Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement), as mentioned in the article Japan and India Reach a Broad EPA. This has much significance to the both countries while at the same time challenges lie ahead.
Top 5 international trade items in 2009
(Source: Nikkei that acquired the information from JETRO (Japan External Trade Organization), translated and edited by the author)
From Japan to India
Item / % of total trade
Iron and steel / 13.0
Components of automobiles / 6.4
Metal working machinery / 4.3
Power engines / 4.1
Organic processed products / 4.0
From India to Japan
Item / % of total trade
Petroleum products / 24.4
Iron ore / 12.1
Non-metal mineral manufacture / 7.5
Sea foods / 7.5
Organic processed products 5.8
1. What does the EPA mean to Japan?
The EPA means that that Japan is closing the gap between Korean in terms of condition of international trade. Korea has already concluded FTA (Free Trade Agreement) with India in January this year; therefore, opinion leaders of Japan such as Mr. Suzuki, CEO/Chairman and President of Suzuki Motors, were extremely worried that Japan has handicap in global competition. With the EPA between Japan and India, they assume that competitive condition for Japanese automobile and consumer electronics compared with their Korean counterparts will improve.
Lowering/minimizing of tariff means so much and should be beneficial to Japanese automobile and consumer electronics. This is because they rely control component and high-precision processing components on import from Japan although they has been making efforts in increasing use of local components to reduce cost because such components are extremely difficult to source locally. Local sourcing to reduce cost is vital to grow business in India where the price range of volume zone is below 1 million yen and price competition is extremely severe.
2. What does the EPA mean to India?
The EPA means that India has made a progress in expanding their business in pharmaceutical (generic drugs). This is because Japan seems to have compromised to study to accelerate approval procedure of generic drugs in Japan. Currently it is difficult for Indian pharmaceutical companies to expand their business in Japan because of the slow speed of approval, which partially attributes to the fact that Japanese doctors and patients request high standard of quality. Some experts expect that cases in which Indian pharmaceutical companies acquire Japanese counterparts will increase in the future.
3. What are the challenges for Japan?
Japan needs to further negotiate with larger countries for EPA agreement such as China, Korea and Australia and catch up with Korea in developing and executing EPA strategy. Japan has only concluded EPA with countries and regions covering 16.5% of the total trade, and it is only 36.5% even if countries and regions in negotiation are included. On the other hand, Korea has already signed FTA with the U.S. and EU, and if countries and regions in negotiation are included it would be as much as over 60%.
The country that Japan seems to be able to agree to conclude EPA in the near future is Peru, whose negotiation is in progress. Mr. Okada, Minister of Foreign Affairs, said that Japan would like to start negotiation with EU and Korea and conclude EPA following agreement with India; however, there is no concrete EPA strategy.
4. Why Japan is behind in FTA / EPA?
It is because Japan has not been able to take bold step for market liberalization in agriculture. This is why in the EPA agreed with India main agriculture products such as rice have been excluded from items whose tariff will be abolished. However, lowering tariff of agriculture products would be inevitable if the Japanese government is to set a target of concluding EPA with the agriculture giants such as the U.S., China and Australia in the basic EPA policy to be drafted by November this year.
Scope of discussion topic of liberalization may expand beyond agriculture. Recently there have been some cases in which liberalization in items of non-tariff barriers such as standardization of safety criteria of products. What is required to initiate EPA is strong leadership of the government (ruling party) to convince stakeholders.
2010年9月12日日曜日
Japan and India Reach a Broad EPA
Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
2010年7月19日月曜日
Turning Point in Japan’s Trade with China
Osaka – Monday, July 19, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japan’s trade with China is at the verge of turning point and may even abolish trade deficit with China to make it trade surplus. With low cost made in China products imported to Japan, trade deficit with China had been around 2 to 3 trillion per year since the middle of 1990s but for 2009 it has shrunk to approximately 480 billion yen.
This is because of the increase in purchasing power of China accompanied by economic growth. There are also qualitative changes in trade such as automobile trade started to drive export from Japan to China. These indicate that China is transforming from “factory of the world” to “market of the world”, and China’s presence as both production site and consumption market is drastically increasing.
If Japanese companies succeed to penetrate Chinese consumption market, it may not only contribute to abolishing trade deficit with China making it trade surplus but also to optimizing total trade imbalance.
1. What is the recent trend of Japan’s trade with China?
1) Analysis and estimation by Barclays Capital
Balance of trade with China for January – March 2010 was surplus, excluding seasonal factors, is the conclusion of their analysis. When they estimated by adding their original adjustment of seasonal factors to trade statistic data issued by Ministry of Finance, trade balance with China is 740 billion yen per year in surplus, although it had been in deficit for the past 21 years since October – December 1988.
2) Indication of data issued by Ministry of Finance, the primary source of Barclay Capital’s analysis
Data issued by Ministry of Finance also reveals changes in Japan’s trade with China. In 2009 with worldwide economy recession triggered by Lehman's fall, import from China to Japan decreased by 16% from 2008, when export to China from Japan decreased only by 4% from 2008.
There are 2 points that needs to be taken into note of. One is that China’s recovery which was earlier than developed countries minimized the trade decreased. The other is that trade of finished products such as automobile and high tech equipments increased prominently.
Percentage of export of transportation equipments (passenger cars, trucks etc.) increased by 3% from 2008 to 10.12% in 2009. This is about double from 5.15% in 2004 when it was at one of the lowest level because of local production by Japanese companies (in the midst when China was called “factory of the world”).
Similarly, for January – March 2010, export of video equipments such as video cameras were 1.6 times of January – March 2009, and export of digital cameras especially of high end products increased by approximately 80%.
2. Why Japan’s trade with China had been in deficit for a long time?
Primary reason why Japan’s trade with China had been in red for a long time is the fact that Japanese companies positioned China as production country/site instead of consumption market with its low labour cost. Japan’s key industry had been clothes until 1990s and shifted to electronics after 2000; however, their business flow had remained the same. Raw materials and components were exported to China from Japan and finished products produced were imported from China to Japan. This means that the value added in China by production equals trade deficit.
3. How has Japan’s trade with China changed (or started to change) today?
However, finished product drives export from Japan to China today. According to JANA (Japan Automobile Manufacturers Association, Inc.), approximately 96,400 cars were exported January – May 2010, which is 50% increase from January – May 2009. Passenger cars including Toyota’s LEXUS constitute approximately 89,600 of them. Japanese companies had been preserving domestic production for these kinds of high end, value-added products and Chinese consumers are aggressive in buying such products today.
This is because China’s purchasing power has been increasing with high economic growth when Japan’s purchasing power has been decreasing with low birthrate combined with aging population and low growth in average income. With disparity in economic growth of the two countries, it is quite possible that scenario of Japan’s trade with China turning from deficit to surplus becomes a reality.
4. How has China’s purchasing power been drastically increasing? How is it estimated to continue increasing and why?
Consumer spending amount of China has been drastically increasing and it is estimated be more than that of Japan in 2020. According to the white paper of international trade and industry for 2010, China’s consumer spending is only 1.53 trillion USD for 2008, which is less than that of 60% of Japan’s. However, in 2010 it is estimated to drastically increase to 5.570 billion USD, which is 3.6 times that of 2008. This is incredible because this surpasses Japan’s consumer spending which is 3.61 billion USD.
China’s consumption market is estimated to continue increasing drastically even with decrease in population similarly to Japan, supported by increase in middle income households. China’s middle income households whose annual income is between 5,000 and 35,000 USD is estimated to almost double from 500 million people in 2010 to 9700 million people in 2020.
An expert in international trade views on recent trends that seem negative factors for employers support such estimation and outlook that China’s import from Japan is likely to continue to increase. He views that the recent repeated labour disputes and increase in labour cost are in fact increase in income for employees, meaning increase in purchasing power of consumers (= employees). Therefore he concludes that exports of finished products from Japan to China would continue to increase despite decrease in total population.
5. What are upcoming challenges and risks for Japanese companies?
On-the-spot challenge and risk for Japanese companies is increase in labour cost of China, but their primary upcoming challenge would be to find new business opportunites in China. Also, in leveraging China’s internal demand, it is quite possible that local production in China becomes more active meaning stable export of raw materials and components from Japan to China is also inevitable.
Leveraging Chinese consumption market is a common challenge for all developed countries of matured economy. This means that global competitiveness and speed of Japanese companies would be vital to expand export to China. This is why a consultant of BCG (Boston Consulting Group) says that Japanese companies would not succeed entering and penetrating Chinese market unless they increase market share in China at an early stage.
On the other hand, if Japan’s trade with China becomes in surplus, it is possible that a new view in foreign currency exchange might emerge, which is a risk for Japanese companies. Developed countries that have been requesting revaluation of RMB market with the objective of taking corrective action imbalanced global economy but they may regard RMB appropriate against yen as it is.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japan’s trade with China is at the verge of turning point and may even abolish trade deficit with China to make it trade surplus. With low cost made in China products imported to Japan, trade deficit with China had been around 2 to 3 trillion per year since the middle of 1990s but for 2009 it has shrunk to approximately 480 billion yen.
This is because of the increase in purchasing power of China accompanied by economic growth. There are also qualitative changes in trade such as automobile trade started to drive export from Japan to China. These indicate that China is transforming from “factory of the world” to “market of the world”, and China’s presence as both production site and consumption market is drastically increasing.
If Japanese companies succeed to penetrate Chinese consumption market, it may not only contribute to abolishing trade deficit with China making it trade surplus but also to optimizing total trade imbalance.
1. What is the recent trend of Japan’s trade with China?
1) Analysis and estimation by Barclays Capital
Balance of trade with China for January – March 2010 was surplus, excluding seasonal factors, is the conclusion of their analysis. When they estimated by adding their original adjustment of seasonal factors to trade statistic data issued by Ministry of Finance, trade balance with China is 740 billion yen per year in surplus, although it had been in deficit for the past 21 years since October – December 1988.
2) Indication of data issued by Ministry of Finance, the primary source of Barclay Capital’s analysis
Data issued by Ministry of Finance also reveals changes in Japan’s trade with China. In 2009 with worldwide economy recession triggered by Lehman's fall, import from China to Japan decreased by 16% from 2008, when export to China from Japan decreased only by 4% from 2008.
There are 2 points that needs to be taken into note of. One is that China’s recovery which was earlier than developed countries minimized the trade decreased. The other is that trade of finished products such as automobile and high tech equipments increased prominently.
Percentage of export of transportation equipments (passenger cars, trucks etc.) increased by 3% from 2008 to 10.12% in 2009. This is about double from 5.15% in 2004 when it was at one of the lowest level because of local production by Japanese companies (in the midst when China was called “factory of the world”).
Similarly, for January – March 2010, export of video equipments such as video cameras were 1.6 times of January – March 2009, and export of digital cameras especially of high end products increased by approximately 80%.
2. Why Japan’s trade with China had been in deficit for a long time?
Primary reason why Japan’s trade with China had been in red for a long time is the fact that Japanese companies positioned China as production country/site instead of consumption market with its low labour cost. Japan’s key industry had been clothes until 1990s and shifted to electronics after 2000; however, their business flow had remained the same. Raw materials and components were exported to China from Japan and finished products produced were imported from China to Japan. This means that the value added in China by production equals trade deficit.
3. How has Japan’s trade with China changed (or started to change) today?
However, finished product drives export from Japan to China today. According to JANA (Japan Automobile Manufacturers Association, Inc.), approximately 96,400 cars were exported January – May 2010, which is 50% increase from January – May 2009. Passenger cars including Toyota’s LEXUS constitute approximately 89,600 of them. Japanese companies had been preserving domestic production for these kinds of high end, value-added products and Chinese consumers are aggressive in buying such products today.
This is because China’s purchasing power has been increasing with high economic growth when Japan’s purchasing power has been decreasing with low birthrate combined with aging population and low growth in average income. With disparity in economic growth of the two countries, it is quite possible that scenario of Japan’s trade with China turning from deficit to surplus becomes a reality.
4. How has China’s purchasing power been drastically increasing? How is it estimated to continue increasing and why?
Consumer spending amount of China has been drastically increasing and it is estimated be more than that of Japan in 2020. According to the white paper of international trade and industry for 2010, China’s consumer spending is only 1.53 trillion USD for 2008, which is less than that of 60% of Japan’s. However, in 2010 it is estimated to drastically increase to 5.570 billion USD, which is 3.6 times that of 2008. This is incredible because this surpasses Japan’s consumer spending which is 3.61 billion USD.
China’s consumption market is estimated to continue increasing drastically even with decrease in population similarly to Japan, supported by increase in middle income households. China’s middle income households whose annual income is between 5,000 and 35,000 USD is estimated to almost double from 500 million people in 2010 to 9700 million people in 2020.
An expert in international trade views on recent trends that seem negative factors for employers support such estimation and outlook that China’s import from Japan is likely to continue to increase. He views that the recent repeated labour disputes and increase in labour cost are in fact increase in income for employees, meaning increase in purchasing power of consumers (= employees). Therefore he concludes that exports of finished products from Japan to China would continue to increase despite decrease in total population.
5. What are upcoming challenges and risks for Japanese companies?
On-the-spot challenge and risk for Japanese companies is increase in labour cost of China, but their primary upcoming challenge would be to find new business opportunites in China. Also, in leveraging China’s internal demand, it is quite possible that local production in China becomes more active meaning stable export of raw materials and components from Japan to China is also inevitable.
Leveraging Chinese consumption market is a common challenge for all developed countries of matured economy. This means that global competitiveness and speed of Japanese companies would be vital to expand export to China. This is why a consultant of BCG (Boston Consulting Group) says that Japanese companies would not succeed entering and penetrating Chinese market unless they increase market share in China at an early stage.
On the other hand, if Japan’s trade with China becomes in surplus, it is possible that a new view in foreign currency exchange might emerge, which is a risk for Japanese companies. Developed countries that have been requesting revaluation of RMB market with the objective of taking corrective action imbalanced global economy but they may regard RMB appropriate against yen as it is.
登録:
投稿 (Atom)