11

NOVEMBER
2023

CENTRAL &EASTERN EUROPE
TODAYS P E C I A L F EAT U R E
Repeatedly destroyed andreconstructed, then finallyrestored after the end of WorldWar II as the Historic Centre of
Warsaw, the old townscape of
the Polish capital symbolizes
today's Central and Eastern
Europe, which is venturing
into new fields while always
respecting its history.

Central & Eastern Europe
Today
Many in Japan may not be familiar with Central and Eastern Europe (CEE),
but numerous Japanese companies are setting up operationsin this fast-growing, buzzing region.
In this issue’s special feature, a representative from the Japan Bankfor International Cooperation (JBIC) Representative Office in Paris
explains the past and present of the CEE economy.
The significance of JBIC’s guarantee of Samurai bonds to support Ukraine’s
neighboring countries is also discussed by members of that project team.

JBIC Representative Office in Paris
Representative

IMAI Minami

Joined the bank in 2016. After
engaging in fund investment operations in the Equity Investment
Department and public relations
work in the Corporate Planning
Department’s Press and External
Affairs Division, she assumed hercurrent position in 2020. She isinvolved in shaping projects incontinental Europe and Frenchspeaking Africa. Graduated fromthe University of Tokyo, College ofArts and Sciences.

Automobiles, IT, green investment: The industrial strength ofCentral and Eastern Europe rooted in history
The region is characterized by “relatively low-cost labor force,” “industrial strength,” and“quality of human resources,” leading to the creation of a huge automotive supply chain from the 1990s.
Reflecting the high level of math and science education,
the software industry has been developing since the 2010s, giving birth to numerous startups.
Suffering from soaring energy prices since Russia’s invasion of Ukraine,
momentum for environmental measures continues to grow.

The region’s economy has tripled
in the two decades
since accession to the EU, with a strong
industrial manufacturing sector,
including automobiles
From 1989 through 1991, one CEE
country after another transitioned awayfrom socialist economic regimes. “Theremay be those in Japan who still carryan image of the impoverished regionof that time. However, the situation haschanged dramatically, especially fromthe 2000s when many of the countries
joined the EU,” explains IMAI Minami of
the JBIC Representative Office in Paris.
Various definitions exist for “Central
and Eastern Europe,” but here it refers to
12 countries (see the map on the right):
the 11 countries that joined the EU over
2

JBIC TODAYNOVEMBER 2023

the 10 years from 2004 through 2013,
with the addition of Austria (joined the
EU in 1995), which historically has muchin common with these countries. The
Representative Office in Paris covers allof continental Europe, including the CEE
countries, and French-speaking Africa,
but “CEE is where the action is now,”
says IMAI. Working quickly and agilely,
she herself has visited 6 out of the 12
countries over the three years since
assuming her post—11 if private visits
are counted.
The 12 countries combined cover an
area that is about three times the size ofJapan, and home to some 110 million
people. Their economies account for 14
percent of the EU’s GDP. “The region’s
economy is surging, approximately tripling over the 20 years or so since thecountries joined the EU following theirtransition to democracy. Although it is a
latecomer from the perspective of economic development, I believe this region
is becoming ever more important.”
According to IMAI, territorial unions
and dissolutions occurred repeatedly
over the long history of the CEE region,
making for a complex mix of ethnicity,religion, history, and culture. But whenit comes to economics, the countries ofthis region have three characteristics incommon: relatively low-cost labor force,industrial strength, and the quality ofhuman resources.
“Against the backdrop of quality, inexpensive labor, from the 1990s, German
and Japanese automakers began setting up operations in Hungary, Poland,
and what was then Czechoslovakia.

NO
In this article, “Central and Eastern Europe” refers to the 12 countries indicated in the map.
In 2015, these 12 countries, which are surrounded by the Baltic Sea, Adriatic Sea, and BlackSea, established the “Three Seas Initiative” to strengthen cooperation within the region.
With an overall GDP of about USD 2,417.7 billion, its presence in the EU is also increasing.

This buildup of the machinery industry,including automobiles, continued into
the 2000s.”
Gathering not only automakers, butalso manufacturers making various
auto parts such as engine-related components, seats, and exhaust filters, anenormous automotive supply chain has
now been formed in Europe. “Supporting
this industrial strength is the quality ofhuman resources. I often hear it said
that people in the CEE are diligent andconscientious. They are dexterous with
their hands and work hard to learn,
and so they quickly become proficientat their jobs. There are also many who
have a positive view of Japan, making
this a region that is very attractive forJapanese companies.”

Environmental measures drive
investments in electricaland EV-related industries
Many Japanese companies have established operations in four CEE countries:

TEW ORTHY

12 CEE
countries

Finland

NorwaySwedenNumber ofJapanese companies

BalticSea

Estonia

RussiaLatviaPoland354

Czech Republic272

Hungary

182

Romania122

Austria

114

Estonia

105

Lithuania

Denmark

BelarusWarsaw

BerlinPolandGermany

UkrainePragueCzech
Republic Slovakia
ViennaSlovakia

58

Austria

Bulgaria

40

Slovenia

Slovenia

32

Croatia31

Lithuania

15

Latvia11

Italy

Moldova

Budapest

Hungary
Croatia

Romania

Constanta

Bucharest

Adriatic
Sea

Bulgaria

Black
Sea

TurkeySource: Survey of Japanese businesses operating in overseas locations,
Ministry of Foreign Affairs of Japan (as of Oct. 1, 2022)

NOVEMBER 2023

JBIC TODAY

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S P E C I A L F E AT U R E

CENTRAL & EASTERN EUROPE

Four key CEE countries drive the regional economy and have deep relations with Japan
Population

Poland

38.01

Czech
Republic

10.51

Hungary

9.73

Romania

millionmillionmillion19.03
million

GDP
USD

688.2
billionUSD

290.9
billionUSD

178.8
billionUSD

301.3
billionEconomic
growth rate

Key industries

Characteristics

4.9

Food and beverages,
metals, automobiles,
electronic devices

With the fifth largest population in the EU, it has been attracting
attention in recent years as a market. Has the largest number of
Ukrainian refugees in the EU at 1.68 million (as of September 2023),
and is becoming a base for reconstruction assistance.

2.5

Machinery including
automobiles,
chemicals, tourism

In 2002, Toyota and France’s PSA Group established an automobile
assembly plant. Utilizing its geographical location next to Germany,industrialization progressed historically. Its GDP per capita is thelargest among the four key countries.

4.6

Machinery, chemicals andpharmaceuticals,
agriculture, livestock

Government policies such as subsidies and tax incentives have beensuccessful, and there is much investment in the automotive industry,
especially in fields such as batteries for EVs.

4.8

Services, industry,
construction, agriculture,
forestry and fisheries

In March 2023, President Iohannis visited Japan and concluded a
strategic partnership with Japan to strengthen relations. The BlackSea port of Constanta in the east is a key logistics hub.
Data as of 2022. Sources: World Bank, Ministry of Foreign Affairs of Japan, UNHCR

Poland, the Czech Republic, Hungary,
and Romania. Not surprisingly, thelargest industry is automotive. Suzuki
and Toyota have production bases in
Hungary and the Czech Republic, respectively. Auto parts manufacturers such as
Denso, Nidec, and Yazaki Corporation
also have factories in the region. They
not only supply Japanese companies,
but are also expanding their businesses
to include OEM supply to European
companies.
Following the automobile industry
is the electrical and electronics industry, led by companies such as Daikin,
Panasonic, and Mitsubishi Electric.
Driven by Europe’s proactive measuresfor environmental protection, recent
years have seen noticeable additional
investment in areas related to heatpumps, which collect heat energy fromthe air for uses such as air conditioning
and hot water supply.
A recent automobile-related trend
is Europe’s shift to electric vehicles,
also driven by environmental policies.
Hungary, especially, has been working
actively to attract EV-related factories,
and German manufacturers such as
the Mercedes-Benz Group, Audi AG,
and BMW have set up operations in the
country. In parallel with this, EV battery
manufacturers are also building factory after factory. In addition to Korean

Supporting Yazaki Corporation’s automotive parts businessin Romania and other markets
JBIC has supported numerous businesses
in their operations in Central and Eastern
Europe. This particular case involves
Yazaki Corporation’s manufacture of wire
harnesses (assembled wires for automotive), which, as IMAI points out, “requires
labor that is high in quality and low in costbecause much of the process involves
meticulous work such as making subtle
adjustments by hand, therefore, making
the process difficult to mechanize.”

Demand for wire harnesses is growing
due to the rise of autonomous driving
and electric vehicles. Ever since Yazaki
Corporation established its wire harness
operations base in Romania in 2003, it
has been expanding its production centers. In May 2022, JBIC concluded loan
agreements totaling EUR 27 million with
Yazaki Corporation’s European subsidiary to support the company’s businessexpansion.

Left: An artist’s rendition of awire harness (assembled wires
for automotive) / Above: Factoryin Romania
Courtesy of Yazaki Corporation

4

JBIC TODAYNOVEMBER 2023

companies such as Samsung SDI and
SK Innovation, the world’s largest EV
battery manufacturer, China’s CATL, is
now constructing what will be the largest battery plant in Europe, at a cost ofEUR 7.34 billion.
One reason for this advancementby manufacturers is that parts can beprocured within the region, another testament to the buildup of industries overmany years. “Japanese companies suchas Seiren (manufacture and investment
in lightweight synthetic leather seats forEVs) and Toray (manufacture of battery
separator film) are also expanding theirinvestments in response to the shift toEVs. In addition, I hear many companies
saying that they have already responded
to this EV shift by expanding their factories or replacing their production lines,
or will be doing so in the near future.”High skills, low cost,and entrepreneurial spirit are
fueling rapid growthin the software industry
It is not that widely known in Japanyet, but other than the manufacturingindustry, momentum is building inthe software industry, which has been
making significant developments since
the beginning of the 2010s. IMAI explains
this while touching on this region’s
history of producing famous scientists,such as Poland’s Copernicus and Marie
Curie, and Romania’s Henri Coandǎ, thefather of the jet engine, as one reason
behind this.
“This region has a high tertiary education enrollment rate compared to its
GDP, and the math and science levels
are especially high. The numerous medalists in the International Mathematical
Olympiad and the International Olympiad
in Informatics bear witness to this fact.
The CEE countries are leaders in terms of

producing software engineers in Europe,and there is no shortage of young people
who can speak fluent English.” On top ofthis, labor costs are lower than in the
U.S. and Western Europe, where wages
are soaring. “Some data indicate thatwages for software engineers in thisregion are about half that in the United
Kingdom.”
Targeting this pool of math andscience talent, Intel, Google and otherbig tech firms are also setting up R&D
centers here. And some of the people
who have worked for such global companies are, in turn, starting up their own
businesses. Because of their limited
financial resources, these startups alsofind this region attractive as they cansecure highly skilled personnel at a low
cost. In fact, about 30 unicorn companies
have emerged in the CEE, some of whichhave gone public with market capitalization of more than USD 10 billion.
With a historical background of industry
concentration, many of the startups
across this region offer B2B solutions forthe manufacturing industry, but these
unicorns also cover fields such as gamedevelopment, e-commerce, cryptocurrency, and fintech.
“There is a palpable spirit of entrepreneurship here. This region still has
memories of the transition from socialist
regimes around 1990, and similar to postwar Japan, there are many who wish
to reinvigorate their country througheconomic growth. In that sense, there
is probably quite a thirst for successhere. In addition, since the CEE market
is not very large, many entrepreneurs
are strongly focused on expansion into
overseas markets. A cycle of giving backis also building, in which entrepreneurs
who were able to achieve a successful
exit in the U.S. return to their homecountries to support the next generationof entrepreneurs.”

Inflation driven by the Ukraine
invasion, while the EU bolsters
decarbonization policies
Since democratization, the CEE has
enjoyed long-term stable growth, but
a large shadow has been cast on thisregion by Russia’s invasion of Ukraine,
which began in February 2022. Before
the invasion, the four major countries
had been posting GDP growth of around
5 percent, but in most of these countries that is expected to drop to below
1 percent in 2023. The major reason is
inflation caused by energy dependence
on Russia.
“The CEE is more dependent on
Russian energy resources than Western
Europe, and the Russian invasion of

MOU between JBIC and Romania
to support investment by Japanese companies
In March 2023, JBIC signed a memorandum of understanding (MOU) with
Romania’s Ministry of Finance and Exim
Banca Româneascǎ S.A. (EximBank),
which included strengthening cooperation to promote direct investment andbusiness expansion by Japanese companies in Romania, and to diversify the
Romanian Government’s funding sources.
The MOU is expected to create new

business opportunities for Japanesecompanies in Romania. According to
IMAI, “We hope to leverage this MOU
for cooperation with EximBank to help
Japanese companies develop their business. In addition to manufacturing andsoftware-related industries, Romania still
has much room for growth in the fields
of energy conservation and renewableenergy.”At the signing ceremony (From left:
H.E. Mr. Ovidiu
Dranga, Ambassador
Extraordinary andPlenipotentiary of
Romania to Japan(representing the
Ministry of Finance),
JBIC Governor Mr.
HAYASHI Nobumitsu,
EximBank Executive
President Mr. Traian
Sorin Halalai)

Ukraine caused crude oil, natural gas,coal, and other fuel prices to soar.
Economic growth slowed due to higher
procurement costs and sluggish consumption.” Inflation in this region was
higher than the EU average, with many
CEE countries recording rates of 10
percent or more in 2022. This surpassed
15 percent in some countries such as
Lithuania.
In the case of natural gas, for example, 10 of the 12 CEE countries weremore dependent on Russia than the EU
average. Suddenly forced to rethink its
dependence on Russia, the region needs
to not only change where it procures its
energy resources, but to also accelerateswitching to renewable energy sources
and improving energy efficiency. Basedon the policy package, “Fit for 55,”
which aims for a 55 percent reductionof greenhouse gas emissions by 2030,
the EU has also initiated the REPowerEU
plan to shift away from dependence on
Russia, and is promoting more efficientuse of energy through heat pumps andother such technologies, as well as thefurther introduction of renewable energy
sources.
IMAI sees this trend as also acommercial opportunity for Japanesecompanies. “Japanese companies havealways been strong in energy-saving
technologies such as heat pumps, aswell as interconnector projects with submarine cables for offshore wind farms.
In addition, amid a modal shift in cargotransportation from trucks and othervehicles to rail, which has less environmental impact, business opportunities
can also be anticipated in the rail sector
to enhance connectivity among the CEE
countries.”
Since spring 2023, inflation has been
subsiding and there are signs of an
upturn in economic growth. Central andEastern Europe, which has a competitive
labor force, industrial strength, and quality human resources that are rooted inits deep history, is already taking steps
toward the next era. IMAI says, “I want
Japanese companies of all sectors totake note of this region, and to comehere sometime soon to feel its dynamism. JBIC will be happy to provide
support.”Romania’s largest trade port, Constanta, located on
the Black Sea, symbolizes the economic growth of
the Central and Eastern Europe region.

NOVEMBER 2023

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S P E C I A L F E AT U R E

CENTRAL & EASTERN EUROPE

Photo: Omar Marques/Getty Images

Supporting Ukraine by working with neighbors:
The significance and role of Samurai bonds

BGK

Government of
PolandGuarantee

Poland’s Bank Gospodarstwa Krajowego (BGK) issued its first yen-denominated foreign bondsin the Japanese bond market (Samurai bonds) with guarantees by JBIC.
The move raises capital for the Aid Fund set up by BGK to provide humanitarian aid to Ukrainian refugees.
JBIC will continue to support aid that can only be provided
by a policy-based financial institution and take on new challenges.

Guarantee

Qualified
Institutional Investors

Ukrainians who fled
to Poland to escapethe conflict.

Eastern European countries, Poland ishighly energy dependent on Russia,
the source of about 80 percent of its
natural gas imports. In addition, Poland
produces about 70 percent of its electricity from burning coal. Such conditions
make it crucial to promote Poland’stransition to a carbon-neutral society. In
September 2022, JBIC and BGK signed
a memorandum of understanding on
support that included enhancing natural
gas-related infrastructure and the useof renewable energy. Half a year had
passed since the invasion began.

Samurai bond guarantee toraise capitalfor a refugee support fund

When the project team visited the Ukranian refugee facility near Warsaw, BGK provided them with the opportunity to interact with the people living there.

What JBIC can do to support Ukraine
and its neighbors
In February 2022, Russia invaded
Ukraine. Along with taking a resolutestance on this issue, the Japanese
government promptly announced its
unwavering support for Ukraine. JBIC
immediately formed a task force toplan what support it could provide as apolicy-based financial institution. Project
leader KANAMORI Hisashi, then Deputy
Director General of the New Energy andPower Finance Department I, recalled,“Ukraine needed support. That being
said, from our position as a bank, not an
aid agency, it was not an easy matter toprovide direct loans or financial support
to a country at war.” (An amendment
to the JBIC Act has now made it possible for JBIC to guarantee loans to
6

JBIC TODAYNOVEMBER 2023

recovery projects issued by multilateraldevelopment banks for the purpose of
supporting Ukraine.)
So JBIC turned its eyes to Ukraine’s
neighbors. The aim was to provide indirect assistance to Ukraine by supporting
the Central and Eastern European countries around Ukraine that were feelingthe impacts of the war. In collaboration
with the JBIC Representative Office inParis, which is charged with this region,
JBIC conducted studies on what countries to support. Through assessmentsthat included the size of the economy
and population, and market entry by
Japanese companies, JBIC decided to
first focus on Poland.
“With the exclusion of Russia, Poland
was the country taking in the largest
number of refugees from Ukraine,” said
KANAMORI. “So, from a humanitarian

aid perspective as well, it was a natural
course of action to first provide support
to Poland.”Discussions with Poland’s Bank
Gospodarstwa Krajowego (BGK) began
soon afterwards, focusing on the urgent
issue of energy. Like other Central and

Deputy Director General (then)Formerly of the New Energy and Power Finance Department
I, Infrastructure and Environment Finance Group of JBIC

KANAMORI Hisashi

The next step in selecting specificfinancing recipients took more time than
expected, but it was during this processthat a new form of support came to attention—the Aid Fund established by BGK.
The purpose of this fund is to provide
humanitarian aid, such as health care,education, housing, and social security,
to Ukrainians who had fled to Poland.
But the number of refugees kept increasing, and at one year from the invasion
reached 1.5 million in Poland. “With noend to the war in sight, refugees wereincreasing day by day,” said KANAMORI.
“As the fund’s budget had its limits, it
was clear that additional capital would
have to be raised.”
JBIC also learned that BGK wanted
to diversify its financial sources andwas considering the issuance of yen-denominated bonds in the Japanese bondmarket (Samurai bonds). Japanese
investors are wary of investing in countries around Ukraine that are affected by
the conflict. A proposal was then madeto BGK for the issuance of Samurai
bonds guaranteed by JBIC under thecondition that proceeds would besolely used for the Aid Fund. Following
a request from BGK in January 2023,

negotiations to realize this plan began
moving at full speed. Aspiring to provide
support as soon as possible, the goal
was set for an official announcement at
the G7 Hiroshima Summit in May. With
about four months to prepare, time wasjust about up. However, the hurdles toovercome proved more difficult than
anticipated.

Emboldened by a sense of challenge,
JBIC will engage in supporting
Ukraine’s other neighbors
Since this was BGK’s first-ever issuanceof Samurai bonds, a great deal of time
was spent on preparing the Japaneseprospectus and contract to comply withJapanese law. Consequently, it was
not until April that unofficial approval
was obtained from the Polish government. That left only one month to theHiroshima Summit. No one thought it
could be done in time. SHIMIZU Yusuke
played a central role in the negotiations after joining the project team as amember of the New Energy and Power
Finance Department I and the Corporate
Planning Department. “All adjustments
we could do on the Japan side weredone during the day and sent to the
Poland side late at night, and we waited
for their response the next morning,”
said SHIMIZU. “We took advantage ofthe time difference to rush through thisone month.”
Through such efforts, the official
announcement was made immediately
prior to the May 19 opening of the G7
Summit. When the President of Ukraine,
Volodymyr Zelenskyy, made a surprisevisit to Japan during the summit, Prime
Minister KISHIDA Fumio introduced
the JBIC initiative in his explanation ofJapan’s continued support for Ukraine.
President Zelenskyy expressed his gratitude for the support.
At the end of May, after the G7
Summit, members of the project team

Deputy Director
Formerly of the New Energy and Power Finance Department I,
Infrastructure and Environment Finance Group and Operation
Policy and Strategy Copredication Division, Corporate
Planning Department, Corporate Planning Group of JBICSHIMIZU Yusuke

visited a Ukrainian refugee facility near
Warsaw, Poland. It houses some 100
people, mainly women and children
who fled the conflict. Many expressed
their appreciation to the team. “Itbrought home the fact that our financial
support was helping their daily lives,”
KANAMORI said. “This form of assistance, which differed from our usual
projects in that we are able to see theactual beneficiaries of our support, gave
us a new sense of challenge and achievement,” added SHIMIZU.
This initiative is a form of support thatcan only be provided by a policy-based
financial institution and is also a newchallenge for JBIC to take on in orderto fulfill its expected role. JBIC will continue to realize support for Ukraine andits neighboring countries.

JBIC Governor HAYASHI Nobumitsu (right) visited
Poland in June 2023 and met with Prime Ministerof Poland Mateusz Morawiecki (center) andJadwiga Emilewicz, Secretary of State, Government
Plenipotentiary for Polish-Ukrainian Development
Cooperation of Poland (left).

NOVEMBER 2023

JBIC TODAY

7

Our People and Their WorkJBIC engages in various projects around the world.
Senior JBIC staff on the front line share their thoughts
and stories behind their projects.

JBIC’s new finance office advancing the realization of a decarbonized society: Energy Transformation Strategy Office

Aiming to build a global-scale hydrogen supply chain
to simultaneously realize carbon neutrality,
economic growth, and energy security
Expectations are growing for hydrogen as a solution in the realization of a decarbonized society.
A new finance office has been established in JBIC to promote hydrogen supply chain creation.
HIDAKA Yoshitaka and TSUJI Naoki from the new office, speak about its role and share their enthusiasm for their work.

For Japan to take the leadin utilizing new energy“As one of the generation responsible forthe future, I was excited to be involvedin a new business field at the opportunity to be at the forefront of hydrogen
finance,” says TSUJI Naoki of the Energy
Transformation Strategy Office, which
was established in July 2022. On theother hand, its director HIDAKA Yoshitaka
recalls, “I was frantically searching forwhat needs to be done in this new mission.”
There are high expectations globallyfor hydrogen and its derivatives such as
ammonia in realizing carbon neutrality
and promoting green transformation(GX). Although many challenges exist in
the use of hydrogen, international competition in the field is now intensifying,
due in part to the energy crisis triggered by the situation in Ukraine. ManyJapanese companies are also working

to take on the challenge of building ahydrogen-based society. It was against
such a background that JBIC’s Energy
Transformation Strategy Office wasestablished to take charge of projects
related to global hydrogen supply chain
creation and development. “By handlingall projects related to hydrogen production, transportation and utilization, it has
become possible for us to both consolidate information and respond smoothly
to customers,” says HIDAKA.
However, they had to start fromscratch. For the first six months, the focus
was on disseminating information and letting people know about the new financeoffice. Potential customers around theworld were identified and divided up
between the staff, who visited them one
by one. This led to the signing of memorandums of understanding (MOUs)
for cooperation and collaboration withgovernments and government agenciesof countries which could be producers ofMemorandum of Understanding (MOU)
related to Hydrogen /Ammonium

August 2021

May 2023

U.S.

YARA June 2022

U.S.

State of California

IDB / IDB Invest
April 2023

March 2021

Saudi Arabia
PIF February 2022

Indonesia

UAE

Egypt

Pertamina

ADNOC

Ministry of International
Cooperation

November 2021

April 2023

Colombia

November 2022

ECOPETROL June 2022

Indonesia
Pupuk May 2023

FONPLATA
Development Bank
March 2022

Islamic Development
Bank GroupHIDAKA Yoshitaka

TSUJI Naoki

Joined the bank in 2003. After assignments including the Representative
Office in London, study at Columbia
University, and the Japanese Ministryof Economy, Trade and Industry,
he worked in project financing forrenewable energy and other power
generation projects. In the Treasury
Department, he was also in charge of
JBIC’s first green bond issuance.

Joined the bank in 2016. After working in sovereign credit assessment at
the Country Credit Department, andproject financing for nuclear energy
and other power generation projects
in the New Energy and Power Finance
Department I, he was seconded to
the Ministry of Finance where hedealt with multilateral developmentbanks including the World Bank.

fossil fuels, for the large-scale use ofhydrogen. The main producers of hydrogen will be the United States, the Middle
East, Australia, India, as well as SouthAmerica and Africa. To get hydrogen to
Japan, it must be shipped in the formof liquid hydrogen (minus 253 degrees
Celsius), a liquid organic hydrogen carrier (LOHC) such as methylcyclohexane(MCH), ammonia or synthetic methane.
The transportation sector, however,is one area where Japan can demonstrate its strength. “More than 50 years
ago, Japan was the first country in theworld to successfully build a global-scale
supply chain for liquefied natural gas(LNG). I hear that there were more thana few who questioned its economic
efficiency at that time, but today, LNG
is utilized across the globe,” emphasizes
HIDAKA. “JBIC has knowledge andexpertise in this area from its long yearsof supporting the development of LNG
supply chains. So, I also want JBIC tolead the way in new forms of financing
for building a hydrogen supply chain.”If used for hydrogen-single fuelpower generation, each power plant
would require the equivalent of 2 to
5 million fuel cell vehicles’ hydrogenconsumption. But financing to build asupply chain for large-scale introduction of hydrogen does not yet exist. The
mission of the Energy Transformation
Strategy Office is to create this systemfrom scratch.

Taking the leadershipin connecting players while
maintaining a proactive mindset
Was there any hesitancy in taking up thisnew challenge? HIDAKA takes a positive
approach: “I am working on this proactively, without fear of failure, so thatJapan can lead the world in this field.”
TSUJI adds, “I am proud to be involvedin an important effort to achieve zero
emissions, a challenge not just for Japanbut for the whole world.”
A business model has not yet been
established, making public support,
including JBIC financing, a key element
in realizing the hydrogen project. But
the main players are of course the businesses in the industry. In order to be apresence that businesses can always
depend on, HIDAKA and TSUJI stressthat they wish to respond in a flexible
manner that is not bound by convention.
As a policy-based financial institution,

it is JBIC’s role to actively take risks in
new fields such as hydrogen. For TSUJI,
now in his eighth year at the bank, every
day is busy but fulfilling. “Being able totake the lead in connecting policy andbusiness from a neutral position is thereal thrill of working at JBIC. Also, I often
go on business trips alone to confer withoverseas governments and companies.
It is very rewarding to be entrusted withsuch work at a young age.”
One year has passed since the establishment of the office, and they are now
seeing projects that will soon lead toloans. These two talented individuals are
spreading their wings and taking on thechallenges of this new field, on which
rests not only the future of Japan, butthat of our planet as well.

Australia

State of Western Australia

August 2021

January 2023
Malaysia

PETRONAS

September 2022

Singapore

Australia

October 2022

Santos October 2022

Woodside Energy November 2022

( as of August 2023 )NOVEMBER 2023

Government of Oriental
Republic of Uruguay
March 2020

Sembcorp
Australia

JBIC TODAY

Hydrogen can be made from renewable energy sources or fossil fuels anddoes not emit CO2 when burned. WhenJapan announced the “Basic Hydrogen
Strategy” in 2017,2017, it was the first country
with such a plan, and is a world-leader inhydrogen technology. But transportation
is a major issue for Japan, which lacks
both renewable energy sources andDepartment of Natural Resourcesof the State of Alaska

State Oil Company (SOCAR)

8

Being the first in the world to createa hydrogen supply chain from scratch

U.S.
Azerbaijan

Norwayhydrogen, and with major hydrogen-related businesses overseas. Some 20
MOUs have already been concluded. “We
are also working actively disseminating
information by making presentations atinternational conferences to explain our
initiatives. Going forward, I wish to structure projects that will involve Japanesecompanies in the entire supply chain,with this not only contributing to Japan’s
zero emissions, but economic growth aswell,” says TSUJI proudly.

Deputy Director
Energy Transformation Strategy Office
Energy and Natural Resources
Finance Group

Director
Energy Transformation Strategy Office
Energy and Natural Resources
Finance Group

Ministry of Energyof the Republic of Chile
August 2023

Summary

In July 2022, the Energy Transformation Strategy Office was established within the Energy and Natural
Resources Finance Group as a finance office responsible for dealing with hydrogen, ammonia, and othernew energy sources to help achieve a decarbonized society and green transformation (GX).

Video introduction of the department
NOVEMBER 2023

JBIC TODAY

9

President
Nihon Shinkan Co., Ltd.

HOSONUMA
Naoyasu
Joined Sony Corporation
after completing a master’s degree in science andengineering at the Tokyo
Institute of Technology.
Joined Nihon Shinkan,
which was founded by his
father, in 2001 and becamepresident in 2008. Under
the slogan of “Aiming to bea ‘small but world-leading
company,’” he is working todevelop new domestic andoverseas sales channels.

Nihon Shinkan Co., Ltd.

An aluminum processor committed to an integrated manufacturingsystem leverages its world-class technology to diversify
Wielding its competence in a process known as aluminum drawing,
the company began licensing its technology overseas in the 1990s. In order to facilitate business expansion
not only in Japan but in Thailand as well, the company is one of the few in the industry
with an integrated manufacturing system in which the entire process is done in-house.

Processing aluminum pipes at
production centers in Saitama,
Fukushima, and Thailand

NOVEMBER 2023

1967

Company established

1976

Fukushima and Shirakawa plants
completed

1985

Established Alma Co., Ltd. (hardanodic oxidation plant)

1991

Started licensing technology to a
British company

2003

Developed and manufactured outercasing for Antarctic ice sheet drills

2012

Established NIHON SHINKAN(THAILAND) Co., Ltd.

2014

Established the Technology
Development Center

2023

Completed its second plant inThailandERSEAS OP
OVERThe second plantin Thailand
wascompleted in 2023.
The site is morethan 35,000 square
meters, and employees number morethan 100. In addition
to office automationequipment parts, neworders for small electronic device parts
will be handled here.

With high-level specialized technologies
and a system capable of mass production,
the company manufactures aluminumcomponents for a wide range of fields
from precision instruments to household
appliances. Camera lens barrels and otherproducts are stacked in the factory.

Consistent mass production capability
for opportunities in areas other thanindustrial equipment
Nihon Shinkan’s work covers multiple
sectors, from office equipment to camera
parts, automotive parts, agricultural andforestry equipment, household goods, railroad parts, and even pipes to drill throughAntarctica’s thick ice sheet. The National
Institute of Polar Research launched an

Nihon Shinkan Co., Ltd.

NSJBIC TODAY

Another management strategy that has
been carried forward since the foundingof the company is a focus on overseas
markets. In the beginning of the 1990s,
office automation equipment, one ofJapan’s leading areas in manufacturing, caught the attention of European
countries. The high-tech capabilities of
Nihon Shinkan were recognized here,
and it began licensing its technology to a

to stop moving ahead. The company is
responding to a wide range of customers’
requirements through research and development at the Technology Development
Center, which was established in Japan
in 2014. It also aims to expand its business in December 2023, centering on
agricultural and forestry equipment, byutilizing its integrated manufacturingsystem in Thailand. “It is our job to help
companies commercialize their products.
We hope to continue to expand our technologies by leveraging our strengths inaccommodating requests that go beyond
drawing.” The goal is to become “a small
but world-leading company,” Nihon
Shinkan will continue to meet clientneeds by balancing specialization anddiversification, and promoting long-term
technological development.

IO

10resistance to metal corrosion. This laid
the foundation for Nihon Shinkan to
be one of the few companies in theindustry that handles the entire processfrom procurement of materials to metal
processing and surface treatment. Even
after his son took over the business in
2008, this thinking outside the box for
future business prospects has remained
strong. HOSONUMA says, “We do
our best to not turn down customer
requests,” he says, “and by taking onchallenges to meet their needs, newpossibilities are born. Recently, we haveeven begun assembling and packaging
products in-house.”

Understanding local production needs
with the aim of expanding revenues
and sales channels in Thailand

British company. That experience proved
extremely useful in its later advancement into the Thai market.
In September 2012, Nihon Shinkan
established its Thai plant in Ayutthaya
Province. Back then, there were hardly
any Japanese aluminum drawing companies with cutting-edge technologies
operating in Thailand. The deciding factors in choosing Thailand were a betterindustrial infrastructure than other
Southeast Asian countries, ease of
raw material procurement, and a goodlabor force. And with many Japaneseaffiliates located there, business opportunities could be expanded. According
to HOSONUMA, “The Japanese economy was in a slump due to the global
financial crisis triggered by the collapseof Lehman Brothers, making Thailand’svitality very attractive. The atmosphere
there was similar to that of Japan during
the post-war rapid economic growth era,and I acutely felt that the know-how we
had cultivated up to now would be put
to good use here.” The Thai factory celebrated its 10th anniversary in 2022, anda second factory was completed in 2023.
The company continues to expand its
market, centering on Japanese-affiliates.
Overseas expansion has given thecompany a broader view of the global
market through access to a great deal of
information that could not be obtainedin Japan alone. Clients would provide
information that is only known locallybecause “your company has a factory
overseas.” That is the big difference
between a company that has taken steps
forward, however small, and one that
only has the intention to do so.
While Nihon Shinkan does face issues
particular to small and medium-sizedenterprises such as developing global
human resources, it does not intend

AT

Aluminum is one of the lightest metals
in existence, and has outstanding corrosion resistance, electrical conductivity,
and thermal conductivity. It can reduce
the weight of components while maintaining the required strength, and canalso be fairly easily formed into complex
configurations used in various products.
These include AT spool valves (parts foradjusting hydraulic pressure in automobile automatic transmission systems),
components of automatic rear doors forvehicles, camera lens barrels, and photoconductor drums in copiers.
Headquartered in Niiza City, Saitama
Prefecture, Nihon Shinkan specializes
in aluminum processing, including thedrawing, processing, and surface treatment of aluminum pipes. Manufacturing
centers are located in its headquarters, Fukushima (Nishigo Village), andThailand. It has established an integrated manufacturing system to handle

the entire process from procurementof materials to product assembly using
advanced technological capabilities thathave won praise from the Japanese
government as “world-leading aluminum processing technology.” According
to its president, HOSONUMA Naoyasu,“Flexible technological skills and responsiveness are crucial in materializing ourclient’s ideas. Our company’s strengths
are our ability to deliver consistent quality
in mass production and to accommodate
needs for integrated manufacturing,which lowers total costs.” Since its foundation in 1967, the company has beenenhancing technologies that specialize
in drawing, in which the diameter andcross-sectional area of aluminum pipes
are reduced by passing them throughdrawing dies at room temperature.
However, if the company rested on its
laurels, its potential growth would eventually reach its limits. With this in mind,
in 1985 former President HOSONUMA
Tetsuo established Alma Co., Ltd., an
aluminum surface treatment plant for
hard anodic oxidation that improves

ambitious project in Antarctica to shedlight on Earth’s crustal movements and themechanism of climate change by drilling
deep into 1 million-year-old ice core andanalyzing the atmospheric components
found inside. Deeper ice core drilling was
made possible by a proprietary outercasing manufactured in 2003 by Nihon
Shinkan. This not only contributed to the
future of humanity, but also showed theworld Japan’s advanced technologicalcapabilities.
According to HOSONUMA, the company’s big turning point came with its
production of parts for cleaning tools.
Mass production requirements were met
with peak monthly shipments surpassing 1 million units. This advancement
into a new field was made possible by
the company’s reputation of having
successfully produced more than 2
million photoconductor drums a month(the third largest share in the world).
“Manufacturing per se is not difficult.
But it is a totally different matter when
you have to consistently make 500,000
to 1 million units a month while maintaining quality,” he says, recalling that
this experience broadened the perspectives of all the employees and helped
drive the company’s subsequent growth.

Loan Summary

Since March 2018, loan agreements have been signed with Nihon Shinkan’s Thai affiliate, NIHON SHINKAN (THAILAND) Co., Ltd.,for loans up to 99 million Thai baht (JBIC portion). Co-financed with the Musashino Bank and Saitama Resona Bank. This supports
the manufacturing and marketing of aluminum products in Thailand, and contributes toward maintaining and improving the international competitiveness of Japanese industry.

NOVEMBER 2023

JBIC TODAY

11

JBIC History

1985

vol.4

JEXIM’s functions expand as friction intensifies
Plaza Accord to Japan’s bubble economy

In 1985 the Plaza Accord was signed to adjust exchange rates, and Japan faced a sharp appreciation of the yen. At that time,
JBIC’s predecessor, the Export-Import Bank of Japan (JEXIM), played an integral part in resolving international trade friction.

Financeministersofthe G5 nations—France,
Germany, Japan, theU.K., and the U.S. met atthe Plaza Hotel in New
York on September 22,
1985. The agreement thatwas signed to reduce thestrength of the U.S. dollar
is known as the Plaza
Accord.
Photo: The New York Times/AFLO

As Japan’s trade surplus grew,
friction escalated into a trade war
After the second oil crisis of 1979, whichcaused rising prices and a deterioration of the balance of payments, earlymeasures taken to control inflation
returned Japan’s current account balance to surplus in 1981. The international
competitiveness of Japanese products,
which incorporated energy-saving andsemiconductor technologies, rose rapidly, increasing the trade surplus with
the U.S. by 2.5 times, from USD 13.3 billion in 1981 to USD 33.2 billion in 1984.
In turn, Western countries became very
critical of Japan, targeting the promotion of imports and opening of markets,and even structural changes for theJapanese economy and way of doing
business. This friction intensified to thepoint that in 1985 it came to be called theJapan-U.S. trade war.
Japan’s government worked to resolve
this with measures including active useof JEXIM’s functions in the implementation of emergency foreign currency loans
for imports, promotion of industry cooperation, and development of import loansystems. In 1984, the Export-Import Bankof Japan Act (JEXIM Act) was amended
as a measure to promote imports,
facilitating import financing such as
low-interest loans for product imports,
as well as making foreign corporations
eligible for import loans.
While Japan’s trade surplus expanded,

the U.S. in the early 80s confronted twin
fiscal and trade deficits, becoming a net
debtor nation in 1985. The Reagan administration, through its “Reaganomics”
economic policy, adopted a “small government” approach. And with its top priority
after the oil crisis being to overcome inflation, introduced high interest rates, which
in turn caused the dollar to appreciate. In
order to correct this excessive appreciationof the dollar through currency adjustments, the Plaza Accord was signed by
the G5 nations in September 1985.The yen
appreciated against the dollar by an annual
rate of around 20% in the three years after
the accord, going from 240 yen to thedollar just before the agreement, to 127
yen three years later.

Foreign direct investment surges,
stock and land prices soar
Japan then faced a recession caused bythis appreciation of the yen. In responseto the strong yen, foreign direct investment (FDI) grew at an unprecedented
rate—increasing annually by USD 10 to
20 billion from 1985 to reach a record
USD 67.5 billion in 1989. The Japanese
government also placed importance on
promoting FDI as a way to shape an internationally balanced trade and industrial
structure, and to contribute to the global
economy as a creditor nation. The JEXIM
Act was also amended in 1985 and 1989
to enhance support measures for FDI.
In addition, the government took
measures to expand domestic demand.

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The Bank of Japan also lowered theofficial interest rate (base rate) in stages,
and the economy recovered robustly.
However, against the backdrop ofexcessive liquidity arising from thecurrent account surplus, expectations ofcontinuous price rises led to an extraordinary surge in stocks and other assets.
The Nikkei Stock Average, which had
hovered around the 10,000 mark in 1985,rose sharply and hit an all-time high of
38,915 at the end of 1989.
But the asset bubble, which had
become detached from the real economy, burst after peaking in 1990. Banks
and businesses were left holding hugeamounts of bad debt and liabilities.
This was the start of Japan’s economic
stagnation.

Japan-U.S. economic friction
and JEXIM’s expanded functions
1981

April

Voluntary export restraint on
automobiles exported to the U.S.

1983 November U.S. President Reagan visits
Japan. Requests market
opening and deregulation.
1984 MayJEXIM Act amended (expansionof import loans)1985 June

JEXIM Act amended(development of overseas
investment loans, etc.)
September Plaza Accord

1989 June

JEXIM Act amended (creationof investment function, etc.)
December Nikkei Stock Average reaches
all-time highInstagramThis printed material uses
vegetable oil ink, which
includes soybean oil ink.