Interview with Mr. Hiroyuki Ishige, Chairman & CEO, Japan External Trade Organization (JETRO)

Business Focus: Please provide our readers with an introduction to Japan and JETRO.

Mr. Hiroyuki Ishige (HI): JETRO is a government-related organisation that facilitates mutual trade and investment between Japan and the rest of the world. For companies investing in Japan for the first time, we are a one-stop shop providing free-of-charge services to help them get started. We have supported more than 14,000 of these investment projects from overseas. Among them, more than 1,400 international companies successfully opened business in Japan.

Japan has certainly changed for the better in the recent past. However, many of our partners and friends overseas are not yet aware of the latest developments and have an out-dated idea of the Japan of today. The country no longer has a stagnating economy. We are on the path back towards sustainable macroeconomic growth—and this is the key message that I would like to share.

One example of the changes that have been implemented is the reduction of corporate tax rate from nearly 40% to 29.97%—a very significant reduction. Another area of focus for Japan has been a reform of the power generation segment. This used to be a regionally monopolised business, but now the sector is fully liberalised and open to investment. Many European renewable energy suppliers have already entered our market as a result of the reforms. Additionally, there has been regulatory reform of the pharmaceutical and medical equipment industries, allowing for the participation of foreign companies there as well.

The government also formulated the Principles for Responsible Institutional Investors: Japan’s Stewardship Code, which modified the Companies Act to urge companies to introduce outside directors. It also introduced the Corporate Governance Code, which compiles the key principles contributing to effective corporate governance, in order to maximise the earning potential of Japanese companies.

Business Focus: Please outline the recent developments in the Trans-Pacific Partnership (TPP), Japan-EU Economic Partnership Agreement (EPA), as well as the Japan-EU Strategic Partnership Agreement (SPA) and their impact on Japan.

HI: Twelve members of the TPP have finalized negotiations and signed the TPP agreement. Now each country needs to ratify the agreement in their respective legislature. Once the agreement is put into effect, it will positively influence and further accelerate the finalisation of the various Japan-EU strategic and trade agreements, bringing Japan and Europe even closer. The European Business Council in Japan had this to say: “2016 will present a ‘golden opportunity’ for business in Japan.” Japan’s FDI stock at the end of 2014 was about 200 billion dollars. Of that figure, investment from Europe accounts for about 90 billion dollars. From this, we can infer that Europe is the largest partner for Japan. I am certain that the EPA and SPA will spur additional growth and development of business opportunities between Japan and Europe.

BF: Please discuss the key aspects of the Abenomics' ‘Three Arrow’ strategy and the transformation and reforms undertaken by Japan to revitalise its economy and secure long-term growth.

HI: “The Three Arrows,”—i.e. easing monetary policy, a more flexible fiscal policy, and structural reform—is, in my view, an appropriate policy package for the current economic situation and will indeed support the Japanese economy. The effects will be most obvious in the long-term.

In terms of inward foreign direct investment, Abenomics, the economic policy of Prime Minister Abe, has proven to be a game-changer. As the Prime Minister has declared: “Our government will make Japan the most business-friendly country in the world.” In fact, all the following economic indices have improved: GDP growth rate, corporate income, business confidence and employment. Growth in the Japanese market has drawn greater investment from overseas. As I mentioned earlier, the electricity retail market has been liberalised, ending 60 years of monopoly control. With regards to the reform to the medical field, many international CEOs have described Japan as an ideal place to develop medicine and medical equipment. In addition to these reforms, the negotiations on the FTA between the E.U. and Japan are likely to be concluded this year.

At a recently-held investment promotion summit in Brussels, Prime Minister Abe emphasised that he will continue to reform the bedrock regulations of our economy, in order to further enhance Japan’s potential and appeal.

The agricultural sector is an important area where there are still many issues to be tackled. JETRO will play a pivotal role in increasing the exports of food in general, including primary agricultural and fishery products. We expect that this new push to expand into the overseas market will open up new opportunities for Japanese agricultural businesses.

BF: Please outline your views on future cooperation, trade, and investment between Japan and the U.K. & London—the world’s largest financial centre.

HI: Japan and the UK have shared a very good relationship throughout a large part of history. I am certain that both countries will make full use of the various upcoming events to further solidify and expand their mutual ties.

During the London 2012 Olympic & Paralympic Games, JETRO’s UK counterpart, the UKTI, managed to make full use of the opportunity to invigorate the British economy. We at JETRO would like to learn from the UKTI’s experience and apply that knowledge to Japan.

JETRO has started to provide support for setting up business in Japan since 2003. With the upcoming Games in Tokyo and Rugby World Cup, amongst other international events, we will aim to accelerate this inward investment promotion, and to further enhance business ties with many nations, including the UK.

We would also like to invite more British-originating investment into Japan. The current ratio of Japanese investment in the UK to UK investment in Japan is almost five to one. The UK produces 1.6 million passenger cars per year and roughly half of them are produced by Japanese companies. The Japanese media group Nikkei’s purchase of the Financial Times, is another example of Japanese investment in the UK. We would like to invite British companies to explore the opportunities in the Japanese market in order to attain a more balanced, two-way investment. I would like to encourage British businesspeople to discover the plethora of opportunities in Japan for themselves.

BF: What are Japan's key advantages when competing for foreign direct investment?

HI: Most investors ask themselves: “Why Japan? It’s a mature and low-growth economy.” Such a misperception must be eliminated and I will give you five reasons why. These are: Japan’s sophisticated market, its role as an innovation hub, its business-friendly infrastructure, its comfortable living environment, and its position as a gateway to Asia.

The economic scale and GDP of the Greater Tokyo area alone is equal to that of the United Kingdom. The GDP of the Kansai region, with Osaka at its centre, is only slightly smaller than that of Spain. The Kyushu region’s GDP is comparable to that of Belgium.

Secondly, Japan has great appeal as an innovation hub. It has the highest ratio of R&D investment compared to GDP among the G8 countries. Many foreign-affiliated companies have established R&D bases in Japan and Apple Inc. is also set to establish a research centre in Yokohama in 2016.

The third reason to invest in Japan is the stable and convenient business infrastructure. The World Economic Forum declared Japan’s business environment to be one of the most sophisticated in the world. We have top-quality transportation infrastructure stretching across the country.

The fourth reason is the safe and comfortable community infrastructure. The UK’s information magazine “Monocle” released a ranking of “the top-25 most liveable cities in the world,” and Tokyo came in first. International companies praise Japan’s security. They celebrate our hospitality. They are enchanted by our beautiful nature and our delicious and healthy cuisine is second to none.

You should also be aware that an increasing number of companies are choosing to use Japan as a gateway to access the rest of Asia. “Made in Japan”, and “Developed in Japan” are gaining recognition in Asia as marks of quality.

These are just some of the reasons that make Japan a preferred investment destination.

Some cite the cost of living as a major deterrent when considering the entrance into the Japanese market. In fact, our research on foreign-affiliated companies in Japan shows that “high cost” was the most commonly cited problem in the past. But today expenses for office rent and housing are comparatively lower than those of other major urban areas in Asia. And just to drive the point home, I would like to direct your attention to the price of Starbucks coffee—the Starbucks coffee index. The price for a latte in Japan is only 2.94 euros. The prices in European cities are comparatively higher.

Let me finish by saying that when Proctor & Gamble develop a new product, they always test it in Japan first, as Japanese housewives are the most demanding in the world!

BF: Please tell our readers what led you to be at the helm of one of Japan’s most important organisations?

HI: My guiding principle is to do my very best in every task I undertake. I am wholeheartedly dedicated to welcoming investors in Japan.

BF: As a final message, please share with our 1.1 million print and 3.2 million online readers the one single aspect of the Japan brand that you believe is most appealing.

HI: My aim is for “Made in Japan” to be associated with the best quality. But more importantly, I would like it to be known that Japan has changed. Please come to Japan, engage with our people and see for yourself how much the business environment has improved. You will almost certainly find yourself warmly welcomed here. And finally, I would like to end by emphasising our slogan—“Talk to JETRO first.”

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    Abenomics (アベノミクス Abenomikusu) refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon "three arrows" of: fiscal stimulus, monetary easing and structural reforms.