News & Updates

Releases

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

Aug 08, 2013

-Key Points-
  1. World trade and investment was low in 2012, while the world economy is predicted to remain at the same level in 2013
  2. Japan’s trade balance ended in the red for the second consecutive year
  3. Japanese outward FDI increased for the second consecutive year, and investment toward ASEAN countries accelerated
  4. Entering the era of mega FTAs, Japan shows a strong presence
  5. FTA utilization by Japanese companies expanded
  6. Consumer markets of emerging and developing countries with great potential
  7. Risk management is important in tapping into emerging markets
  8. Strengthening approaches to agricultural, forestry, fishery and food exports
  9. Overseas business expansion of SMEs with great potential
  10. Strengthening support system to promote FDI in Japan

-Outline-
1. World trade and investment was low in 2012, while the world economy is predicted to remain at the same level in 2013
  • World trade remained at the same level as the previous year ($17.977 trillion, an increase of 0.02% over the previous year.) In terms of regions, Europe showed unfavorable results. In terms of products, chemicals and steel slowed. Direct investment around the world decreased for the first time in three years due to a drop in investment in advanced countries, especially in Europe ($1.3509 trillion, a decrease of 18.2% over the previous year).
  • The global economy remained at the same level due to influence from the prolonged European debt crisis and the stagnation of economic growth in emerging countries, and there is concern about further slowdown of economic growth in the future. It is predicted that emerging and developing countries will continue to lead the global economy.

2. Japan’s trade balance ended in the red for the second consecutive year
  • Exports from Japan in 2012 decreased compared with the previous year, ending in deficit for the second consecutive year. In addition to mineral fuel imports remaining high, the surplus in capital goods and parts also dropped (each △22.3 billion, △7.8billion).
  • In current-account terms, the income balance surplus increased(+3.6 billion). However, the trade deficit resulted in a significantly reduced trade surplus(△58.5 billion〔119.2⇒60.7 billion〕).

3. Japanese outward FDI increased for the second consecutive year, and investment toward ASEAN countries accelerated
  • Japanese outward FDI increased for two years in succession, with the second highest increase in history being recorded ($122.4 billion, an increase of 12.5% over the previous year). Japan’s total outward FDI stock exceeded $1 trillion. The rate of return on Japan’s outward FDI followed the level of the US, UK and China, showing that Japanese companies earned through investment.
  • While total inward FDI fell below Japanese outward FDI for two consecutive years until 2011, inward FDI exceeded outward FDI in 2012 because of the favorable movement of FDI from Asian countries ($1.761 billion).
  • On the back of increasing China downside risk, Japanese corporate investment in ASEAN has accelerated in 2013, a clear of difference from investment in China.

4.Entering the era of mega FTAs, Japan shows a strong presence*
  • Competition in FTA network planning and establishment has become intensified. In addition to TPP negotiations, negotiations for other mega FTAs have begun in rapid succession, including the EPA/FTA between Japan and the EU, the Regional Comprehensive Economic Partnership (RCEP) and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU.
  • Japan participated in negotiations for the EU-Japan accord, RCEP and TPP. These three mega FTAs account for 80% of the world economy and greater than 60% of the world’s population. If Japan becomes a party to the agreements, it would increase its FTA coverage from 19% to 74%.

5. FTA utilization by Japanese companies expanded
  • Utilization of FTAs (EPAs) to which Japan is a party increased. However, FTA utilization by SMEs remained at half the rate of large-scale companies.
  • In addition to FTAs in East Asia, FTAs were entered into by the US and Korea, by the EU and Korea, and utilization of FTAs between third countries by Japanese-affiliated overseas companies has expanded.

6. Consumer markets of emerging and developing countries with great potential
  • The consumer market size in emerging/developing countries was 3.7 times that of Japan. The combined consumer markets of China and India were approximately the same size as Japan. The combined consumer markets in China, India and ASEAN countries totaled 1.4 times that of Japan. As the penetration rate for consumer durables remains low for emerging and developing economies, there is an opportunity for Japanese companies to expand.
  • There are 45 cities in China with a per-capita GRP exceeding $10,000 (Total population: 237million). There are 9 cities with populations greater than 10 million and per-capita GRP below $10,000. Among ASEAN countries, there are cities with big consumer market like Bangkok (Population: 6.9million, per-capita GRP:$14,919), Jakarta (9.6 million, $9,871), and Ho Chi Minh(7.8 million, $3,179).

7. Risk management is important in tapping into emerging markets
  • As the number of Japanese companies entering emerging countries increases, business risks have been identified.
  • It is essential to secure as many sources of information on risk as possible since it is important to have information on risk management.
  • There are some cases in which human rights issues have arisen despite the intention of companies that have entered emerging countries without established legal systems. It is also necessary for SMEs to consider CSR activities.

8. Strengthening approaches to agricultural, forestry, fishery and food exports
  • The Japan Revitalization Strategy sets a target for expanding the export of agricultural, forestry, fishery and food products to \1 trillion by 2020. JETRO supports the improvement of skills of export beginners and promotes Japanese food to overseas buyers and individuals involved in the restaurant business.
  • Because of policy recommendations to the government by JETRO in June 2012, there is a movement toward the improvement of food safety regulations in preparation for the early approval of HACCP regulations for fish and fishery products.

9. Overseas business expansion of SMEs with great potential
  • In FY2011, 0.9% of Japanese SMEs possessed an overseas subsidiary. According to JETRO’s research, more than 60% of SMEs that are interested in expanding business globally have the intention of expanding overseas business.
  • The Japan Revitalization Strategy also focuses on overseas expansion of medical industry. It sets a target to capture 5 trillion yen worth of medical market in emerging countries by 2030.
  • Many European SMEs have high shares in niche markets.
  • The Japan Revitalization Strategy sets a target to double SMEs 2010 exports by 2020. As part of the effort, JETRO started a project to support 1,000 SMEs in expanding business overseas.

10. Strengthening support system to promote FDI in Japan
  • Japan’s inward FDI stock remains low compared to other countries. Issues such as high business costs are pointed out as obstacles to investing in Japan.
  • Many countries have an organization providing one-stop support services to promote FDI. JETRO is strengthening comprehensive support for foreign companies to invest in Japan.
  • JETRO to contribute to increasing the number of foreign visitors by promoting investment of tourism-related services in Japan.

For more information, please contact:

Mr. Kajita, Mr. Yoneyama, Mr. Yasuda, Mr.Suzuki, Ms.Ago
International Economic Research Division
Tel: 03-3582-5177