The growing importance of the Japanese market

Posted on 15 Jan 2019 by Maddy White

A string of new deals for British and Japanese companies worth over £200m have been announced, following trade between the countries surpassing £28bn in 2018 - up 5% on the previous year.

Trade between the UK and Japan was more than £28bn last year - Depositphotos.
Trade between the UK and Japan was more than £28bn last year – Depositphotos.

Japanese PM Shinzo Abe and Theresa May met last Thursday in Downing Street to discuss their countries’ economic opportunities and potential partnerships in a post-Brexit world.

With Britain’s departure from the European Union edging closer, companies continue to look to secure trade outside the EU to avoid potential tariffs if a ‘no deal’ Brexit goes ahead. Currently, 54.2% of all UK exports go to non-EU countries.

To aid this objective, the UK government also launched an export strategy last year aiming to increase UK total exports as a proportion of GDP to 35%. This caused mixed reactions from manufacturing leaders.

The deals

Hamleys toy shop has announced that they will open 30 new stores in Japan over the next five years as part of an export win worth £47m.

Hamleys is the world’s oldest and fastest growing international toy retailer, with a global presence of over 160 stores across 17 countries. The business opened their first two stores in Tokyo and Fukuoka last December, and will shortly commence planning for a further six store openings in 2019.

British motorcycle company Norton has also signed a new £20m export deal to Japan, which will support 200 jobs in the UK and see around 1,000 new motorbikes sold to Japanese customers over the next five years.

Japanese-owned Lucozade Ribena Suntory, a leading soft drinks manufacturer and makers of; Ribena, Lucozade and Orangina, has announced that they will install a new line at their production plant in Gloucestershire, investing £13m and supporting more than 330 UK jobs.

Toyota Corolla

toyota corolla - image courtesy of toyota
Toyota Corolla – image courtesy of toyota

The deals follow production commencing on the new Toyota Corolla model yesterday at the company’s Burnaston plant, following a £240m upgrade to the factory.

The Burnaston factory is the exclusive European production centre for the new model. The business claim the vehicle will play a “critical role” in the Japanese firms European “market ambitions”.

To date, the Derbyshire facility has produced over four million cars and engines, and currently employs around 3,200 people across both sites.

Japan’s industrial sector

Many of the world’s leading electronics companies are Japanese, including: Casio, Hitachi, Mitsubishi Electric and Toshiba. These alongside leading automotive manufacturers Honda, Nissan and Toyota.

The Readiness for the Future of Production Report 2018 published by the World Economic Forum (WEF) revealed that Japan is leading globally in current baseline of production. The report also noted that only 25 countries are in the best position to gain, as production operations stand on the brink of radical digital change.

Japan is the world’s predominant industrial robot manufacturer: The production capacity of Japanese suppliers reached 153,000 units in 2016 – the highest level ever recorded. Today, Japan’s manufacturers deliver 52% of the global supply. 

Overall the country ranked fourth for global robot density in the world according to The 2017 World Robot Statistics. The report also revealed that 74 robot units per 10,000 employees is the new average of global robot density in the manufacturing industries, up from 66 units in 2015. The UK has a robot density below the world average with 71 units, ranking 22nd.

The top 10 most automated countries in the world were named as; South Korea, Singapore, Germany, Japan, Sweden, Denmark, the US, Italy, Belgium and Taiwan.

Lift on beef and lamb ban

British farmers will also now be able to export beef and lamb to Japan for the first time since the two meats were banned in 1996.

British farmers will be able to export beef and lamb to the Japanese market for the first time since 1996
British farmers will be able to export beef and lamb to the Japanese market for the first time since 1996.

The ban was instituted over two decades ago after the outbreak of bovine spongiform encephalopathy (BSE), known more commonly as ‘mad cow disease’, among British cattle.

The new agreement is estimated to be worth around £127m over the first five years – £75m for beef and £52m for lamb. This a positive boost for UK manufacturing’s biggest sector.

Trade agreement

When Britain leaves the EU, the two leaders confirmed their intention to ensure Japan-EU international agreements continue, including the Japan-EU Economic Partnership Agreement, which will form the basis for a new UK-Japan trade agreement. 

Both agreed that Japan and Britain should work quickly to establish the economic partnership between the countries, with the intention that it should come into force as soon as possible.

They have also committed to work together to reform the World Trade Organization (WTO) and reduce global trade tensions that exist. Efforts to reform the WTO will focus on reforming the rules to better address the root causes of trade tensions and advancing discussions on digital trade.

This could allow free and frictionless trade for many British businesses, helping them to expand into some of the world’s largest and fastest growing markets. 

The Japanese market is becoming increasingly important to the UK; with the recent ban lifted on beef and lamb potentially contributing £127m, the new Toyota model being manufactured in Derbyshire, several deals recently being made and future ones on the horizon. Trade between the countries exceeded £28bn last year, as the importance of strong partnerships, particularly outside of Britain, becomes an increasing priority.