of Japanese companies

Japan External Trade Organization (JETRO)

Potential emerging and developing countries (provisional calculation)
 Emerging and developing countries were classified into three groups based on population scale (10 million or above, based on the population of Tokyo) and per
capita GDP (US$1,000 or above and below US$30,000).
 Group A: Frontier emerging and developing economies. This group includes countries in Africa, as well as Asian countries including Sri Lanka, the Philippines,
Vietnam, and India. It also includes countries that are powerful despite having a per capita GDP below US$1,000 (Kenya, Cambodia, Myanmar, Bangladesh).
Group B: Volume zone. This group includes countries that are gaining strength as sales markets for consumer durables such as automobiles and home
appliances. It includes China, Indonesia, Colombia, South Africa, Thailand, and Egypt, etc.

Group C: Countries which belong to the regions with relatively strong economic power, such as the Middle East, South America, and East Europe, etc.
Figure III-5: Classification of emerging and developing countries
US$1,000≦Per capita GDP＜US$3,000
US$3,000≦Per capita GDP＜US$10,000
A：18 Frontiercountries

Per capita
GDP (US$)

MoroccoSri Lanka
Philippines
Bolivia
Sudan
Uzbekistan
Nigeria
Ghana
Vietnam
India
ZambiaYemen
Pakistan

2,999
2,873
2,614
2,532
1,789
1,737
1,631
1,562
1,528
1,492
1,474
1,377
1,296

South Sudan

1,175

Population(10,000
people)

B：17 Volume zone Per capita
countries
GDP (US$)3,252 Romania
2,068 Colombia
9,580 South Africa
1,083 Iran
3,351 Peru
2,945 Iraq
16,475 China
2,493 Angora
9,039 Dominican Republic
122,317 Algeria
1,392 Thailand
2,588 Ecuador
17,891 Tunisia
1,039 Ukraine

Population(10,000
people)

7,935
7,855
7,507
7,211
6,530
6,305
6,076
5,873
5,763
5,694
5,678
5,311
4,232
3,877

Cameroon
1,165
2,146 Indonesia
3,592
Senegal
1,057
1,311 Guatemala
3,302
Côte d'Ivoire
1,054
2,337 Egypt
3,112
Chad
1,006
1,074
Notes: (1) This data focuses on countries with population above 10 million people (2012).
(2) Countries which statistics were unavailable are excluded.
39
Source: "WEO, April 2013"(IMF).

US$10,000≦Per capita GDP＜US$30,000
C：11 Economic
powersPer capita
GDP (US$)

Population(10,000
people)2,135 Saudi Arabia
25,0852,899
4,660 Chile
15,4101,740
5,120 Russia
14,247
14,192
7,612 Venezuela
12,956
2,952
3,047 Poland
12,5383,890
3,370 Brazil
12,07919,836
135,404 Kazakhstan
11,773
1,668
2,021 Argentina
11,576
4,103
1,024 Turkey
10,6097,489
3,649 Malaysia
10,304
2,946
6,438 Mexico
10,247
11,4871,524
1,078
Per capita GDP＜US$1,000
Population
Sub-Group A
Per capita
4,545(10,000
countries
GDP (US$)people)24,447 Kenya
977
4,210
1,511 Cambodia
934
1,525
8,250 Myanmar
835
6,367
Bangladesh
818
15,004

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 1: Appeal of emerging economies, and the position of Japanese companies

Japan External Trade Organization (JETRO)

Major Chinese cities join the $10,000 club
 The number of major cities with per capita GRP (gross regional product) exceeding US$10,000 has increased from three cities in 2007 to 45 cities in 2012. The total population of these cities has grownfrom 21.57 million to 236.59 million. It increased by 11 times in the past five years.
 There are 15 Chinese cities with a population above 10 million. It is possible to classify the nine cities (see Reference) that have not yet reached the $10,000 club status based on the criteria used in theprevious page. These cities would fall under the volume zone and frontier. In ASEAN as well, the per capita GDP is US$14,419 for Bangkok (population of 6.88 million), US$9,871 for Jakarta(population of 9.61 million), and US$3,179 for Ho Chi Minh City (population of 7.75 million).

Figure III-6: Major Chinese cities joining the US$10,000 club
25,000【Reference: Per capita GRP for major Chinese cities with population above 10 million (2011) 】

50

Pop ulation(10,000 p eop le)

Linyi (Shandong)
Baoding (Hebei)
Nanxi (Henan)

Per capita
GRP (US$)
17,096
15,10913,193
12,783
12,643
10,577
8,803
7,654
6,181
5,342
4,258
3,375
3,343

Zhoukou (Henan)
Fuyang (Anhui)

2,436
1,999

1,239
1,040

City

45

41

Population (10,000
people, left axis)

20,00045

US$10,000 club
6 cities
US$10,000≦
Per capita GRP＜US$30,000

4035No. of cities
15,00030
2123,65922,177
10,00020

16

10,860

5,000
3

15

13,376

10

10

2009
City
282 Dalian (Liaoning)

2 frontier cities
US$1,000≦
Per capita GRP＜US$3,000
2010
Population
City
589

2,019 Tianjin
2,348 Weihai (Shandong)
185 Hangzhou (Zhejiang)
723 Zhuhai (Guangdong)

5

4,973

2,157
0

0
2007

Region

2008

2007
City

2009

Volume zone
7 cities
US$3,000≦
Per capita GRP＜US$10,000

25

2010

2008
Population
City
Daqing (Heilongjiang)

2011

2012

Population

Northeast
Dongying (Shandong)
Shenzhen (Guangdong)

186 Wuxi (Jiangsu)
1,047 Suzhou (Jiangsu)
Ningbo (Zhejiang)
Guangzhou (Guangdong)

468 Beijing
642 Shanghai
576 Xiamen (Fujian)
1,275 Foshan (Guangdong)Karamay (Xinjiang)

28 Ordos (Inner Mongolia)

200 Jiayuguan (Gansu)

EastCentralWest

Baotou (Inner Mongolia)
Source: CEIC database.

269

23

Wuhai (Inner
Mongolia)

40

Shenzhen (Guangdong)
Guangzhou (Guangdong)

Tianjin
Shanghai
Beijing
Wuhan (Hubei)
Zhengzhou (Henan)
Chengdu (Sichuan)
Shijiazhuang (Hebei)
Chongqing (Sichuan)

2011
City
Shenyang (Liaoning)
Panjin (Liaoning)
Anshan (Liaoning)
1,355 Tangshan (Hebei)
254 Qingdao (Shandong)
696 Yantai (Shandong)
157 Zibo (Shandong)Nanjing (Jiangsu)
Zhenjiang (Jiangsu)
Changzhou (Jiangsu)
Shaoxing (Zhejiang)
Jiaxing (Zhejiang)
Zhoushan (Zhejiang)
Zhongshan (Guangdong)
Wuhan (Hubei)
Changsha (Hunan)
Xinyu (Jiangxi)
Tongling (Anhui)

Population

54 Hohhot (Inner Mongolia)
Yulin (Shaanxi)

1,047
1,275
1,355
2,348
2,019
1,002
1,010
1,407
1,028
2,919
1,081
1,127
1,201

2012
City
723 Benxi (Liaoning)131
352
763 Jinan (Shandong)
766 Yangzhou (Jiangsu)
652 Huzhou (Zhejiang)
424
636
272
363
440
343
97
314
1,002
709
115
73

Population

Population

154

607
460
261

291
335

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 2: Business risks and risk management in emerging countries (1)Japan External Trade Organization (JETRO)

Business risks for emerging countries differ amongst countries and regions
 Emerging countries in Asia face increasing risks of rising personnel cost and labor issues. The inadequacy of infrastructure and legal systems continue to be problems plaguing these countries.
China is characterized by intellectual property risks and rising personnel costs, while rising personnel costs is a significant problem for Thailand. Indonesia faces an increasing number ofproblems, while Vietnam is confronted by the issue of stagnation in infrastructural improvements. India ranks third for labor issues, but the rate is on the rise.
In Africa, political and social instability has become a growing problem as compared to five years ago. This is followed by the issue of development and implementation of regulations and laws.

Figure III-8: Management issues in Africa

Figure III-7: Business risks and issues in major emerging countries in Asia
China (n=1,304)

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Faces intellectual property protection
issuesThailand (n=750)

0.0

20.0

53.1

Development and application ofregulations and laws

10.5

Employment/Labor issues

10.4

Infrastructural environment

Infrastructure is undeveloped

34.1

Legal systems are undeveloped with issues
in the application of laws

Faces tax risks and issues

Faces tax risks and issues

Fiscal 2008
12.3

Related industries are notconcentrated/developed

Fiscal 2010

Infrastructure is undeveloped

5.6

Fiscal 2008

5.5

Faces intellectual property protection issues

40.0

60.0

80.0

Vietnam (n=612)

0.0

20.0

40.0

36.4

Legal systems are undeveloped with issues
in the application of laws

60.0

43.6
Legal systems are undeveloped with issues
in the application of laws

27.2

Has labor issues

23.0

Has labor issues

11.9

Exchange rate risks are high

12.4
Related industries are notconcentrated/developed

Faces intellectual property protection issues

11.1

6.5

Fiscal 2008

Faces tax risks and issues

Fiscal 2010

Faces intellectual property protection issues

9.8

20.0

40.0

60.0

80.0

56.8

29.6

Has labor issues

14.2

13.7

20.0 40.0 60.0 80.0 100.0

Legal systems are undeveloped with issues
in the application of laws

Exchange rate risks are highFaces tax risks and issues

0.0

Infrastructure is undeveloped

18.1

21.0

51.4

0.0

India (n=507)

Personnel costs and high and on the rise

Personnel costs and high and on the rise

80.0

Fiscal 2007
Fiscal 2012

Note: Period of implementation: August-October 2012. Targets: 333
Japanese companies venturing into the African market. Effective
responses: 168 companies (50.5% response rate).
Source: "2012 Survey on Business Conditions of Japanese-AffiliatedFirms in Africa" (Jan. 2013, JETRO).

27.8

Related industries are notconcentrated/developed

22.1

25.0

Other

Fiscal 2012

4.8

Infrastructure is undeveloped

Infrastructure is undeveloped

46.6

Securing capital funds

(%)

20.0

60.8

Fiscal 2010

3.3

0.0

72.3

6.5

Fiscal 2012

11.6

77.7

Difficulty in local procurement

23.2
Exchange rate risks are high

87.8

Exchange rate risks are highHas labor issues

Indonesia (n=615)

12.7

Has labor issues

45.1

80.0

30.1

49.5

Legal systems are undeveloped withissues in the application of laws

60.0

Political/Social stability

Personnel costs and high and on the rise

Personnel costs and high and on the rise

Related industries are notconcentrated/developed

40.0

Fiscal 2008

Related industries are notconcentrated/developed

Fiscal 2010

Faces tax risks and issues

23.7
18.5

15.0
8.7

Fiscal 2012

Fiscal 2012

Exchange rate risks are highPersonnel costs and high and on the rise

13.8
7.9

Fiscal 2008
Fiscal 2010
Fiscal 2012

Faces intellectual property protection issues
6.9

41

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 2: Business risks and risk management in emerging countries (2)Japan External Trade Organization (JETRO)

The importance of risk management in breaking into markets in emerging countries
 Africa is perceived as a high-risk region, but its business environment has also been assessed to be similar to that of Asia’s. It is important to conduct careful and in-depth studies. Thereis high demand for improvements in the investment environment from Japanese companies.
 Localization is an important element in risk management, but there are also many related issues. Local exchanges, exchange of information among Japanese companies, and informationfrom public institutions are effective countermeasures against risks.
 In emerging countries where relevant laws and regulations have not been established, companies that are expanding into the market face risks of violating human rights. There is a needto take countermeasures through CSR initiatives, and there is a need even for small and medium-sized enterprises (SMEs) to pay attention to this factor going forward.

Figure III-9: Future countries of note in Africa, andcountry rankings from the “Doing Business Report”
Countries of note
(N=151)
1st South Africa
2nd Mozambique
3rd Angora
4th Nigeria
4th Kenya
6th Egypt
7th Tanzania
8th Morocco
9th Côte d'Ivoire
9th Zambia

No. ofBusiness environment
responses ranking
53
39
50
146
46
172
44
131
44
121
37
109
34
134
29
97
9
177
9
94

Others: Libya (8), Algeria (7), Ghana (7), Uganda (6), Zimbabwe (6),Tunisia (6), Ethiopia (5), Namibia (5), Botswana (5), South Sudan (5).
*Exckudes countries with less than 5 companies responding. Multiple
answers.
Example of DB ranking for emerging countries; China 91st, Vietnam
99th, Russia 112th, Brazil 130th, India 132nd

Figure III-10: Issues in advancing business localization
0.0

10.0

20.0

30.0

40.0

50.0

Capability/mindset of local human resources

49.6

Difficulties in employing potential managers

41.8

Lack of progress in development of local humanresources
Linguistic abilities of local human resources(Japanese and English)
Weakness in local planning and marketing
abilities
Lack of progress in transferring authority fromheadquarters to local officeDifficulties in reducing number of Japanese
expatriates
High level of resignations among potential
managers
Weakness in local development capabilities for
products and services

36.9
18.8
17.8

15.8
15.1
13.2
12.2

No particular issues
Lack of consistency with headquarters'
employment policy

11.2
6.2

Source: "FY2012 Survey on Business Conditions of Japanese Affiliated Firms in Asia and Oceania (JETRO).

Sources: "FY2012 Survey on Business Conditions of JapaneseAffiliated Firms in Africa" (Middle East and Africa Division, JETRO),
Doing Business 2013 (The World Bank).

Figure III-12: Examples of major human rights violation cases in emerging countries
Year

CompanyCountry of incident

1984

Union Carbide (U.S.)

India

1997

Nike (U.S.)

Indonesia, Vietnam

1990s

Shell (U.K., Netherlands)

Nigeria2003

Coca-Cola (U.S.)

India

2004

Yahoo (U.S.)

China

2010

Apple (U.S.)

China

2010

BP (U.K.)

Gulf of Mexico

Details
Large number of deaths among residents caused by leakage of poisonous gas from
insecticide plant (violation of right to live)
Child labor, low wages, forced labor at subcontractor plants
Sharing of profits with military regime that is acting in violation of human rights,
environmental destruction such as crude oil leakage accidents
Excessive pumping of groundwater violated residents' right to access water supplies;
contamination of well-water
Provision of personal information to Chinese authorities (user ID), violation of freedom ofspeechSuccessive suicides among employees of Foxconn, a production subcontractor (illegal
treatment of employees)
Oil rig explosion resulted in crude oil leakage, violating right to live (fisheries),
environmental contamination

Sources: Study and research report on respecting human rights in expanding business in emerging countries (Business Policy Forum, Japan) (M arch 2013) and other press releases.

42

Figure III-11: Risk information sources that should
60.0 be used by Japanese companies expanding overseas
Information source

Specific examples
Daily contact with people in neighboring homes,
Local community
factories, or offices. Rotary Club, etc.
Maintaining open communication with each level ofLocal employee
employees. Individual consultations and gatherings
are important.
Chamber of commerce for Japanese companies,
industry organizations (including local companies),
Among companies
social club restricted to members, partnercompanies
Consulting lawyers, accountants, tax accountants,
Supporting companies equipment delivery/installation businesses,
cleaning/delivery businesses, etc.
Municipal offices (including police, postal services,
Local governmentetc.), state/provincial government, central
government
Newspapers, magazines, television/radio programs.
Publicly available
It is also important to maintain an outfield
information such asperspective (international broadcasts, Internet,
reports
SNS).
Japanese embassies/consulates, JETRO, Ministry ofJapanese Government, Foreign Affairs website, websites of various
public institutionsorganizations such as Japanese businessassociations overseas
Japanese risk consultants, foreign risk specialist
External experts
consultants
Source: Interviewsand various materials.
Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives to promote agricultural, forestry, fishery and food exports

Japan External Trade Organization (JETRO)Japanese food is popular throughout the world, according to JETRO survey
 Government sets goal of increasing annual exports to ¥1 trillion by 2020
Japan’s agricultural, forestry and fishery exports for 2012 fell 0.3% year-on-year to ¥449.687 billion. The domestic market is shrinking as a result of the
low birth rate and aging population. Japan aims to expand its overseas market particularly focusing on Asia, where total population and the wealthy classes
are expected to grow.
 Japanese food ranks first as consumers’ favorite foreign cuisine

In December 2012, JETRO conducted the “Survey on Japanese Food Directed at Overseas Consumers” (2,800 respondents from China, Hong Kong,
Taiwan, South Korea, US, France, and Italy, in age groups from 20s to 50s). Sushi, yakitori, sashimi, and tempura rank high among the consumers’ favorite
Japanese dishes. Other than these regular favorites, ramen was also popular among Asian and American consumers, while curry rice was popular among
Europeans.

Figure III-13: Japan’s agricultural, forestry, and fishery exports(100 million yen)

Figure III-14: Favorite foreign cuisine
Trillionyen

8,000
12,000Agricultural Products

MarineFisheryProducts
Products

Forestry Products

90%
83.8%
80%
70%

6,000

449.7 billion yen

65.0%
59.5%

60%

340.2 billion yen

50%
41.8%
40%

39.4%

4,000

29.3%

30%

・ ・ ・ ・

29.1%

26.4%

26.1%
22.4%

20%

14.2%

10%

2,000

5.2%

0%

Japanese Chinese

Italian

Thai

KoreanFrench American Mexican Indian Spanish

Total number of respondents from seven countries＝2,800

MiddleEastern/
ArabianAfrican

0
2003

04

05

06

07

08

09

10

11

12

Sources: "Exports and Imports of Agricultural, Forestry and Fishery Products (Projections)" and "Basic
Plan for Food, Agriculture, and Rural Areas" (both Ministry of Agriculture, Forestry and Fisheries).

・ ・ ・ ・

20

(Year)

43

Note: Multiple answers are accepted. The percentage of the number of responses for each
respondent is shown. Cuisine from the home country are excluded from the choices.
Source: “Survey on Japanese Foods Directed at Overseas Consumers” (JETRO).

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives to promote agricultural, forestry, fishery and food exports

Japan External Trade Organization (JETRO)

Government and JETRO initiatives for agricultural, forestry, fishery and food exports; actions taken
after policy recommendations■Government serious about expanding exports of agricultural,
forestry, fishery and food products
At a Cabinet meeting held on June 14, 2013, the Japanese Government made an official decisionon the “Basic Policies for Economic and Fiscal Management and Structural Reform”, which
represents its basic stance for fiscal reform, as well as the “Japan Revitalization Strategy”, which isone of the “three arrows” under Prime Minister Abe’s economic policy. Promoting exports ofagricultural, forestry and fishery products and food is positioned as one of the growth strategies.
On June 19, the House of Representatives Committee on Agriculture, Forestry and Fisheries
unanimously passed a resolution on the adoption of the following items pertaining to expanding
exports of agricultural, forestry, fishery and food products. This is the first parliamentary resolution
passed on the export of agricultural products.
・Communicating the safety of Japanese meat products, accelerating discussions toward abolishingexport bans, and strengthening support for the development of meat processing facilities
corresponding to the health and sanitary criteria set by the partner country.
・Promoting the branding of Japanese fish, establishing quality management systems such as
promoting the acquisition of HACCP accreditation in the United States and EU, and building
systems for the prompt issuance of sanitary certification.

■JETRO’s initiatives on exports of agricultural, forestry, fishery andfood products
・As there is a high percentage of inexperienced exporters in this area, JETRO is strengthening support
for improving the skills of exporters.
・Collecting and analyzing information from overseas, and actively disseminating it to exporters.

・Conveying the allure and value of Japanese agricultural, forestry and fishery products and food tobuyers, food service businesses, and retailers overseas, etc.

■Key actions taken by JETRO after policy recommendations
・Ceaseless efforts toward the early abolishment of nuclear-related import restrictions ⇒ Importregulations are in force in 42 countries and regions as of July 1, 2013 (51 countries and regions
immediately after the nuclear power plant accident).
・Responding to food safety regulations ⇒ JETRO conducts seminars and provides relevant
information about the US Food Safety Enhancement Act.
・Promoting talks on animal and plant quarantine ⇒ After the foot-and-mouth disease outbreak,exports of beef to the United States resumed in August 2012.
・ And more.

・Initiatives to acquire Halal certification in Islamic countries, which make up a quarter of theworld’s population, and providing support for acquiring certification, such as GLOBALGAP, etc.

Examples of JETRO’s support
Hokkaido: Steadily rising export volume

Fukushima: Export of peach and apples

Nemuro’s frozen saury exports to Vietnam and other destinations

Peaches and apples produced in Fukushima for export to Thailand●To launch exports from Fukushima once again after
export suspension in the aftermath of the nuclear power
plant incident, buyers from Thailand were invited to
Fukushima during the harvesting period for peaches, andtours of production sites and business consultations werecarried out.
●800 peaches produced in Fukushima were sold out intwo department stores (at ¥600 each) that had sentbuyers to Fukushima. Thereafter, products were sold ina greater number of places. This was the first time
Fukushima agricultural products were exported since theincident.
●After that, Fuji apples cultivated on two farms in
Fukushima City and Date City were successfully sold at
a local commercial facility (at ¥360 each).

●This is the third year of support to promote
exports to Vietnam, including mission dispatches
and inviting buyers to Japan.
●According to Nemuro City, in FY2012, exportsof Nemuro products to Vietnam increased threetimes year-on-year to approximately 300 tons.
(This was 7 tons in FY2010 and 100 tons in
FY2011.)●By carrying out events for consumers in
addition to completing business deals with buyers,
Nemuro saury strengthened its brand name.

44

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives to promote agricultural, forestry, fishery and food exports

Japan External Trade Organization (JETRO)

Promoting sales of products that match export destination demand- Exporting Korean paprika to Japan  In 1995, South Korea began to engage in growing paprika for export, using Dutch technology. It targeted the Japanese market, which is geographicallyclose to South Korea.
 Since the beginning of 2000, there has been a rapid increase in the amount of low-priced, high-quality paprika exports from South Korea, which have
replaced Dutch products. South Korea became the top import partner for Japan. Paprika produced in South Korea is a successful example of promoting
products that match market demands in the export destination.
Figure III-15: South Korea’s paprika exports(100 million yen)80
To the world

To Japan

70
60

50
40
30
20
10
0

2000

2000
To theworld
To Japan

2001

2002

2001

2003

2002

2004

2003

2005

2006

2004

2005

2007

2008

2006

2009

2007

2010

2011

2008

2009

(Year)

2012

2010

2011

2012

25.6

41.7

39.9

51.4

52.9

62.9

56.0

59.4

58.7

53.7

55.0

56.0

74.1

25.6

41.6

39.8

51.3

52.6

62.7

55.9

59.3

58.6

53.6

54.9

55.8

74.1

Note: HS:070960 (Fruits of the genus Capsicum or of the genus Pimenta).
Source: “Global Trade Atlas”( Global Trade Information Services, Inc).

45

Copyright (C) 2013 JETRO. All rights reserved.

Japan External Trade Organization (JETRO)

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Government accelerates export of infrastructure The Growth Strategy has established a target of achieving overseas sales for infrastructure worth approximately ¥30 trillion (currently ¥10 trillion) by 2020. The strength of Japanesecompanies lies in petro chemistry, LNG plants, electricity, and railway. However, in recent years, there has been a stiff competition with China and South Korea, which have a stronger
edge with regard to price. Japan is responding to the competition by strengthening public-private cooperation.
 The Growth Strategy will focus on medical technology and equipment as a new frontier field in the area of infrastructure. Japan’s strengths in the Asia Pacific region lie in diagnostic
imaging equipment such as endoscopes and CT scan equipment, as well as ultrasound diagnostic equipment. However, its competitor countries are also expanding their import market
share. From now on, the Government’s policy is to export medical technology and services in an integrated manner.
 To the companies, it is possible to explore sales routes and find trade partners efficiently through participation in exhibitions and fairs overseas. JETRO has launched new initiatives that
include inviting foreign doctors to Japan so as to help Japanese companies open up new sales channels. To kickoff these initiatives, five doctors from major private hospitals in Thailand(in the field of dialysis) were invited to Kyushu to visit medical institutions and companies, and to tour exhibitions and fairs.

Figure III-17: Import share of ultrasound diagnostic equipment in the Asia Pacificregion, by country (2012)

Figure III-16: Import share of CT equipment in the Asia Pacific region, by country(2012)Top import destination
China

United States (35.5%)

Taiwan
Korea
Malaysia

2nd import destination
Japan (35.47%)

3rd import destination

Top import destination

2nd import destination

3rd import destination

Germany (25.95%)

China

United States (42.85%) Korea (14.61%)

Japan (13.4%)

United States (41.18%) Germany (29.14%)

Japan (18.92%)

TaiwanUnited States (36.51%) Japan (30.57%)

Korea (9.23%)

Germany (40.86%)

Japan (23.01%)

Korea

United States (60.26%) Japan (15.29%)

China (4.62%)

United States (53.18%) Germany (19.92%)

Japan (15.1%)

Malaysia

United States (23.24%) Singapore (16.82%)

Japan (14.95%)

ThailandJapan (42.3%)

United States (31.44%)

China (9.12%)

Thailand

United States (68.89%) Korea (11.75%)

Denmark (6.7%)

Indonesia

China (32.54%)

Japan (28.55%)

Germany (23.08%)

Indonesia

Korea (31.66%)

China (20.57%)

United States (18.83%)

Singapore

Japan (66.68%)

United States (16.70%)

Germany (14.81%)

Singapore

Japan (37.90%)

United States (31.33%) France (7.53%)

Philippines

China (71.65%)

Germany (16.61%)

United States (9.48%)

VietnamJapan (35.61%)

Austlia (19.19%)

India
Australia

United States (23.13%)

Philippines Korea (35.25%)

Japan (21.47%)

United States (19.55%)

China (15.36%)

VietnamJapan (44.41%)

Korea (21.38%)

China (11.44%)

United States (29.48%) China (25.18%)

Japan (15.31%)

India

United States (22.22%) China (21.84%)

Korea (17.86%)

United States (43.95%) Germany (19.57%)

Japan (18.03%)

Australia

United States (63.41%) Japan (11.77%)

Korea (6.4%)

Notes: (1) HS902212. (2) Only figures for Vietnam are 2011.
Source: trade statistics of each country.

Notes: (1) HS901812. (2) Only figures for Vietnam are 2011.
Source: trade statistics of each country.

Figure III-18: Major overseas trade fairs in the field of medical equipment (FY2013)
Fair

PeriodLocation

China International Medical Equipment Fair (CMEF Spring 2013)

April 17-20, 2013

Shenzhen, China

BIO International Convention

April 22-25, 2013

Chicago, United States

Medical Fair Thailand 2013

September 12-14, 2013

Bangkok, Thailand

BIO Europe 2013

November 4-6, 2013

Vienna, Austria

MEDICA 2013 (International fair and international conference for medical equipment)

November 20-23, 2013
December 1-6, 2013
January 27-30, 2014
February 11-13, 2014
March 14-16, 2014

Dusseldorf, Germany
Chicago, United States
Dubai, UAE
Anaheim, United States
Mumbai, India

RSNA 2013 (Radiological Society of North America)
Arab Health 2014
Medical Design & Manufacturing West 2014
Medical Fair India 2014
Source: various materials.

46

Remarks
Largest specialized trade fair for medical equipment in the Asia PacificregionWorld's largest specialized trade fair and business meeting forpharmaceutical biotechnology
Largest specialized trade fair for medical equipment in Southeast Asia
Europe's largest specialized trade fair and business meeting forpharmaceutical biotechnology
World's largest trade fair for medical equipment
World's largest radiological conference and trade fair
Largest trade fair for medical equipment in the Middle East
World's largest specialized trade fair for medical equipment parts
India's largest trade fair for medical equipment

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Japan External Trade Organization (JETRO)

Promoting “Cool Japan” globally Collaboration between different industries in order to expand globally is an issue faced by the creative industries. Japanese companies are also taking steps to break into countries and regions that they have notyet explored. Japanese products, which boast superior design and function, are accepted not only in emerging countries, but also in competitive Western countries’ markets. Price is a continuing issue.
 According to a JETRO survey on service industry companies with a proactive stance toward overseas business, more than 40% of those responding (546 companies) indicated that they have had experience inoverseas expansion. The biggest issue they faced in achieving overseas expansion is appropriate localization, such as the supply of products and services, and price setting. Other issues raised were humanresources, capital and costs.

Collaboration between different industries
J-POP

Figure III-19: Correlation analysis between achievement of overseas businessand respective issues
Issues that are strongly
correlated with degree ofbusiness success

Automobilerelated goods

Bangkok International Auto Salon 2013
(Largest automobile fair in ASEAN)

All companies
1st Products/services
that responded
2nd Capital and cost

Period: June 20 – 30, 2013
Organizer: Local publishing company
Estimated number of visitors: 1 million (approximately 0.7 million last year)
Description:
18 Japanese automobile sundry goods companies exhibited their products at theJapan booth set up by JETRO. A live J-pop performance was also held at the fair.
The collaboration between Japanese products and J-pop opened up newsales channels.

Exploring the women’s market in the Middle East

B-to-B
companies

2nd
B-to-C
companies

Wholesalers

Middle East and North Africa: Population exceeds 500 million (large youth population),and many affluent classes in the Gulf countries
Fashion market： Large number of European and American fashion brand stores (ZARA,
H&M, etc.). Entry of Japanese apparel companies into the market is limited due to various
forms of restrictions.
New initiatives:
Aug 2012: Buyers from the fashion and beauty industries (6 companies) were invited from
Saudi Arabia, Turkey, and UAE to Japan. Business meetings were held in Japan.
Feb 2013: 17 Japanese apparel companies was dispatched to Saud Arabia and UAE toparticipate in local trade fairs and business meetings.
Japanese products were highly praised (sophisticated, adorable, creative, withJapanese elements)

1st Products/services

Business
environment

Problems related tolabor laws, etc.
Set-up costs

2nd Products/services

Stable supply(quantity) of products
and services

1st Personnel

Management of local
employees

1st Products/services

2nd Capital and cost
Companies
venturing into
China

1st
2nd
Supply of products andPrice setting forservices that match the
products and services
needs of the local
for the local market
marketRisk management in
Set-up costs
business investments
Supply of products andPrice setting forservices that match the
products and services
needs of the local
for the local market
market

1st Capital and cost

2nd Management

All industries
exceptwholesalers

Specific issues that are strongly correlated with overall issues on theleft

1st Personnel

3rd
Supply of products andservices that matchlevels in Japan
Securing capital funds
Price competitivenessof products andservices

Administrative
procedures for licenses
and approvals
Securing capital funds Business costs such as
locally
infrastructure, etc.
Price setting forPrice competitivenessproducts and services of products andfor the local market
services
Implementation ofTransfer of knowhow
local personnel
to local employees
evaluation system
Local tax systems

Collecting andCollecting information
analyzing market
Strategic collaboration to decide on theinformation for thewith partners
destination for thedestination of thebusiness venturebusiness venture
Supply of products andSupply of products and Stable supply
services that match theservices that match(quantity) of products
needs of the local
levels in Japanand services
marketRisk management in
Set-up costs
Securing capital funds
business investments
Management of local
employees

Securing internal
human resources

Work motivation of
local employees

Regulations on
Cultural and businessparticipation by foreign
practices
capital
Source: JETRO's 2nd "Field Survey Concerning Overseas Presence in the Service Industry FY2012".
2nd

47

Business
environment

Problems related tolabor laws, etc.

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Japan External Trade Organization (JETRO)

Overseas expansion by SMEs with great potential (1) In fiscal 2011, only 0.9% (15,011 companies) of Japanese small,and medium-sized enterprises (SMEs) had subsidiaries or offices
overseas. (Source: The general condition of the 2012 Basic Survey,
The Small and Medium Enterprise Agency)
 According to a JETRO survey on Japanese enterprises taking aproactive stance toward overseas business, more than 60% of SMEs
are interested in expanding their businesses overseas. In conducting
business overseas, 28% responded that they wished to capture
overseas demand through exports. The difference with large
corporations is clear.
 JETRO has launched a project providing individual support to about
1,000 established SMEs for two years from March 2013. In addition,
it provides consistent support for overseas expansion by Japanesecompanies by providing various consulting and businessconsultation opportunities.
【Reference】 Attributes of experts dispatched in the support program for overseas
expansion in emerging countries by SMEs

(2) Country/regionof specialization(1) Industry of specialization
Electrical /electronic
11% Textiles
5%
Information
andcommunicati
ons
14%

Logistics
3%

Russia/CIS
1%

Services
5%
Other
13%

Middle East
and Africa
4%East Europe
6%

Pharmaceuti
cals
3%
ASEAN
58%

Machineryand parts
46%⇒Many home-appliancemanufacturers

Southwest
Asia
7%
East Asia
16%

Central andSouth America
8%⇒East/Southeast Asia
makes up 70%(3) Age
40s
3%

70s
3%

Figure III-20: JETRO’s support for overseas expansion by individual companies
Service

Fees (Note 1)

Target companies (Note 2)

Trade and investment consultationFree

No restrictions

BOP/Volume zone business consultationFree

No restrictions

Services related to the protection of intellectual
property

Free (somepriced services)

No restrictions

Services for conducting surveys overseas

PricedNo restrictions

Consultation with export coordinators in overseas

Free

Small and medium-sized enterprises(excluding infrastructure sector)

New Market Development Program for Japan-madeProducts with Global Potential

Free
Consultation/
Providing Support for individual companies in the service industry Free
information

Small and medium-sized enterprises
Service industry

Support for consortium on overseas expansion

Free

More than half of the group member
are small and medium-sized enterprises

Dispatch of experts to provide support to small andmedium-sized companies venturing into emerging
economies

Free

Small and medium-sized enterprises,
and medium-sized company

SME Overseas Expansion Platform(service provided in overseas)

Free

Small and medium-sized enterprises (asof July 2013)

Business support center (service provided in overseas) Priced

Some facilities for small and mediumsized enterprises only

Services to assist in the acquisition of businessappointments

No restrictions

ProvidingInviting overseas buyers to Japan and dispatching
opportunities
business missions to overseas
for businessmeetings Support for participating in trade fairs and exhibitions
Asia Caravan projectPriced--PricedMainly small and medium-sizedenterprises

PricedSmall and medium-sized enterprises

Notes: (1) Please refer to the service guide on JETRO's website for details (http://www.jetro.go.jp/services/). When using theservices, separate costs may be incurred by companies using the services.

50s
21%

(2) Small and medium-sized companies are defined based on the Small and Medium Enterprise Basic Law. While there are no
legal definitions for medium-sized companies, classification is based on factors such as capital, sales, and number of employees.
60s
73%

n=37

(3) Fees and target companies for inviting overseas buyers and dispatch of missions differ on a case-by-case basis.

⇒Average age is 62
years old(4) Overseas expansion support services are provided separately for companies in the agricultural, forestry and fishery and foodproduct sectors. 48
Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Japan External Trade Organization (JETRO)

Overseas expansion by SMEs with great potential (2) It is effective for small enterprises to promote their products developed through established technologies by cooperating with overseas partners and putting creative effort intodrawing up proposals.
 SMEs in the US are characterized by thorough utilization of “site capability” overseas in the aspects of personnel and sales, based on established technologies and products thatcan be passed on to overseas markets. While minimizing the number of expatriates dispatched from the home country, capable local personnel are employed locally, and local
sales agents are fully utilized.

Figure III-21: Examples of overseas expansion by Japanese SMEs
Company

No. ofemployees

Headquarters

Characteristics

Provided a demonstration of electronic measuring systems and scientific instruments on
actual machinery and equipment used by an overseas customer, thereby achieving newsales.
Design and manufacture of ultra-high precision molds. Established a joint ventrue
company overseas with a company that it had met at an overseas trade fair, thereby
securing a sales base in Asia.

Tohoku Electronic Industrial Co., Ltd.

Sendai, Miyagi
Prefecture60

Sayama Mold Manufacturing Co., Ltd.

Iruma, Saitama
Prefecture

31

Yuki Precision Co., Ltd.

Chigasaki, Kanagawa
Prefecture

20

Exhibited in an overseas trade fair, harnessing its strength in ultra-high precision finemetal processing technology, and received orders for satellite parts and automobile parts.

Taisin Production Co., Ltd.

Matsudo, Chiba
Prefecture3

Ice-making mold "Ice Mold" drew the attention of an established whisky manufacturer
overseas, at a liquor trade fair. Thereafter, it received orders from various parts of theworld through word-of-mouth.

Note: The number of employees is the number as at the time each company was interviewed.
Source: company interviews.

Figure III-22: Examples of overseas expansion by American SMEs

CEM Corporation

1978

North
Caroline

No. of employees/
Annual sales
Approx. 280/
Approx. US$80 million

RGB Spectrum

1987

California

Not disclosed

Power Integrations 1988

California

443/
US$298.74 million

Fluidigm

1999

California

239/
US$42.9 million

MP Biomedicals

1959

California

Approx. 500/
Not disclosed

Company

Established Headquarters

Source: JETRO Sensor, Nov 2012 issue.

Main product(s)Overseas expansion format

Overseas bases

Overseas
sales ratio

Microwave laboratory Exports products
Sales subsidiaries in Japan, U.K., Germany, France, and Italy 70%
equipment
manufactured in United States
Sales subsidiaries in China and Netherlands. Representative
Video graphics
Exports products
offices in Japan, Korea, Australia, India, France, Russia, and 40%
products
manufactured in United States
Beirut.
Integrated circuits
R&D subsidiary in Canada. Service center in Singapore.
Subcontracts production to(IC) for use by
Subcontracts production to China, Malaysia, Thailand, and90%
overseas companies
substations
Philippines.
Establishes overseas
Sales subsidiaries in Japan, China, Netherlands, and France.
Microfluidic chip
47%
production bases
Production base in Singapore.
Pharmaceutical
Sales subsidiaries in nine countries, including Japan, China,
Acquires overseas production
Notlaboratory equipment
India, Australia, NZ, Europe, and Russia. Production base incompanies
disclosed
and reagents
Singapore.

49

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Japan External Trade Organization (JETRO)

Overseas expansion by SMEs with great potential (3) In Europe, companies boldly capturing overseas markets through the “agility” that is unique to SMEs are known as “hidden champion” or “born global”
companies.
 SMEs that take a proactive stance toward overseas expansion are characterized by not only the potential to do so but also the ability to create niche markets,
make quick decisions, add high value and be service-oriented, have a sound market strategy and be flexible.
Figure III-23: Hidden champion and born global companies in Europe
Hidden Champion companies
Definition/ ・Anonymous (Supplier of fundamental parts and services)
Criteria ・Ranked in the top three globally among peers in the niche industry
・Sales below US$4 billion
Character ・Not limited to small enterprises; many medium-sized companies
・Strategic dominance of niche markets
istics・Global expansion while securing profits in the home country
・Flat global business expansion
Country/
Germany, Switzerland, Italy, etc.
Areas
Also
Global nicher
known asExamples ・Tetra (Germany): Tropical fish food・Wanzl (Germany): luggage trolleys used by passengers in airports
・Gerriets (Germany): theater curtains and stage equipment
・Da Vinci (Germany): paint brushes
Born Global companies (BGC)
Definition/ ・Small and medium-sized ventures (less than 250 employees)
Criteria ・Overseas business expansion within three years of
establishment/founding (small domestic market)
・More than 25% sales in overseas markets
・Less than 20 years old
Character ・ICT, biotechnology, new services, etc.
・Engage in cutting-edge industries
istics・Technological innovation through collaboration with research institutes
・Universal design-oriented・Linear global business expansion
Country/
North Europe, Switzerland, Ireland, etc.
Areas
Also
International ventures
known asExamples ・Zound Industries (Sweden): Headphones
・NetHawk (Finland): Operation inspection tools for mobile communication
・CRF (Finland): Processing of clinical test data using PDA・Team Olivia (Sweden): Home care/welfare services
Sources: JETRO's report on the globalization strategies of European small and medium-sizedenterprise(Feb 2013).

Figure III-24: Five characteristics of SMEs in Europe that venture overseas

Five characteristics

Explanation

Foundation foroverseas expansion

・Need to move away from subcontracting due to the slump amongmajor European manufacturers
・Need to capture demand outside the region due to low economic
growth.
・No resistance toward expanding business in multilingual countries.

Speed management

・Prompt decision-making through family management
・Absorbing customer needs through direct sales, reducing use of
middlemen
・Proactive stance toward sales by top executives

Creation of nichemarket・Need to create unique and proprietary products and services bymoving away from subcontracting
・Motivation to take up something that other companies in the industry
have failed in

High value-added
and service
orientation

・Branding domestic production (Example, "Made in Switzerland")・Stabilization of profitability through the long term contracts ofmaitenance services to main customers.

Strategy that takes
the global market
into consideration;
flexibility・Complementing weaknesses through cluster collaboration
・Not adhering to own management resource.
・actively utilize the right personnel for the right job.
・Active utilization of sales tools such as international fairs.

Sources: JETRO's report on the globalization strategies of European small and mediumsized enterprise(Feb 2013).

50

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Initiatives and issues in the expansion of Japanese businesses overseas

Japan External Trade Organization (JETRO)

Companies with a policy of overseas expansion are also ambitious
in expanding their domestic business Existing studies show that the higher the level of productivity of a company, the more active they tend to be in exporting and FDI. It is important to have in place policies for
reducing fixed costs for companies when they venture overseas.
 Japanese companies wish to maintain appropriate functions in their respective overseas bases, and companies that are attempting to expand their businesses overseas also tend towant to expand their domestic businesses. Companies that wish to maintain the status quo or that are passive in overseas ventures tend to be content with the status quo in thehome country.

Figure III-26: Future direction for domestic businesses of SMEs, based on policy
for overseas businesses

Figure III-25: Stance in the implementation of overseas businesses

Other/No response

44.8
48.0

Would like to retain the appropriate functions
both in the country and overseas
Would like to stay in the country and use
exports to meet overseas demand

12.1
15.0

Would like to stay in the country if possible,
but has no choice but to venture overseas

5.7
3.8
5.2

Will neither export nor venture overseas in the
future

4.3
4.8
4.4

Would like to venture overseas if possible, but
has no choice but to stay in the country

3.6
1.0
2.9

Other

1.6
3.6
2.1
0.0

10.0

22.4

Thinks that it is necessary to reduce scale of domestic
business
Aims to maintain current state of domestic business

23.2

Aims to expand domestic business

28.0

6.6

Would like to actively venture overseas

56.9

Small and medium-sizedcompanies(n=1,093)
Large companies(n=392)
Overall(n=1,485)
20.0

30.0

40.0

50.0

60.0
(%)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

37.1

23.1
61.3

56.6

61.5

57.2
34.9

34.7

Aims to expand Aims to maintain Not engaged in Thinks that it isoverseas business current state of overseas business necessary to(n=871)overseas business now and in the
reduce scale(n=235)future (n=173) of/withdraw fromoverseas business(n=13)

Source: Figures III-25 and 26 are both based on “FY2012 Survey on the International Operations ofJapanese Firm"(March 2013, JETRO).

51

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Investments in Japan toward the creation of the most advanced business environment in the world

Japan External Trade Organization (JETRO)

Foreign direct investment in Japan remains at a low level
Foreign direct investment in Japan remains extremely low compared to other countries. However, there are also companies that are attracted byfactors such as industrial concentration in Japan, and which are entering and expanding operations in the Japanese market. The appeal of the market
is expected to shrink relatively, so the promotion of foreign direct investment through the application of Japan’s strengths is of even greater
importance. In recent years, investment from Asian countries has been on the rise. There is a need to promote investment not only from Europe andAmerica, but also from Asian countries that have strong ties with Japan.
Figure III-27: GDP ratio of inward FDI for major economies
Japan

Figure III-29: Assessment of Japan in the Global Competitiveness Report

U.S.

Innovation (5th)

26.2

UK

6

Germany

4

Business sophistication
(1st)

21.1

39.5

2
1

10.3

South
Korea

Market size
(4th)

12.7
10.0

Macroeconomic environment(124th)3

FranceChina

Infrastructure (11th)

5

54.4

-

（Unit: Top 7 rating）

Institutions (22nd)
7

3.7

20.0

30.0

40.0

50.0

60.0

Health and primary education(10th)

0(%)

Sources: "World Investment Report 2013"(UNCTAD)"International Investment Position of Japan"(Ministry of Finance)"National Accounts" (Cabinet Office)Technological readiness(16th)

Higher education and training(21st)
Japan

Figure III-28: Change of regional FDI stock in Japan (End of 2003=100)
Financial market development(36th)(End of 2003＝100）

Goods market efficiency(20th)

600.0

South Korea

Labor market efficiency (20th)

East Asia

Note: The ranking placed in brackets after each item refers to Japan's rank among 144 countries/regions.
Source: ”The Global Competitiveness Report” 2012-2013（World Economic Forum）.

500.0
Europe

400.0

China

Singapore

Figure III-30: Examples of R&D investments in Japan
North
America

300.0【NeoPhotonics Corporation】

 Provides modules and subsystems for high-speed optical communication
networks based on photonic integrated circuits (PICs).

200.0
100.0
0.0
End '03 End '04 End '05 End '06 End '07 End '08 End '09 End '10 End '11 End '12

 In November 2012, the company established a new R&D center thatengages in R&D on low power-consumption drivers, which are the mainpart used in next-generation optical transmitter modules.

Sources: Stock of External Assets and Liabilities of Japan (Ministry of Finance, Bank of Japan), and Foreign
Exchange Rates (Bank of Japan).

52

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Investments in Japan toward the creation of the most advanced business environment in the world

Japan External Trade Organization (JETRO)

Main barriers to foreign direct investment in Japan
In a survey conducted by JETRO on foreign companies from February to March 2013, respondents pointed out several barriers to foreign direct
investment in Japan. These included high business costs, peculiarities of the Japanese market, and difficulty in communicating in foreign languages.
Foreign companies have called for reduction in business costs through cuts in effective corporate tax rates, etc., and put in demands for less stringent
criteria in the company registration system and initiatives to enhance the development of global human resources.
Figure III-32: Specific demands for improvements to Japan’s business environment

Figure III-31: Barriers to FDI in Japan

Requests for improvement

Comments(1) Reduce effective corporate tax rate

It is difficult to make business profitable
in Japan due to corporate tax and highbusiness costs. (Machine/ North
America)(2) Expand special exemption measures for corporate taxes for foreigners

We hope tax incentives of the Act for
Promotion of Japan as an AsianBusiness Center will be expanded.
(Medical/ Asia and Oceania)（Unit: No. of companies, multiple answers)

High business costs

76

Peculiarities of the Japanese market

52

1. Tax/financial measures
Difficulties in foreign language communication

41

Difficulties and complications in administrative
procedures and accreditation systems

The range of business covered by thesubsidy is small. (Automobile parts /North America)
We would like the subsidy application
period to be prolonged. (Medical /Europe)When it comes to technical or specialist
personnel who can speak English, therange of human resources becomes
extremely narrow. (Environmental energy/ Europe)

37

Difficulties in securing human resources(3) Enhance subsidies for setting up business

32

Anxiety about natural disasters such as
earthquakes and tsunami

16

Difficulties in procuring capital funds

12

Undeveloped systems and structures

10

Difficulties in living environment for foreigners

8

Anxiety about radioactive contamination

7

Other

6
0

10

20

30

40

50

60

70

2. Easing difficulty of
securing human resources(4) Develop global human resources

3. Improvement measuresfor company registration system(5) Loosen criteria in company registration system

When establishing a Japanese office,finding a CEO who is a resident in Japanis difficult. (Information communication/ North America)(6) Ease regulations for various industries

Japanese regulations for medical
equipment have not beeninternationalized. (Medical products /North America)
Costs in clinical pharmaceutical trials forrare disease treatment is too expensive
and related procedures are timeconsuming. (Medical products / North
America)
In terms of selling wireless equipment,
meeting the unique standards andcertification system of Japan is cost andtime-consuming. (Communications /Asia and Oceania)

80

Note: From April 2003to December 2012, of the 1,048 foreign companies entering Japan with the assistance of JETRO, a questionnaire survey was conducted on 555
companies, and responses were received from 102 companies..
Source: Opinions and requests for improvement from foreign companies about barriers to investing in Japan (April 2013, JETRO).

4. Measures to ease regulations

Source: Opinions and requests for improvement from foreign companies about barriers to investing in Japan (April 2013, JETRO).

53

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Investments in Japan toward the creation of the most advanced business environment in the world

Japan External Trade Organization (JETRO)

Intensification in competition to attract companies
Many countries have introduced various measures to attract foreign companies. European countries are putting effort into enhancing their locationcompetitiveness by promoting industrial concentration in urban areas and reducing corporate taxes. Asian countries are taking a proactive stancetoward attracting foreign companies by formulating bold incentive measures.
Figure III-33: Measures and systems to attract companies in major countries

Country

U.S.

Germany

UK

South Korea

Singapore

Measures for attracting investors
There are no preferential measures in place that are applicable only to foreign investors. Under the tax revision policy
laid out in February 2013, it was announced that corporate tax rate would be reduced to 28%. Much focus has beenplaced on the ripple effect of manufacturing industries on the domestic economy. To that end, there are plans to raise thededuction rate of deductable income attributable to manufacturing activities carried out in the United States, for the
manufacturing industry in order to set the maximum effective tax rate at 25%.
There are no preferential measures in place that are applicable only to foreign investors. For investments that are highly
effective in creating employment, ventures into specific regions, or ventures into specific sectors and industries, various
incentives are in place at the national, state, and EU level. These include cash incentives, low interest loans, employmentrelated incentives, and R&D incentives.
There are no preferential measures in palce that are applicable only to foreign investors. In March 2013, the government
announced that it was reducing corporate tax rate. Tax rate would be reduced in phases, reaching 20% by April 2015.
This will be the lowest tax rate among the major European/American economies.
Through its law to promote foreign investment, tax exemptions and deductions of corporate taxes and other taxes areprovided to foreign investments in (1) businesses that involve advanced technology, and (2) businesses that provide
support services to industries. These are businesses that are necessary for the strengthening of international
competitiveness of domestic industries. In addition, there are also tax reduction/exemption measures for companies that
set up bases in foreign investment communities, free economic zones, and enterprise cities.
In addition to having the lowest level of effective corporate tax rate (17%) in Asia, a large number of diverse
preferential measures are in place. Through the development of the business environment, the country is promoting theconcentration of foreign companies in Singapore. In particular, with the aim of establishing a knowledge-based economy,
investments in sectors that contribute to this development are rewarded. These include cutting-edge technology, highvalue-added industries, R&D, and services that contribute to business hub functions. Bold incentives are available fortechnologically innovative companies, such as corporate tax reduction/exemption for 15 years.

Sources: Various government institutions websites. Details about the measures provided by each country are available as country /region information (J-File) on the JETRO website.

54

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Investments in Japan toward the creation of the most advanced business environment in the world

Japan External Trade Organization (JETRO)

Strengthening systems to attract investment
Many countries, including the major advanced economies, have in place organizations to provide one-stop support for investment activities from foreign companies.
In particular, in addition to low corporate tax rates, South Korea and Singapore have established and applied various support tools. These include consultation
services that facilitate administrative procedures for investors (South Korea) and offering preferential measures such as tax exemption through individual
deliberation(Singapore), etc.

Figure III-34: South Korea’s system for attracting investment

Figure III-35: Systems for attracting investment in major economies
Organization

KOTRA

Function below is established under theForeign Investment Promotion Act.
 Support center for foreign business ventures:
Provides one-stop support for some administrative
procedures for foreign investment (tax and businessregistration, tariffs, changes in visa status, etc.)
 Ombudsman for foreign investors: Handles
complaints from foreign investor companies incooperation with the relevant administrative
organization【Invest Korea Plaza】
 KOTRA’s Incubation center for foreign investors(nine-floors high 〔two floors in the basement, 40
incubator rooms〕).
 Established Foreign Investment Support Center thatprovides one-stop support for foreign investment inSouth Korea.

Characteristics○Provides one-stop support for
attracting Singaporean and foreign【Singapore】
investors.
Economic○Provides preferential measures
Development Board
such as reduction/exemption of(EDB)
corporate tax to companies, throughindividual consultation.
○Provides one-stop support forforeign investments in the United【United Kingdom】
Kingdom.
UK Trade and○Attentive support is provided by
Investment (UKTI)
experienced sector and location
consultants.
○Provides one-stop support for【France】
foreign investments in France.
Investment in France ○Attentive support is provided by
Agency (AFII)
representatives for the respective
industries.
○Established Invest Japan BusinessSupport Center (IBSC) that provides
one-stop support for foreign
investments in Japan.
○Attentive support is provided to【Japan】
companies that are interested inJapan External Tradeinvesting in Japan, by experts in
Organization
attracting investments. Services(JETRO)
include the provision of information
to individual companies, advice forentering the Japanese market, andconsultations on establishingcompanies in Japan.

No. of employees responsible for
attracting investments (includes
estimates)

Office leasing

Approx. 500 (Singapore andoverseas) (A large number of
employees are engaged inNonework related to attracting
investments)

Approx. 500 (U.K. andoverseas)

None

Approx. 160 (France andoverseas) (All employees areNone
engaged in work related to
attracting investments)

Approx. 60 (Japan andoverseas)

40 offices
・23 offices inTokyo・17 offices inother regions

Sources: Each organization's website etc.

55

Copyright (C) 2013 JETRO. All rights reserved.

Chapter 3 Section 3: Investments in Japan toward the creation of the most advanced business environment in the world

Japan External Trade Organization (JETRO)

Increasing the number of foreign visitors in JapanThe number of foreign visitors in Japan for 2012 was about 8.37 million. There was a large number of tourists from Asia, such as South Korea andChina. Efforts to attract the investment of tourism-related companies to Japan, such as low cost carriers (LCC) and travel agencies, are expected tocontribute to a further increase in tourist numbers. In June 2013, the Japan Tourism Agency, Ministry of Economy, Trade and Industry, Japan
National Tourism Organization and JETRO formulated a joint action plan for increasing the number of foreign tourists in Japan. In collaboration
with measures and projects implemented by the respective organization, such as Visit Japan, Cool Japan, and Invest Japan, the organizations will
promote the appeal of Japan to foreign visitors.
Figure III-37: Revitalization of tourism through investment in Japan

Figure III-36: Number of foreign visitors to Japan
1,000

Attracting tour transport operators such as foreign air
carriers, LCC, and cruise ships(Unit： 10,000 people)

900

Attracting theme parks, international restaurant chains, etc.

800

Attracting relevant service companies such as travel agencies
and hotels

700

Improve
accessibility
Enrich tourism
resources
Develop environment
to welcome foreign
tourists

Figure III-38: Examples of overseas expansion by tourism companies to Japan
600

Industry

CompanyCountry/Region

AirAsia X

Malaysia

T'Way AirSouth Korea

Air Busan

South Korea

LCC. Launched flights to Fukuoka Airport andto Kansai International Airport, it establishedoffice in Fukuoka and Osaka in 2010.

DBS CRUISE FERRYJAPANSouth Korea

Ferry operator. Operates ferries that connect
Japan, Korea, and Russia. Established a publiccompany in Tottori in 2009.

OSBERT Hotels

Hong Kong

Acquired Chikusenso in Zao, which had
become bankrupt, and reopened it in 2010.

Japan Powder Hakuba

Australia

Operates ski resort accommodations inAustralia. Established branch office in
Hokkaido in 2008.

HANAZONO308(Nihon Harmony Resorts)

Hong Kong(Australia)

Australia Alpine Enterprises, which operates ski
resorts, established Nihon Harmony Land in
August 2004. In 2007, it was sold to Hong
Kong developer Pacific Century Premium
Developments.

Lion Travel Japan

TaiwanLargest travel agency in Taiwan. Establishedpublic company in Tokyo in 2010.

Japan Spring Travel Services

China

In November 2012, it established a publiccompany in Tokyo to serve as a land operator
specializing in "land arrangements" for Chinese
travellers to Japan.

Inside Japan Tours

U.K.

Tour operator that welcomes foreign visitorsand makes various arrangements. Establishedbranch office in Japan in 2007.

500
Aviation

400
300
Shipping

200
100
Accommodations

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
（Year）South Korea

China

TaiwanU.S.

Hong Kong

Other

Note: Figures for 2003-2011 are actual figures. Figures fore 2012 are estimates.
Source: Changes in number of visitors to Japan after the launch of tthe Visit Japan project (20032012). (Japan National Tourism Organization).

Travel agency

Overview
One of AirAsia's divisions that covers longdistance routes. In 2010, began operating flights
in Japan, it established a branch office inTokyo.
LCC. Launched flights to Fukuoka Airport, itestablished a branch office in Fukuoka in 2012.

Note: These cases were extracted from tourism-related companies that were supported by JETRO to enter Japanese market.

56

Sources: Reports and various websites.

Copyright (C) 2013 JETRO. All rights reserved.