Austrade Briefing on Japan and JAEPA Opportunities Leonie Muldoon Senior Trade Commissioner Tokyo and Country Manager Japan October 2014
GDP Comparison of Japan s regions with some countries US$ Billions 2009 Source:IMF World Economic Outlook Database (April 2012) Prefectural Economic Almanac (Feb 2012) Economic and Social Research Institute, Cabinet Office
Asia s growing middleclass is walking through a Japanese shop door No of UniQlo Stores in Japan-841 China-355
The opportunity Number of middle class consumers in 2009, and forecast in 2030 Source: Kharas and Ghertz, 2010
Japanese Asian Outbound Foreign Direct Investment 2009-2013
Overseas Profits Increasingly Important for Major Japanese Companies As of April-June each year Source: Nikkei Asian Review, 13 September 2014
Asia s Growing Middle-Class is walking through Japanese Shop doors Source: Nikkei Asian Review, July 24-30, 2014 (P9)
Abenomics Scorecard Approval Rating March 2012 73% Approval Rating October 2014 53%
Abenomics Scorecard -June 2014 Performance Results 2012 2013 2014 Nov Mar Jun Sept Dec Mar June Nikkei Stock Average (Yen) 9,466 12,398 13,677 14,456 16,291 14,828 15,162 Expected Inflation Rate 0.7% 1.3% 1.1% 1.6% 1.7% 2.4% 2.3% Exchange Rate (US$1 = Yen) 82.5 94.22 99.14 98.3 105.2 103.2 101.33 Long-term Yield (new 10 yr JGB) 0.72% 0.55% 0.85% 0.69% 0.74% 0.64% 0.57% CPI (excl. fresh food; yearon-year% change) -0.1% -0.5% 0.4% 0.7% 1.3% 1.3% 3.3% Household Income (real; year-on-year % change) 2.1% 1.8% 2.0% 0.9% -1.7% -3.3% Source: Bloomberg - Nikkei Stock Average, Exchange Rate, Long-term Yield ; Statistics Bureau - CPI, Household Income -6.6%
Abenomics Growth Strategy Opportunities Enhancement of Corporate Governance and introduction of Independent Directors Reforming Management of Public and Quasi-Public funds Abeducation Reinforcing the Workforce
Education Japanese Study Abroad Trend 2002-2013 20,000 19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source Department of Education and ABS Higher Education VET ELICOS Schools Non-award Grand Total
AbEducation Specific policy targets: Double the number of Japanese students (university and high school) studying overseas: 60,000 (2010)- 120,000 2020 Double the number of international students in Japan 135,000 (2013)- 300,000 (2020) 1,300 scholarships for short term school children Increase short-term University scholarships by 100% to 20,000 Increase funding for Study Abroad-US$90million
AbEducation Top Global Universities (2014-24) US$105 million program funding 13 top universities in world top 100 (research intensive) 24 others funded to lead internationalisation (increase international students, joint degrees)
Abenomics Growth Strategy Opportunities Developing New Growth Engine Industries Agriculture Sector Reform Promoting Innovation and Robot Revolution PPP/PFIs
A Tale of Three Cities First Year in which Adult Dippers outsold Baby Dippers in Japan- 2012
Japan Demographics 1970-2025
Estimated change in concentration of population 2010-2050 Note: 1km-mesh population is estimated by MLIT National and Regional Policy Bureau Changes in Population from 2010 to 2050 Increase Decline by 0-50% Decline by 50-100% Uninhabited Areas Source: Ministry of Land, Infrastructure, Transport and Tourism Grand Design 2050 paper
Population Demographics required to support social infrastructure 0-5,000-10,000-20,000-50,000-100,000-200,000-500,000- Retail Stores Hotels/Food and Beverage Services Life Style related Services 500 2,500 7,500 Restaurant Coffee Shop 77,500-92,500 275,000 Department Store 175,000 275,000 Large Scale Shopping Center Starbucks Cinema 87,500 175,000 Academic Research, Education/Study Aid Medical/Welfare Financial Institutions Services for Corporates Museum General Hospital Medical Clinic 5,500 27,500 500 8,500 27,500 Home Nursing Care Business 500 6,500 9,500 Post Office Bank 57,500 87,500 University 125,000 175,000 175,000 275,000 Private Nursing Home 42,500 125,000 Emergency Medical Care Center 57,500 77,500 Law Firm City Examples Utshinai in Hokkaido Sekigahara in Gifu Kumano in Mie Nagasaki Hagi in Okayama Source: Ministry of Land, Infrastructure, Transport and Tourism Grand Design 2050 paper; Population of Cities, Statistics Bureau 2010 Kamakura Nara Tokyo Osaka Nagoya
Demographic Driven Opportunities Rising affluent populations in Osaka and Tokyo demanding premium, unique products Market concentration provides a financially viable base for niche products Reverse Mortgage market Regionally focused businesses look to foreign investment as a road to survival (eg Residential construction companies)
Demographic Driven Opportunities The online and call-centre channels become more important (Est. 75% growth in next 5 years due to the decreased mobility of the ageing population. Reverse Mortgage Market Remote solutions for delivery of social services (health/education/cultural/elderly care) Remote Communication Solutions
Japan Public Debt per person- US$97,878 Greece Public Debt per person-us$26,738
Japanese Debt to GDP Ratio
Debt
Japanese Debt-Financial stability turns on domestic capital remaining in Japan and continuing to circulate
JAEPA Maximising the Opportunities Percentage of Australian Companies taking advantage of Bilateral FTAs- 19%
TOP 10 JAEPA TARGET COMMODITIES AGRICULTURIAL Beef/Beef Offal & Prepared Meat Dairy Products Wheat Barley INDUSTRIAL Non-Crude Petroleum Oils Coke and Semi-Coke Aluminium Unwrought Nickel Wine Nuts
Wine Source: WANDS Publishing Ltd, April 2014. Original source: Ministry of Finance Japan, Customs and Tariff Bureau Commodity Bulk Wine Bottled Wine Tariff 0% implementation 15%-0% over 7 Years
JAEPA Service Sector Opportunities (I) Service Sector JAEPA Impact Financial Services Cross-border access for Australian funds managers providing investment advice & portfolio management services. Right to participate in wholesale securities transactions Off-shore processing of financial data Legal Services Expedited registration procedures in Japan Opportunity to form Legal Professional Corporations Ongoing legal services cooperation agenda: -greater recognition of each other s lawyers -strengthening cooperation on provision of trans-national legal services in third countries
JAEPA Service Sector Opportunities (II) Service Sector JAEPA Impact Education Professional Services Japan Student Services Organization s (JASSO) overseas low-interest loans available to broader range of Australian education and training providers guaranteed visa access arrangements, including for spouses and dependents, to enter and stay in Japan. Telecommunications Greater certainty regarding: - allocation of spectrum - access to facilities, interconnection, submarine cable systems, leased circuit services, resale services - number portability and dialling parity
FTA Usage Source: FTAs: fantastic, fine or futile? The Economist Intelligence Unit Limited 2014 Based on a survey conducted in the 1Q of 2014 of senior executives from 800 companies in Australia and Asia.
Enemies of Success Complexity of the Terms Low understanding of benefits Supply challenges in prospective areas Lack of focus on the Market EPA boosted opportunities in other markets
% of Japanese FDI represented by Switzerland- 6.6% Australia- 0.6%
Overseas Corporate Representation in Japan 1400 1200 1000 800 600 400 200 0 USA Germany England France China Holland Italy Hong Kong Sweeden Denmark Australia Finland
Overalls
Cashing in on the Japan Opportunity Deepen understanding of and engagement in the market Exploit our Niche Develop Japan capable leaders Strengthen Commitment to in-market presence Build Brand Australia Awareness