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Japan in 2017: Economic Outlook & Trends, Status of Abenomics, and
JETRO's Role in Promoting FDI
March 2017
Ichiro SONÉChief Executive Director
JETRO Chicago
Copyright (C) 2017 JETRO. All rights reserved.
Copyright (C) 2017 JETRO. All rights reserved.
1.CURRENT STATUS: JAPANESE ECONOMY
1. Japanese Economic Data
2. Outlook of Japanese Economy
1.1 Japanese Economic Data
3
• Japan’s GDP is over 500 trillion yen. • “A leading world economy that boasts large-scale economic power.“
(Source: Cabinet Office)
Source: Gross domestic product 2015 (US dollars, Billions)World Development Indicators database, World Bank, 22 July 2016
Japan’s GDP is Ranked 3rd in the World
World Ranking of GDP
1
2
3
4
5
6
7
8
9
10
11
12
4,123 billion US$
Copyright (C) 2017 JETRO. All rights reserved.
Copyright (C) 2017 JETRO. All rights reserved. 4Source: Cabinet Office, "Report on Prefectural Accounts FY2013" (2016)
Japan’s local regions offer enormous and attractive markets. Even one region has national-level GDP.
Comparison of Regional GDP in Japan
Comparison of Japanese regional gross production (nominal, FY2013)(Unit: US$1 billion)
1.1 Japanese Economic Data
Copyright (C) 2017 JETRO. All rights reserved. 5
Prime Minister Abe announced his “New Three Arrows” policy in September 2015, which aims to create a society where the population is sustained at 100 million, and all members of society are active in the workplace, at home and in the local community.
Abenomics : Growth Strategy and Three Arrows
1st Arrow: Bold Monetary
Policy
3rd Arrow: Growth Strategy
that Promotes Private Investment
2nd Arrow: Flexible Fiscal Policy
Strong Economy
GDP of 600 trillion Yen
Productivity revolution, Increasing inward investment
Support for Child Rearing
Child care for all children
Raising fertility rate to 1.8
Social Security
Enabling pursuit of a career while caring for
elderly parents
A society where no one has to leave a career to provide
elderly care
“Three Arrows”
“New Three Arrows”
1.1 Japanese Economic Data
6
Aim to reach 600 trillion yen GDP by accelerating the positive economic cycle of (1) Boost Productivity; (2) Drive Innovation and Trade; and (3) Energize Corporate Activities.
Engines that Keep the Positive Economic Cycle Spinning
Copyright (C) 2017 JETRO. All rights reserved.
1.1 Japanese Economic Data
Copyright (C) 2017 JETRO. All rights reserved. 7
Since the launch of the Abe administration in December 2012, stock prices, Tankan DI, and unemployment data have all improved.
Abenomics Showing Good Results
Stock Prices(Nikkei Stock Average)
CPI Growth Rate(Less food (except alcohol)and energy, year-on-year )
Unemployment Rate
GDP(Real GDP (seasonally
adjusted))
Business Conditions(Tankan, current
situation, manufactures)
19,378.93 yen10 Feb 2017 (Closing price)
-1.2%2010
+0.3%2016
4.3%2012 average
Large firms -3Medium-sized -5
SMEs -12Survey in Dec 2012
Large firms 10Medium-sized 6
SMEs 1Survey in Dec 2016
10,230.36yenDec. 26, 2012
(Launch of the current administration
498.8 Trillion yen2012 (Before the launch of the
current administration)
521.8 Trillion yen2016 (Calendar year, 2/13)
2.9%2016 Q4 (Oct – Dec)
Copyright (C) 2017 JETRO. All rights reserved. 8
In the ”revitalization case” scenario of the government, which reflects the effects of the Economic
and Fiscal Policy, real GDP growth rate will be more than 2%, and more than 3% in nominal terms.
In the “baseline-case” scenario, the economy will only grow at its potential growth rate, and real
GDP growth rate will be a little less than 1%, and around 1.5% in nominal terms in the mid-long
term.
GDP Forecast - The Government’s Scenario
1.2 Outlook of Japanese Economy
2015-2018 real GDP growth rate outlook
Japanese Government : Cabinet Office, “Economic and Fiscal Projections for Medium to Long Term Analysis(Executive Summary)” FY2016 (2017/01/25 Council on Economic and Fiscal Policy), “Basic Policy on Economic and Fiscal Management and Reform 2016” (Jun. 2, 2016)
IMF : “World Economic Outlook Database “, World Bank: “Global Economic Prospects”
Unit: %
Copyright (C) 2017 JETRO. All rights reserved. 9
In 2017, Japan’s GDP growth rate is estimated at around 1.0 – 1.2%.
GDP Forecast by Private Think Tank
Estimated quarterly real GDP growth rate (quarterly, annual rate, seasonally-adjusted)
EstimateActual
Source: Compiled from the data of Japan Center for Economic Research “ESPForecast Survey,” Feb. 2017http://www.jcer.or.jp/esp/result.html
1.2 Outlook of Japanese Economy
Unit: %
2.IMPROVEMENT OF THE BUSINESS ENVIRONMENT
1. Regulatory Reform and Related Projects
2. Measures for “Invest Japan” Promotion
3. Evaluation of the Japanese Market by
Foreign-Affiliated Companies in Japan
10
Copyright (C) 2017 JETRO. All rights reserved. 11
Reduced corporate tax rate down to a range of the twenties in FY 2016. It was lowered about 7% in the three years.
Reduction of Effective Corporate Tax Rate
2.1 Regulatory Reform and Related Projects
Japan
Lowered the rate to 20's%
Source: Website of the Ministry of Finance and "FY 2016 Tax Reform Outline"
(as of April 2016)
Life Science (Regenerative Medicine)
➢ Increasing the speed of review process of advanced health care (regenerative medicine, medical devices)
(revised Pharmaceutical Affairs Act)
✓ Elimination of drug lags and device lags
➢ “Fast Track Designation System”(Trial operation started in April 2015)
✓ Prioritized approval review for innovative medical products/equipment (early commercialization)
➢ “Medical Treatment Based on Patient’s Request” system(Started in April 2016)
✓ Enabled the use of medical products that are not yet approved in Japan for a combination of insured and uninsured
treatment
➢ Create a new system for combining insured and uninsured medical services
✓ Allow patients to receive prompt advanced medical care at preferred medical institutions upon request
➢ Accelerate the practical usage of regenerative medicine(November 2014)
✓ Allow outsourcing of cell culturing and processing. Enact an adaptive licensing approval system, making Japan the
leading country in the practical usage of regenerative medicine
Energy
➢ Full liberalization of the energy retail market(April 2016)
✓ Foreign companies can now enter the market(schedule: legal separation of power transmission/distribution (April
2020), removing restrictions on power retail price (after April 2020))
➢ Gas Market
✓ Full liberalization of the gas retail market (April 2017)
The government is making progress in the regulatory reform in various sectors, such as energy and life science, and this is creating new business opportunities for foreign companies.
Examples of business opportunities created by regulatory reform
12
Business Opportunities Created by Regulatory Reform
<Regenerative Medicine/Energy>2.1 Regulatory Reform and Related Projects
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13
Introduction of conditional/time limited approval system to obtain early authorization as far as, about the regenerative medical product using a human cell, its efficacy is presumed and safety is confirmed (Re-application attached outcome within a certain period of time is required). For business of regenerative medicine products, it's expected to accelerate to start business and decrease a level of financial risk for R&D by early retrieval of investment.
Expedited Approval System for RegenerativeMedical Products for Early Implementation
Copyright (C) 2017 JETRO. All rights reserved.
The regenerative medicine product market such as cell-processed products is mainly composed of Japanese companies. Meanwhile, the regenerative medicine-related product market such as equipment, devices, consumables, related services, etc. for regenerative medicine has attracted many foreign-affiliated companies.
※Note: the listed above are major categories and players, but not limited within those. (Source) Composed by "Report of Implementation and Industry of regenerative medicine" and "Survey report regarding related industry of regenerative medicine" by METI
Regenerative Medical Products Equipment Consumables
Japan Tissue Engineering (regenerative skin and cartilage)Terumo Corporation (cell sheet)JCR Pharmaceuticals (cell pharmaceuticals)SanBio (cell pharmaceuticals)Tella(cancer immuno cell therapy)MEDINET(cancer immuno cell therapy)CellSeed (cell sheet)CellBank (autologous fibroblast)
<Auto Cell Culture Device>Kawasaki Heavy Industries, KANEKA, TWO CELLS,Hitachi, SHIBUYA CORPORATION, SHIMADZU, NIPRO,Toyo Seikan, Asahi Kasei, etc.
<CPC, Cell Processing Isolator>Panasonic Healthcare, Hitachi Plant Technologies, AIRTECH JAPAN
<Incubator>Thermo Fisher Scientific , Panasonic Healthcare, etc. <Microscope>Olympus, Carl Zeiss, Leica Microsystems, NIKON, etc.
<Flow cytometer>Nippon Becton Dickinson Company, Beckman Coulter
<Sequencer>Thermo Fisher Scientific, Beckman Coulter, Illumina,Roche Diagnostics, etc.
<Centrifugal>Beckman Coulter, Hitachi Koki, etc.
<Other>Chart Japan (liquid nitrogen tank)
<Culture Medium, Regent>GE Healthcare Japan, Sigma-Aldrich, Thermo Fisher Scientific,STEMCELL Technologies, Takara Bio,Nippi, ReproCELL, KANTO CHEMICAL, etc.
<Culture Vessel>CORNING JAPAN, Greiner Bio-One,Thermo Fisher Scientific, ASAHI GLASS, Sumitomo Bakelite
<Cell Separation Device>Cytori Therapeutics, KANEKA
<Allogamy Cell Source for Research Use>Lonza Japan, Thermo Fisher Scientific, Cell Systems
Services Including CMO
Nikon CeLL Innovation (Lonza Japan)Takara Bio (vector GMP production)
Cells for Drug Discovery Using Regenerative Medical Technology, etc.
ReproCELL, Cellular Dynamics International Japan (iPS Academia Japan's agent), Takara Bio (iPS cell manufacturing service), Japan Tissue Engineering
in red:foreign-affiliated company
Major Players in Regenerative Medicine Market
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The number of foreign visitors to Japan in 2016 was 24.04 million, an all-time high. Their consumption was 3.7 trillion yen, up 7.8% from the previous year.
Promoting Japan as a Tourism-Oriented Country
Source:Japan National Tourism Organizationhttp://www.mlit.go.jp/kankocho/siryou/toukei/syouhityousa.html
Foreign visitor arrivals and their consumption amount(Millionpeople)
(Trillion Yen)
By 202040 million visitors,8 trillion
yen
2.1 Regulatory Reform and Related Projects
Copyright (C) 2017 JETRO. All rights reserved. 16
Tourism Field~succeeded in various reforms and renewed the record-high number of foreign visitors
• Relaxing of visa requirements
• In July 2013: Thailand, Malaysia, Vietnam, Philippines,
Indonesia
• In January 2015: China, etc.
• Great increase in the landing slots at Haneda
and Narita
• Expansion of exemption of consumption tax for
foreign tourists (food, drinks, cosmetics, etc.)
(May 2016)
• Passed Integrated Resort Promotion Bill (Casino
bill) (December 2016)
• New LCC Terminals at Narita and Kansai
International Airports
• Plans for future:
• Revision of tour guide-interpreter system, deregulation
of vacation rental rules
• Enhance seaport capabilities to accommodate growing
demand for larger cruise ships
2.1 Regulatory Reform and Related Projects
Business Opportunities Created by Regulatory Reform
<Tourism>
Copyright (C) 2017 JETRO. All rights reserved. 17
National Strategic Special Zones Reform of “Bedrock Regulations”
Medical CareEmployment of foreign doctors 9
Speed-up of developing innovative medical devices
1, 7,9
Foreign
PersonnelAccepting foreign personnel for housekeeping work
1, 9
TourismMinpaku (the use of vacant houses as tourist accom-modation)
1, 9
StartupsStartup Visa (Deregulation of a visa requirement)
3, 4, 8, 9
Tokyo One-Stop Business Establishment Center
9
Revitalization of
CitiesSpeed-up of the procedure for city planning
9
TaxSpecial treatment for capital investment (Special depreciation system, tax reduction for capital investment)
1, 8
AgricultureDiversified business model by agricultural corporation
2, 6
10 areas designed as the Special Zones
2
3
4
5
7
8
9
10
Source: The Cabinet Office, Local Creation Promotion Office
1 6
2.1 Regulatory Reform and Related Projects
Red: 1st selection, Blue: 2nd selection (Local revitalization), Green: 3rd selection (Local revitalization)
Copyright (C) 2017 JETRO. All rights reserved. 18
Strengthening Corporate Governance
Source:Headquarters for Japan's Economic Revitalization, Mirai Toushi Kaigi (No.4) 、JETRO Invest Japan Report 2016
Increase companies’ “Earning Power” by corporate governance reform
Stewardship Code (Feb 2014)
• Adopted by 213 institutional investors (life
insurance, investment trust companies, etc.)
(As of Sep 2, 2016)
• Reinforce monitoring function to investee
companies.
Corporate Governance Code
• Started in Jun 2015
• Adopted by more than 2,000 listed companies
More and more companies appointing
independent outside directors
• TSE-listed companies
87.7% in 2015⇒ 97.2% in Aug2016
• Companies appointing two or more
independent outside directors
21.5% in 2014 ⇒ 77.9% in 2016
Ratio of TSE-listed companies appointingindependent outside directors
[Source] “Survey on Corporate Governance of Listed Corporations”(August 1, 2016, Japan Association of Corporate Directors)
2.1 Regulatory Reform and Related Projects
Future plan
70 points or more
80 points or more
Human resource points
70 or more
5years
3years
Shorten
1year
Shorten
Current Required period of residence for application for permanent residence
34 years old or younger 10 points
Annual salary6 million yen 20 points
Master’s degree 20 points
Job experience ofthree years 5 points
Patented invention 15 points
Graduated from a top-tear university 10 points
Total 80 points
Example of point
calculation
In case of Engineer
(33 years old)
• Establishment of the world’s fastest green card approval system, the “Japanese Green Card for Highly Skilled Foreign Professionals“ in March 2017 (scheduled)
• Drastically shortening the required period of residence for application of highly skilled foreign professionals for permanent residence status from 5 years
Required period of residence for application for permanent residence
Outline of “Japanese Green Card for Highly Skilled Foreign Professionals” system
Source: Created from several media reports
Establishment of “Japanese Green Card for Highly Skilled Foreign Professionals” System (Scheduled March 2017)
Copyright (C) 2017 JETRO. All rights reserved. 19
2.2 Measures for “Invest Japan” Promotion
Copyright (C) 2017 JETRO. All rights reserved. 20
• JETRO conducted the “Survey on Japan’s Investment Climate” to foreign-affiliated companies in Japan (June – July 2016)
• More than 40% of the companies are feeling improvement in the business climate
2.3 Evaluation of Japanese Market by Foreign-affiliated Companies in Japan
More than 40% of Companies Feel Improvement in Business Climate
Do you feel that the Japanese business climate has become better?
Business plans in Japan (within the next 5 years)
n=195
(+7.7% from 2015)
2015 Survey
2015 Survey
2016 Survey
2016 Survey
Copyright (C) 2017 JETRO. All rights reserved. 21
Top 3 “attractiveness of doing business in Japan” were: 1) The Japanese Market; 2) Well-developed Infrastructure and; 3) High Quality R&D
The Greatest Appeal is “Japanese Market”
n=188~191The attractiveness of doing business in Japan(Top 5 answers from 14 choices)
1. The Japanese Market
2. Well-developed Infrastructure
3. High Quality R&D
4. Existence of Good Partners, Companies
or Universities with Outstanding Technology or Products
5. Everyday Living Conditions
Largely attractive
Attractive A little attractive
Not attractive
2.3 Evaluation of Japanese Market by Foreign-Affiliated Companies in Japan
Copyright (C) 2017 JETRO. All rights reserved. 22
Voices of Foreign Businesses in Japan
These days, thanks to the effort of the Japanese Government, drug lag has almost disappeared.”
Japan has a strong power of science. We see it will not change, and thus we will continue to put more effort into business in Japan.
I have lived in Japan for 15 years, and found Japan has become internationalized in an amazing speed in the past few years.
Mr. Eric Golden, Fortress Investment Group LLC, U.S.(2016)
Mr. Alex Gorsky, Johnson&Johnson, U.S. (2016)
Mr. Gabriel Baertschi, AstraZeneca plc., UK (2015)
2.3 Evaluation of Japanese Market by Foreign-affiliated Companies in Japan
23
76.0% of companies answered that the Tokyo Games would lead to significant demand in the Japanese economy.
33.4% of companies recognized thatthe Tokyo Games would have “positive effects” on their business performance.
Impact of Tokyo Olympic Games in 2020
Tokyo Metropolitan Government/The Tokyo Organizing Committee of the Olympic and Paralympic Games
3.0
Japan Center for Economic Research 2.2
Mizuho Research Institute 2.5
Dai-ichi Life Research Institute 21.0
The Mori Memorial Foundation 19.4
Estimated Economic Effects of Tokyo Olympic Games
Approx. 80% of Companies Anticipate “Significant Demand in the Japanese Economy”
Unit: trillion yen
■Towards the 2020 Tokyo Olympic Games, it is expected that there will be large infrastructure development and that the Abenomics policies will be carried out ahead of schedule, to meet the target of 2020.
■Estimated economic effects are 3 trillion to 21 trillion yen.
Source: “Survey on Perceptions of Companies about 2020 Tokyo Olympic and Paralympic Games” (Teikoku Databank)
November 2013, number of valid respondents: 10,769 companies
Copyright (C) 2017 JETRO. All rights reserved.
24
Expanding foreign direct investment in Japan and improving the business environmentProject 6 Policies to attract more foreign direct investment in Japan
Source: The Cabinet Office “Japan Revitalization Strategy” Main achievements to date and Further reforms, Oct 2015
Providing solutions to social issues through technology/ Exporting solution-integrated systemsProject 1 Use of next-generation transportation systems and automatic driving technologyProject 2 Solutions to energy/environmental problems through use of distributed energy resourcesProject 3 Realization of a universal future society through leading-edge robotic technologyProject 4 International implementation of high-quality Japanese medical services and technology
(inbound use of medical care)
Developing an environment to increase the number of foreign tourists to JapanProject 5 Showcasing Japan as a country of tourism
The government decided to drive forward, as a major national concern, the core projects to be achieved by 2020. This is based on the idea that it is important to accelerate reform and innovation, using the year 2020 as momentum, when Japan attracts global attention and sees a large number of foreign visitors with the Olympics and Paralympics.
Japan implements 6 projects in 3 priority issues which contribute to showcase Japan’s strength, to appeal to foreign countries and lead to future economic growth.
Copyright (C) 2017 JETRO. All rights reserved.
Towards the Olympics: "Reform 2020” Projects
Copyright (C) 2017 JETRO. All rights reserved. 26
End of 2015 sees new record for Japan’s inward FDI stock at 24.4 trillion yen
3.1 FDI in Japan
Steadily Increasing Investment in Japan
The stock of inward FDI and its portion in the nominal GDP(Trillion Yen)
Record High2015
24.4 Trillion Yen4.9%
Target 2020
35 Trillion yen
[Source] "Balance of Payments"(Ministry of Finance), "National Accounts of Japan" (Japan Cabinet Office) 1st preliminary
Success Cases By Country
JETRO Success Cases (FY2003-2015)
✓411 US Clients have successfully set-up operations in Japan with JETRO’s assistance over the past 13 years.
✓We assisted mostly first-time investors in Japan.
Environment• Renewable/Alternative
Energy• Clean Tech
Health Care• Pharmaceutical• Bio Tech• Medical Device
ICT• Communication• Data Center• Cloud
Service• Social Media/E-Commerce• Large Retailer• Tourism
Disaster Recovery• Earthquake• Radiation• Waste Management
Promoting FDI in R&D facilities, regional headquarters, and 5 priority industry sectors
Priority Industry Sectors
Investment Destination by Prefecture
✓Now, we assist secondary investment/expansion in Japan as well, to strengthen regional economy. (= important task of Abenomics)(ex. Chicago office assisted Caterpillar to expand R&D recently)
Total 1,405 Cases
27
US29%(411)
China11%(151)
Germany9% (120)
Korea7%(96)
UK6%(85)
France5% (75)
Australia3% (46)
Singapore3% (45)
Taiwan3% (43)
Hong Kong3% (41)
Other21%(292)
Tokyo, 871
Other than
Tokyo 534
Kanagawa, 145
Osaka, 100
Aichi, 88
Hyougo, 54
Chiba, 35Fukuoka, 26
Saitama, 17 Other 69
Other than Tokyo38%
Tokyo62%
Copyright (C) 2017 JETRO. All rights reserved.
▪ The company is a global construction machinery manufacturer.▪ The company is planning to add a new hydraulic excavator R & D
facility at an existing factory in Hyogo Prefecture.▪ In FY 2014, the company was awarded a Japanese government
subsidy for the promotion of R&D or Asian headquarters site. JETRO’s Support ▪ Explained the details of available government
incentives for site establishment. ▪ Arranged meetings between Caterpillar and the
Ministry of Economy, Trade and Industry (METI) and provided support for the grant application process.
Success Cases from US Midwest
Caterpillar (Illinois)
▪ The company manufactures and sells ultrasonic welding and ultrasonic cutting machinery for use in the automotive industry.
▪ In 2013, the company established an office in Tokyo to provide sales and technical support.
▪ Since setting up an office in Japan, sales have grown steadily, prompting Dukane to consider a secondary expansion in Japan, which could include manufacturing.
JETRO’s Support ▪ During the establishment of their sales office, Dukane utilized the
Invest Japan Business Support Center incubation facility at JETRO Tokyo.
▪ The company manufactures and sells planarization pads for semiconductor silicon wafers and abrasives.
▪ The company established a presence in Japan in 2002 and set up a R & D base for abrasives in Mie Prefecture where the company already has had a production base.
JETRO’s Support ▪ The company was awarded a subsidy from the
Japanese government in FY 2011 to support the establishment of an Asian headquarters site inJapan.
▪ The company manufactures knitted women’s accessories and stationery products.
▪ The company established a corporation in Japan in 2012 and opened a number of permanent shops within famous department stores.
JETRO’s Support▪ Arranged tours of permanent shop candidate
sites in Japan.▪ Provided information on shop candidate
department stores. ▪ Posted case study interviews with the
company on the JETRO website.
Cabot Microelectronics (Illinois)Dukane Corporation (Illinois)
Vera Bradley (Indiana)
28Copyright (C) 2017 JETRO. All rights reserved.
29
In recent years, there has been a movement by foreign-affiliated companies to take advantage of Japan’s outstanding
technologies and knowhow by establishing R&D centers in Japan.
Reflecting Japan’s excellent reputation as a hub of R&D and for government support, there are many cases of
research collaboration between foreign-affiliated companies with Japanese universities, research institutes and
other groups, as well as the establishment of R&D bases in Japan.
Rocket Software (US)A global business software developer set up an office in Yokohama in April 2015 to respond to the demand for high quality by Japanese customers. It was followed by an R&D center in Sapporo, an IT cluster regions in Japan where it is easy to find talented people. Rocket Software aims at expanding their share of mainframe software in Japan, one of the world’s largest IT markets.
ICT
Caterpillar (US)It strengthened its R&D function to develop new products for the global market in Akashi, Hyogo, which is a global center formanufacturing and R&D of hydraulic shovels. Their R&D was subsidized by METI in fiscal 2014.
Manufacturing
Johnson&Johnson (US)It’s “Tokyo Science Center” was established in the International Strategic Zone in Kawasaki, in August 2014. The center, equipped with a surgery simulation system, is expected to be utilized by healthcare professionals of Asian countries as a research and training facility.
Life science
Tenneco Japan (US)A Japanese subsidiary of American global supplier of auto parts Tenneco began full-scale operations of its Yokohama Technical Center in April 2016. Tenneco Japan supports the development and design capabilities of Japanese corporations operating globally, and is strengthening its support system for customers’ domestic and overseas production. In addition to the automotive sector, it aims to expand its presence in the Japanese market in the ships, vessels, agricultural machinery and construction machinery sectors.
Manufacturing
R&D Investment from U.S.
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USARegional HQs
Cooperation inR&DSales
Production
Japan
Asia and Emerging Economies
R&D
Sales
Production
Japan as a Gateway to Asia and Beyond
Post
TPP
Marketing Know-How
Advanced Technology
Business Experience
FTA Platform RCEP
0% 50% 100%
1980-1990
1990-2000
2000-2010
2010-2018
83.1
79.3
50.6
38.4
16.9
20.7
49.4
61.6
AdvancedEconomies
EmergingandDevelopingEconomies
Contribution to World Economic Growth
by Emerging and Developing Economies
Global Partnership
Source: “WEO, April 2013”(IMF)
Copyright (C) 2017 JETRO. All rights reserved. 31
• Low-cost manufacturing has been shifting to emerging countries (US and Japan alike).• Manufacturing for R&D intensive, integrated processes has remained in Japan.• Factors include strong R&D capabilities, advanced manufacturing processes, intricate components configurations (molding and components expertise).• Integrated device manufacturers using Japan as a test market prior to Asia and global launch.• Asia operations are now more than a manufacturing strategy; companies must view these moves as part of a large operations strategy.
Midwest Successes in Japan: Advanced Manufacturing/R&D
2. Deepening Japan-US InterdependentRelationship on Cutting Edge Technologies:Japanese and the U.S. companies must hone their global competitive edge by deepening interdependent relationship in the high-tech, value-added technologies which set them apart from competitors from emerging countries.
1. The Manufacturing Dynamics in Asia Have Changed:
Leading Midwest global companies have strong commitment to Japanese market:
The BOEING Company, CATERPILLAR Inc. and MOLEX Inc.
32Copyright (C) 2017 JETRO. All rights reserved.
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• Japanese companies supply 35% of parts for the 787 Dreamliner. Mitsubishi Heavy Industries produce their 787 wings in Aichi Pref. and ship to the U.S.
• Boeing has more than 65 Japanese suppliers. Japan is the second largest source of goods and services after the U.S. Boeing procured $4.3 billion in Japan in 2013.
Midwest Successes in Japan: Advanced Manufacturing/R&D
1. The BOEING Company
<Source: Boeing HP, Nikkei News>
2. CATERPILLAR Inc.• Akashi Plant in Hyogo Pref. is their mother plant for Hydraulic Excavator and its Global R&D HQ. 70% of Hydraulic Excavators shipped from Akashi plant are supplied to overseas markets, in Asia, Oceania, Europe, the Middle east, Africa and Central and South America, as well as North America.
3. MOLEX Inc.• (1) Their Micro Product HQ, one of three Global Product HQs, is in Japan.
• (2) Molex's Japan unit also has the most expertise in advanced assembly automation. Its innovation in the field has overcome Japan's relatively high labor costs and contributed to the development of its plants in other countries.
• (3) Molex's Japan operations include its most effective new product design center.
It might be hard for some people to believe that Boeing's huge passenger plane wing and Caterpillar's massive hydraulic excavators are produced in a country with relatively high labor costs like Japan and shipped overseas, but these products are true examples of the high-tech, state of the art and cutting-edge products. They show how manufacturing for R&D-intensive, integrated processes has really remained in Japan, thanks to the capability of engineers and the country's strong supplier base -- not just big companies, but also many small and medium-sized companies.
Copyright (C) 2017 JETRO. All rights reserved.
34
Arai Helmet Ltd. Leading supplier of specialized autosports helmetsAsahi Diamond Industrials Has 90% of the global market share for specialty wire used to cut silicon for PV cellsCovalent Supplies 70% of the world’s carbon brushes in electric motorsFuji Springs Produces 40% of the aluminum cases used in lithium-ion batteries and battery terminalsHoriba One of the top analytical & life sciences instrumentation companies in the worldIsuzu Glass Produces over 60% of the lens arrays for the LCD projectorsJapan Steel Works Only manufacturer in the world that makes the steel containment vessel used in nuclear power plantsKohoku Kogyo Makes 40% of the world’s lead terminals for aluminum electrolytic capacitors Kuraray Manufactures 80% of the world’s optical-use polyvinyl alcohol (PVA) films for LCDs Mabuchi Sells 90% of the motors used to adjust automotive rear view mirrorsMolten Corp. Specialty balls & sports equipment manufacturer; supplier to the Olympics Murata Has 40% of the global market for capacitors Nichicon Capacitor Sells more than 30% of the world’s conductive polymer-type capacitorsNippon Super Industry Sells 80% for motor hubs for hard disk drivesNishi Industry Co. Ltd. Produces specialized manufacturing equipment used to make polarization boards used in LCDsNitto Denko Leading supplier of polarizing film used in LCD manufacturingNTN Corp. Supplies 60% of the world’s spindle motors bearings Shimano Sells 60% of the worlds bicycle gearsSusumu Co. Makes 60% of the world’s thin film electronic componentsTaiyo Industrial Responsible for 50% of the world’s laser equipment for Li-on battery manufacturingTaiyo Kogyo Specialty architecture materials manufacturerTanaka Chemical Top market share for nickel metal hydride batteriesTayca Corp. Leading manufacturer of micro titanium dioxide and other industrial chemicalsTokyo Electron 80% of the etchers used in the production of LCD panelsTowa Corp. Supplies 50% of the world’s semiconductor molding equipment Wakayama Seika Produces 80% for raw material used in resins for printed circuit boardsYKK Manufactures over 50% of the world’s zippers & fastenersZuiko Leading manufacturer of machinery used to make diapers and sanitary napkins
2. Some of Japan’s Market-Leading Companies: How many of these do you know?
1. Source of Innovation:➢ In 2014, three Japan-born scientists won the Nobel Prize in Physics for inventing blue LEDs, which triggered a
transformation of lighting technology when they produced bright blue light from semiconductors in the 90s. The invention of efficient blue light-emitting diodes led to energy-saving white light sources.
➢ One of the recipients, Dr. Shuji Nakamura, is now professor of materials and of electrical and computer engineering at the University of California, Santa Barbara, was an engineer at a company called Nichia Corporation when he invented blue LEDs. Nichia is now a major manufacturer, but it used to be much smaller at the time of his discovery. This in an excellent example of Japanese small and medium-sized companies' capability and commitment to R&D. These companies are also a source of great innovation.
Why Japan?: Strong Supplier Base
Copyright (C) 2017 JETRO. All rights
reserved.
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Why Japan?: Share the Common Values
1. Well Governed by Global Standards with Predictable Legal System:
2. Trust and KIZUNA (Bond of Friendship) Underlying the Relationship between Japan and the Midwest, Based on Our Common Values:
Japan and the U.S. share the common value on dedication to democracy, free trade and the rules of law (incl. Intellectual Property) as industrialized nation.
Open Government Index: Canada=0.82, Japan=0.77, UK/Germany=0.73, France and US=0.7, China=0.41Absence of Corruption Index: Japan=0.84, Germany=0.83, Canada=0.81, UK=0.8, France=0.78, US=0.75, China=0.48 (Source: World Justice Project 2014)
Japan and the U.S. Midwest share the common values on work ethics, especially on “Monozukuri”
(=manufacturing, engineering, craftsmanship, industrial inventiveness, etc).
<Quotes from Midwest Governors’ Statements at the Annual Joint Meeting of the Midwest U.S. – Japan Association>Gov. Mike Pence (Indiana) (Then): “The closer we work together, the more opportunities are presented. I believe the Japanese people and companies have found a particularly welcome home in the heartland of America because of shared values. People of Indiana and all across the Midwest and people of Japan share those timeless values such as integrity, excellence, hard-work, honesty, tradition, family and modesty.”
Gov. Rick Snyder (Michigan): “There is such a level of trust between Michigan and Japan that it results in good things. It is trust that must be earned and when it is, trust makes things happen. It is trust that makes a relationship.” People in Japan and Michigan “have a commonality in being honest, humble, and hardworking people.”
Gov. Scott Walker (Wisconsin): “More than 40 years ago, Kikkoman came and invested in a small town near where I grew up because of three things: plenty of clean fresh water, plenty of soy beans and most importantly, good workers with a Midwest work ethic that paralleled work ethic of good people of Japan.”
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The U.S. Midwest and Japan are both global centers for advanced manufacturing, and "the next industrial revolution," such as the Internet of Things (IoT), will surely bring more business opportunities and collaborations for both sides.
In the auto industry, next-generation automobiles such as autonomous and electric vehicles (EV) have already had a big impact on the industry. To be competitive in the global marketplace, major automakers have to work with new innovative suppliers, including ones outside of their conventional supply chains.
This is where Japanese cutting-edge technology companies can contribute, and JETRO can play a significant role in connecting them to the U.S. automakers.
Fiat Chrysler Automobiles (FCA)
Date: February 25, 2016Venue: FCA HQSuppliers: 25 Organizer: JETRO, FCA
Fiat Chrysler Automobiles (FCA)
Date: November 3, 2016Venue: FCA HQSuppliers: 13 Organizer: JETRO, FCA
Ford Motor CompanyDate: March 1, 2017Venue: Ford Product Development CenterSuppliers: 36 Organizer: JETRO, Ford
(Business Matching Process)• Detroit's Big 3 Automakers declare their technology needs, then pre-screen and qualify Japanese suppliers from a list of candidates
recruited by JETRO.• JETRO organizes closed business matching events with U.S. automakers.
*JETRO hopes to plan these business matching events with major U.S. manufacturers in other industries such as construction machinery, agricultural machinery, and the
aviation industry in the future.
JETRO hosts “Japan Innovation Showcase” at Detroit 3’s HQs
The U.S. – Japan Innovation Dynamic:Connecting Next Generation Technologies = JETRO’s Role
Copyright (C) 2017 JETRO. All rights reserved. 36
2,036
2,584 2,535 2,644 2,7193,159
3,470 3,414 3,576
4,0564,416
4,781
5,124
5,9246,852
7,110
7,8567,865
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Japan United Kingdom Germany France
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Expenditure on R&D by Japanese companies in the U.S. (2014) amounts to $7.87 billion, the largest in G7 countries (0.05% of U.S. GDP)
R&D increased by 53% compared to 2009, the largest increase ($2.74 billion) by country
(Year)
$2.74 billion
Up 53%
(Million USD)
Note: Companies in which majority is owned by ultimate beneficial owner (UBO), Source: U.S. Department of Commerce, Bureau of Economic Analysis
R&D by Japanese Companies in U.S. is the Largest
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Copyright (C) 2017 JETRO. All rights reserved.
Much of the infrastructure has recovered. Housing reconstruction is in progress. The Reconstruction Agency, local governments and NPOs are working on reviving industry and livelihoods as well as providing health and living support.
.
• Industrial production indices recovered to the pre-earthquake level.• 83% of Tsunami-affected farmland have recovered. 88% of seafood processing industry have restarted business.• 45% of companies have recovered sales to the pre-earthquake level.
• Decontamination of 7 municipalities out of 11 is now complete. Beginning construction of Interim Storage Facility and soil transportation. Evacuation orders were lifted in some areas (Tamura City, Kawauchi Village, Naraha Town, Katsurao Village, Minami-Soma City)
• Reviving industries in Fukushima → Next Page
4. Revitalizing and Reconstructing Fukushima:
3. Reviving Industry and Livelihood:
2. Restoration of Towns & Housing:
1. Providing Health and Living Support:
Reconstruction Progress After 6 Years : The Great East Japan Earthquake and Tsunami
<Source of Information and Photos: Reconstruction Agency HP>38
• The number of evacuees has decreased from approx. 470,000 to 140,000 (Oct. 2016) . Evacuees in temporary housing: approx. 50,000 (Sep. 2016).
• Physical and mental care is essential in the prolonged evacuation life.
• Relocation to upland and building houses: at the height of construction.*Public housing: approx. 20,000/30,000units (66.2% completed) → 86% by March, 2017, 97% by March, 2018.*Relocation to upland: approx. 10,000/20,000units (49.7% completed) → 69% by March, 2017, 91% by March 2018. • The removal of debris and restoration of public infrastructure: almost completed.• School and medical facilities: 90% completed.
Copyright (C) 2017 JETRO. All rights reserved. 39
Creating New Industries in Fukushima
1. Renewable Energy Promotion:Fukushima has a target to produce enough renewable energy to supply 100% of the energy
demand in the prefecture by 2040 (26.6% in March, 2016). This will be achieved by increasing renewable energy adoption, and building hubs through the clustering and development of relevant industries.
2. Developing Medical Device Industry:Since before the disaster, Fukushima has been one of the top producers of medical devices and
parts in Japan. The prefecture plans to develop an even greater production base, through promoting both industry and employment.- Production volume of medical devices in 2014 = 130.3 billion yen (3rd in Japan) (Up from 61 billion yen in 2015)- Outsourced production volume of medical devices in 2014 = 43.3 billion yen (1st in Japan)- Production volume of parts for medical equipment in 2014 = 17.7 billion yen (1st in Japan)
3. Innovation Coast Initiative:With a purpose to recover industry and employment of the coastal region which were lost by the
disaster and nuclear power accident, they will create new industry and employment through research and development related to decommissioning and robot technology, accumulation of energy related industry, rehabilitation of primary industry. ①Robot Test Field ②Okuma Analysis and Research Center (Lab for Radioactive substances) ③Int’l Decommissioning Joint Research Center ④Nahara Remote Technology Development
<Source: “Steps for Revitalization in Fukushima” by Fukushima Prefecture>
What is JETRO?
➢ 7 locations in North America: New York, San Francisco, Chicago, Los Angeles, Atlanta, Houston and Toronto
The Japan External Trade Organization (JETRO) is a Japanese government-related organization that promotes mutual trade and investment between Japan and the rest of the world.
➢ Established in 1958 by the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry “METI”)
➢ JETRO’s core focus (1) Promoting FDI into Japan (2)Helping Japanese SMEs expand their business overseas
➢ Headquartered in Tokyo with 44 offices in Japan and 76 offices in 56 countries. About 1,600 employees worldwide.
74 officesin 55 countries
46 offices in Japan
Incl. Tokyo HQ, Osaka HQ and IDE
Copyright (C) 2017 JETRO. All rights reserved. 40
5. “Talk to JETRO First”: Why is this interaction Important,(Ralph Inforzato, Executive Director, Business Development)
Talk to JETRO when setting up a new company in Japan• JETRO has expert advisors in Tokyo who can provide information on corporate structures and the cost of
registration for a new legal entity. JETRO staff can explain the process and time frame for set-up. • To meet the needs to American companies making their initial market entry into Japan, JETRO can
introduce qualified business service providers, including human resources agents; tax, accounting and payroll providers; attorneys and paralegals; and real estate agents.
• For qualified companies, JETRO can provide Business Matching Services and introduce them to prospective clients in Japan.
Talk to JETRO when considering an expansion of an existing facility in Japan• JETRO can introduce foreign companies to local government officials in Japan for discussions on subsidies
and incentives to support expansion plans. JETRO understands your concerns & considerations and can connect you with the right people.
• With 46 offices across Japan, JETRO has a deep local network which allows us to make substantive inquiries on behalf of foreign companies pursuing investments. JETRO can work with companies to set up appointments in Japan with local government representatives at your convenience.
JETRO understand that the term “expansion” has different definitions. There may be incentives to support the hiring of new employees or to add major capital expenditure to an existing facility in Japan. JETRO can help foreign companies sort through the various investment incentives from the Prefectural and city governments. Whether you are pursuing an initial investment in Japan or an expansion, JETRO’s goal is to ensure that it all proceeds smoothly.
“Talk to JETRO First” Why this is important
42Copyright (C) 2017 JETRO. All rights reserved.
JETRO’s USA Business Development team members are located in Atlanta, New York, Chicago, Houston, Los Angeles and San Francisco. JETRO also has teams in Canada and Mexico ready to assist foreign companies.
JETRO USA Canada: JETRO Toronto Mexico: JETRO Mexico Citywww.jetro.org www.jetro.go.jp/canada/ www.jetro.go.jp/mexico/
In Tokyo, the JETRO Invest Business Support Center (IBSC) is a valuable resource for companies considering Japanese strategic investments. The facilities include a temporary office space, meeting rooms, conference space, a business library and provide access to JETRO’s expert staff. www.jetro.go.jp/en/invest/ibsc/
For more details, contact me at JETRO Chicago. I can connect you with the appropriate Business Development team member in North America and Tokyo.
Ralph InforzatoExecutive Director, Business Development
JETRO ChicagoRalph_Inforzato@jetro.go.jp
“Talk to JETRO First” Who can assist you
43Copyright (C) 2017 JETRO. All rights reserved.
For more details, please contact JETRO Chicago:Ralph Inforzato, Executive Director, Business Development Ralph_Inforzato@jetro.go.jpAkira Kawachi, Director, Business Development Akira_Kawachi@jetro.go.jp
This material is distributed by JETRO Chicago on behalf of Japan External Trade Organization, Tokyo, Japan. Additional information is available at the Department of Justice, Washington, D.C.
Thank You!
• Japan Economic Policies (Abenomics)http://www.japan.go.jp/abenomics/index.html
• Reconstruction Efforts of the Great East Japan Earthquake and Tsunamihttp://japan.kantei.go.jp/incident/index.html
• Outlook of Japan EconomyGovernment Estimates: http://www.cao.go.jp/index-e.htmlJapan Centre for Economic research: http://www.jcer.or.jp/eng/
• JETRO’s Services“How to Set up Business in Japan”: http://www.jetro.go.jp/en/invest/setting_up/“JETRO IBSCs”: http://www.jetro.go.jp/en/invest/ibsc/
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