Exporting to Japan

Australia’s partnership with Japan is strong and mature, providing a solid foundation for Australian exporters seeking to enter the Japanese market.

Entering any new market can be daunting, and Japan’s local language and cultural differences may be preventing SMEs from considering the great opportunities Japan holds for many Australian businesses.

The information contained in this guide should help you answer the following questions:

9 What is the economic and political environment for doing business in Japan?

9 What opportunities are there for my business in Japan?

9 What do I need to be aware of when entering Japan? Are there risks to doing business there?

9 How should I go about entering the Japanese market?

9 What is the Japan-Australia Economic Partnership Agreement and can it benefit my business?

Exporting to Japan

Export relationship▪ Japan is our second largest export destination and trading partner

▪ Australian exports to Japan were worth US$50 billion in 2014

▪ Australian investment in Japan was worth A$70 billion in 2014, which is equivalent to four per cent of Australia’s foreign investment portfolio

▪ Japan is Australia’s fourth-largest investor, with an investment worth around A$175 billion at the end of 2014

Economic climate▪ Japan is the world’s third largest economy after the US and China

▪ Japan is a highly industrialised market economy with a very high per-capita income and a well-educated workforce

▪ However, economic growth is weak compared to its advanced economy peers, with growth averaging less than one per cent over the last two decades

▪ The fallout from Japan’s asset price bubble in the late 1980s, a declining population, weak productivity and greater competition from other high tech manufacturers have weighed on GDP growth

▪ Japan’s Prime Minister has ramped up fiscal stimulus and delivered unprecedented monetary easing in an attempt to end deflation and lift growth

Political climate▪ The World Bank ranks Japan in the top quartile in all areas of governance

▪ A free trade agreement between Australia and Japan entered into force in January 2015

▪ The agreement will allow more than 97 of Australian exports preferential treatment or duty free access into Japanese markets

What is the economic and political environment for doing business in Japan?

“ 64 per cent [of Australian international businesses] expect business in Japan to get better, pointing to a generally positive outlook on the country.”

Australian International Business Survey 2015

Find out more:Find more detailed information about Japan’s economic and political climate here: http://www.exportfinance.gov.au/education-and-tools/country-profiles/asia/japan/

Australia has a very strong relationship with Japan, and the size and proximity of the Japanese market makes it a promising destination for Australian SMEs.

Exporting to Japan | September 2015

Japan’s population of approximately 127 million makes it one of the world’s largest consumer markets. High levels of disposable income and demand for premium, high-end goods and services provide some great opportunities for Australian exporters.

What opportunities are there for my business in Japan?

“ Japan is the sixth most important market for Australian international SME businesses.” Australian International Business Survey 2015

Mining▪ Japan has few natural resources of its own and Australia is a critical exporter of minerals and

energy to the country

▪ In 2014, Australia’s major exports to Japan included LNG (approx A$14 billion), coal (A$11.9 billion), iron ore (A$8.4 billion) and copper ores and concentrates (A$1.6 billion)

Agriculture▪ Japan’s agricultural sector is heavily protected but imports of produce have steadily increased

▪ Japan imported A$4.2 billion worth of agricultural products from Australia in 2014, with Japan being Australia’s largest export market for beef, fish, fruit and vegetable juices, animal feed and dairy products

▪ The demand for Australia’s agricultural products reflects our agricultural industry’s strong reputation for quality, environmental sustainability and food safety, all of which are highly valued in the Japanese market

Services▪ Service exports to Japan were worth A$2 billion in 2013-2014, of which 58 per cent was from travel

▪ Japan is Australia’s fifth largest tourism market behind China, US, UK and New Zealand

▪ The rapid ageing of Japan’s population is expected to create future opportunities for exporters of health and welfare goods and services

Exporting to Japan | September 2015

Japan’s business climate is generally on par with most other advanced economies. Australia’s International Business Survey 2015 asked over 1,200 Australian internationally-active businesses about potential barriers to doing business in Japan:

What do I need to be aware of when entering Japan? Are there risks to doing business there?

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“ Their attention to detail and their quality control [in Japan] is a much higher standard than maybe we are used to in Australia. So making sure that you adapt to their requirements is one major challenge.”

John Cassegrain, Cassegrain Wines, NSW-based wine exporter

Local language, culture and/or business practices▪ A high proportion of Australian businesses stated that the local language and culture

is the biggest barrier to doing business in Japan

▪ English is not widely spoken in business in Japan – an interpreter is usually required

Payment issues▪ Common methods of payment in Japan tend to depend on the product, quantity

and relationship established between the two partners

▪ Advance payment is generally preferable and may be possible for some exports to Japan

Protection of intellectual property rights▪ Protecting intellectual property is an important consideration in all markets

▪ Japanese companies are experienced in this area and understand the need for confidentiality in the early stages of setting up an export relationship

Austrade, the Australian Government’s trade and investment agency, provides more information on some of the potential risks to doing business in Japan and how to mitigate them.

Understanding local regulations▪ The World Bank’s ‘ease of doing business’ gauge ranks Japan 29th out of 189 economies

▪ Paying tax can be significantly harder in Japan relative to other OECD nations – seeking the advice of a local accountant or tax adviser can help

Regulations that favour local firms▪ Potential exporters to Japan should not be deterred by a perception of heavy

regulations applying to foreign firms and imports

▪ Where formal restrictions do exist, the Australian Government has recently signed a free trade agreement with Japan to help remove the remaining barriers

Exporting to Japan | September 2015

Austrade provides guidance on a range of steps that Australian SMEs looking to export to Japan can take to help make their transition as easy as possible. Some of these include:

How should I go about entering the Japanese market?

Develop strong relationships▪ Developing strong relationships is crucial

to potential Japanese partners you may be looking to do business with

▪ Committing to a valued partnership is just as important as a legal contract in establishing a successful export relationship

Tap into expert support▪ Austrade, the Australian Government’s trade

and investment agency, provides a range of services for Australian companies seeking to grow their business in Japan

▪ Austrade provides advice and support to Australian businesses and can also help you identify possible partners for your business through its network of contacts

Build a local network▪ The Australian International Business Survey

2015 found that Australian SMEs are most likely to service their Japan market directly from Australia (61 per cent)

▪ This model of going to market ensures you can retain complete control over your export operation, but does mean you may need in-country partners to provide support

▪ Establishing a local network of partners can be invaluable when things go wrong and you need people on the ground to help out

Appreciate cultural differences▪ Business etiquette in Japan is important – the

Japanese place great importance on respect and social rank

▪ For example, seating arrangements are used in formal business meetings – the most important guest sits furthest from the door and the host sits closest to the door

▪ Knowing the local social customs will help ensure you start your export relationships off on the right foot in Japan

“ You’ve got to have a good network of either agents or in-country personnel to support you [if you do not have a presence in the market].”

Aaron Begley, Matrix Composites and Engineering, WA-based manufacturer

Exporting to Japan | September 2015

Direct benefits for exporters▪ On full implementation, 97 per cent of Australian exports to Japan will be duty free

▪ Almost all resources, energy and manufacturing exports will be duty free

▪ A number of agricultural industries such as beef, fruit and vegetables will receive gradual tariff reductions

Indirect benefits for exporters▪ Australian service providers will be treated the same as Japan service providers – they will not be

required to have a representative office or be resident in Japan to provide services

▪ Australian financial service providers can provide advice to the Japanese market without having to open a full commercial presence

▪ Australian law firms have guaranteed access to the Japanese legal services market

▪ Australian education providers have guaranteed access to Japan’s higher and vocational/technical education services market

▪ With some threshold exceptions, Australian exporters will be treated the same as Japanese suppliers in respect of Government procurement

Requirements▪ In order to obtain these benefits, the goods being exported into Japan must be of Australian or

Japanese origin

▪ A certificate of origin is required, which can either be self-completed or granted by an authorised body upon application

Japan and Australia’s bilateral economic relationship was further strengthened by the signing of the Japan Australia Economic Partnership Agreement (JAEPA) in July 2014. JAEPA entered into force in January 2015 provides Australian exporters with various advantages over their international competitors.

What is the Japan-Australia Economic Partnership Agreement and can it benefit my business?

“ [We’re] hoping the free trade agreement with Japan will open up the market from a cost perspective and therefore become competitive for us versus multi-national import brands and domestic players.”

Survey respondent, Australia’s International Business Survey 2015

Find out more:For detailed information, please visit: http://dfat.gov.au/trade/agreements/jaepa/Pages/japan-australia-economic-partnership-agreement.aspx

Exporting to Japan | September 2015

Cassegrain is a multi-award winning winemaking company based in Port Macquarie, NSW, which is growing its exports to Japan and China in response to high demand.

Having established the business in 1984, Cassegrain started exporting in 1987 in response to specific demand from a Japanese buyer. Since then, the company has been successfully exporting its wines to Europe, UK, North America and Asia for a number of years.

Japan remains its main export market, representing around three quarters of its export products. Currently, exports represent 30 per cent of Cassegrain’s sales but the company is aiming to increase that to 70 per cent in five years’ time.

Faced with growing demand from buyers in Japan and China, Cassegrain was worried about matching product supply to the purchase orders it was receiving.

The wine industry has a significant lag phase, as the harvest cycle doesn’t necessarily align with demand for product and the lead time from production to supply can vary significantly. This means that Cassegrain has to invest in manufacturing its wines before receiving orders, to have sufficient product to fulfil a contract when it comes in.

In order to realise its potential growth in Japan and China, Cassegrain needed working capital to pay suppliers and keep production running smoothly.

Export Finance Australia provided Cassegrain with a A$500,000 export contract loan to enable the company to deliver on its growing export contracts in Japan and China by investing in its manufacturing capacity.

An Australian success story in Japan.

“ Export is a fantastic future for the Australian wine industry and naturally the free trade agreement recently signed with Japan is a great boost and provides opportunities to take advantage of.”

John Cassegrain, Cassegrain Wines, NSW-based wine exporter

Cassegrain WinesBottling success

Exporting to Japan | September 2015

For more information, contact us on1800 093 724 or visit www.exportfinance.gov.au

Australia has a strong relationship with Japan, built around mutual benefits of two complementary economies. Though Japanese

growth is slow, its large population represents a significant consumer market bolstered by high disposable income.

Australian exporters are well placed to take advantage of this strong consumer demand, particularly after the recent introduction of the

Japan-Australia Economic Partnership Agreement, which lifts a number of barriers to doing business in Japan.

Being aware of the potential difficulties and risks around entering the Japanese market will help ensure Australian exporters are well-

prepared and positioned for overseas growth in Japan.

If you would like further information or to have a discussion about funding solutions for your export or export-related business or an

overseas direct investment, please call 1800 093 724 or send us an enquiry via our website and we will come back to you soon.

The information in this document is published for general information only and does not comprise advice or a recommendation of any kind. A person or entity should seek their own independent legal and financial advice. While Export Finance Australia endeavours to

ensure this information is accurate and current at the time of publication, Export Finance Australia makes no representation or warranty as to its reliability, accuracy or completeness. To the maximum extent permitted by law, Export Finance Australia will not be liable to you or any other person for any loss or damage suffered or incurred by any person arising from any act, or failure to act, on the basis of any

information or opinions contained in this document.

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