WA-Japan Relationship and Opportunities
Craig Peacock
Commissioner
North Asia Agency – Tokyo Office
19 September 2013
Government of Western Australia
|
Department of The Premier and Cabinet
Topics for today
1. A quick look at Japan
2. Functions of the Japan offices and our role
3. The iron ore market
4. The LNG market
5. Agribusiness opportunities
6. The Kansai Region and special opportunities
7. How to contact us
Government of Western Australia
|
Department of The Premier and Cabinet
Japan is back!!!
Abenomics is working!
Government of Western Australia
|
Department of The Premier and Cabinet
What is this “Abenomics”?
•
Abenomics includes a “mix of reflation, government spending and a growth strategy
designed to jolt the economy out of suspended animation that has gripped it for more
than two decades.”
•
The stock market has subsequently risen by 55 percent, consumer spending has
pushed economic growth up 3.5 percent annually, and Shinzo Abe’s approval rating
has ticked up to 70 percent.
•
Abe’s economic policy can be interpreted as having as much to do with reinvigorating
the economic situation as does with the rise of China.
•
The Economist: “Economic decline took on a new reality in Japan when China
elbowed Japan aside in 2010 to become the world’s second largest economy... Mr.
Abe believes that meeting China’s challenge means shaking off the apathy and
passivity that have held Japan for so long.”
•
Recent spats with China over the disputed Senkaku islands have led to a call to
action.
•
Abenomics is an economic doctrine inextricably linked to Japanese national security
policy.
Government of Western Australia
|
Department of The Premier and Cabinet
Abenomics – The Three Arrows
1. Quantitative Easing : the BOJ (Bank of Japan) leaves the interest rates near 0%
with the objective of promoting lending. The objective over the next years is to double
the amount of money in circulation and as a consequence reach a 2% inflation target.
As a consequence ithe yen has been depreciating fast against other currencies since
the Abenomics measures were implemented.
2. Fiscal policies to stimulate demand: investment in public works and renovation of
infrastructure which is older than 50 years (built shortly after the Second World War),
tax breaks to companies that invest in R&D and hire more employees, pay higher
salaries, buy new equipment, etc. These measures aim to achieve an increase in
investments, create new jobs and increase salaries.
3. Deregulations and creation of sustainable growth: This arrow includes the TransPacific Partnership (TPP), a new free-trade agreement between countries in the AsiaPacific region that would help Japanese companies export more. It could also mean
positive things for an FTA with Australia, which has been 6 years in negotiation!
Government of Western Australia
|
Department of The Premier and Cabinet
Is Abenomics really working?
Well, yes, for now it is…
 15 years of debilitating deflation is over, prices are up 1%, half of the
2% target
 The job market is stronger, incomes are up, spending up
 Unemployment down to 3.8
 Manufacturing is up 3.2%
 The economy grew 2.6% in Q2
Government of Western Australia
|
Department of The Premier and Cabinet
Is Abenomics really working?
 Data released 9 Sept 13 shows the rebound is strong
 Q3 growth set to exceed 3.8%
 Private investment up 1.3%
 A real chance to move forward, most Japan believe Abe
is the man to do it
Government of Western Australia
|
Department of The Premier and Cabinet
Is Abenomics good for WA?
• You bet! Cashed up companies are rewarded for
investing abroad
• Despite high costs, WA is still one of the most
attractive investment destinations
• Change in federal government seen as positive
– carbon tax, mining tax disliked in Japan
• Premier’s visit in June cemented a good
relationship with the Abe government
Government of Western Australia
|
Department of The Premier and Cabinet
A Quick Look - Japan & WA
• Japan is Western Australia’s second largest trading partner. Total
bilateral trade was worth over $25 billion in 2012.
• Western Australia’s merchandise trade with Japan has grown from
$9.4 billion in 2000-01 to $19.9 billion in 2008-09. In 2009-10 it
declined to $16.6 billion in response to the GFC but has now grown
to the figure above.
• Exports account for over 85% of Western Australia’s merchandise
trade with Japan ($23bn).
• Western Australia’s exports to Japan have grown at an average
annual rate of 10%, the GFC providing the only hiccup in that trend.
Government of Western Australia
|
Department of The Premier and Cabinet
A Quick Look - Japan & WA
•
Japan is the State’s largest market for petroleum exports with a 44% ($9.4
billion) share in 2012.
•
Other major commodities Japan imported from WA in 2012 included LNG
($7.5 billion or 40%), crude oil ($919 million or 6%), LPG ($730 million or
5%) and wood chips ($281 million or 2%).
•
Japan is also WA’s top export market for agriculture, amounting to over
$900 million in 2012.
Government of Western Australia
|
Department of The Premier and Cabinet
A Quick Look - Japan & WA
• Japan rates third after the US and UK as Australia’s largest source
of foreign investment.
• Last year a large proportion of Japan's new $120 billion in
investments in Australia came to WA, primarily for resource
development.
• Western Australia’s trade with Japan in iron ore in the 1960s and
LNG in the 1980s created WA's first modern resources boom.
• Iron ore was Japan’s largest import commodity from Western
Australia in 2012, valued at $11.5 billion or 42% of total imports from
Western Australia.
Government of Western Australia
|
Department of The Premier and Cabinet
A Quick Look - Japan & WA
• Iron ore exports to Japan have grown at an average annual rate of
12% over nine years, from $2.1 billion in 2000-01 to $11.5 billion in
2012.
• It was Japanese foundation investment that provided the core
infrastructure that enables WA today to service the broader global
market for petroleum and mineral resources.
• Japanese investors - including some here today – continue investing
into the expanding WA minerals sector, and most recently into
boosting production of rare earths.
Government of Western Australia
|
Department of The Premier and Cabinet
Functions of the Agency
“Opening the door to Japan”
•
WA Tokyo Office established in 1968, first Australian state office in Japan
•
In keeping with our broad role to support, help coordinate and expand WA-Japan
trade, the WA government Japan offices work to facilitate and support the flow of trade
and investment in both directions.
•
Our key function in Japan is to provide local on-the-ground knowledge and expertise to
support WA companies looking to grow and expand by entering the Japanese market.
•
Our other primary functions include:
–
Assisting new and existing Western Australian businesses to grow through diversified exporting
–
Attracting new Japanese business and investment into Western Australia
–
Provision of information on approvals processes, royalties and taxation
–
Helping to establish business bases in Japan for Western Australian companies
–
Offering advice on political, economic and cultural conditions in Japan
–
Assisting with missions, exhibitions and company visits to and from WA
–
Promoting goodwill via cultural and education exchanges
–
Assisting any Japan-based activity that benefits Western Australians
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Iron Ore Market
• In 2011 the Japanese steel industry recovered steel production
levels to pre-Global Financial Crisis (GFC) levels. A production of
120.6Mt of steel output was achieved in the 2012 calendar year, a
15% increase over 2011. This production retains Japan’s standing
as the second largest world steel producing country, with 7.8% of
world supply.
• The Japanese steel industry is reliant for a significant part of its
output on the export market (about 40%), particularly to
neighbouring countries of South Korea, China, Thailand and
Taiwan.
• A portion of “Chinese” demand is actually indirect Japanese demand
as Japan is the largest foreign investor in China.
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Iron Ore Market
• Japanese steel company growth is seen via participation in joint
venture steel developments or alliances in a wide range of locations,
especially developing regions such as Brazil, India, China, and
Vietnam.
• Overall Australia supplied 60.2% or 83Mt of Japan’s total iron ore
intake of 134Mt in 2011. This is double the supply sourced from
Brazil.
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Iron Ore Market
• The question of continuing competitiveness of Western Australia is
important in maintaining our 60% penetration of the Japanese
market. Additionally, to Japan the availability of quality ore supply is
important, in what it sees as a market more focussed on China,
lower quality ores and the increasing lock up of supplies by Chinese
“companies”.
Government of Western Australia
|
Department of The Premier and Cabinet
Japanese Steel Mills
Crude Steel Production 2012
1. Arcelor Mittal
93,600,000t (down from 2011)
2. Nippon Steel/Sumitomo Metal Corp.(from 1/10/12)
47,900,000t (up from 2011)
3. Heibei Steel (China)
42,800,000t (down)
4. Baosteel (China)
42,700,000t (down)
5. Posco (Korea)
39,100,000t (flat)
9. JFE Steel
30,400,000t (up)
48. Kobe Steel
6,800,000t (up)
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Iron Ore Opportunities
• Expansion in steel production linked to exports in autos
• Demand stagnant in recent years but will increase due to rebuilding
needs (March 2011 earthquake) and greater export potential.
• Investment in WA projects has stepped up in 2012 and this trend will
continue.
• Recent investment activity includes:
– Roy Hill (Marubeni 12.5%)
– Southdown (Sojitz/Kobe Steel 30%)
– Oakajee(Jack Hills/OPR) (Mitsubishi Corporation 100%)
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Iron Ore Opportunities
• Potential steel mill investors include Nippon Steel/Sumitomo Metals,
JFE Steel and Kobe Steel.
• Potential trading firm investors include Mitsui & Co, Mitsubishi
Corporation, Sumitomo Corporation, Itochu Corporation, Sojitz
• Consortiums of the above are also possible investor entities
• Our Agency can coordinate meetings with these companies in
Tokyo, introduce key decision makers and follow up on meetings.
• The key is to visit Japan with a carefully prepared presentation. We
can work with you to make sure your presentation materials are
suitable.
• Most decisions are long term, “Win- Win” is the goal.
• Our Agency has assisted in every Japanese iron ore investment in
WA in the last 10 years.
Government of Western Australia
|
Department of The Premier and Cabinet
Japan - LNG Market
• Japan is still WA's number one buyer for LNG - and that is currently
where much Japanese investment is heading
• The March 11 2011 earthquake and tsunami caused the gradual
shutdown of Japan’s 43 nuclear power stations – to date only 2 have
reopened but more possible under current government
• The loss of nuclear has meant a scramble for LNG and spurred
equity investment in projects to guarantee off-take
Government of Western Australia
|
Department of The Premier and Cabinet
Japan - LNG Market Key Facts
• LNG: Tokyo Electric Power and Tokyo Gas were one of eight
foundation customers for Western Australia’s North West Shelf LNG
project.
• In recent years, Tokyo Electric Power has become a foundation
customer/investor in Chevron’s Wheatstone project.
• Woodside’s Pluto Project is funded through a financial agreement
with JBIC. Tokyo Gas and Kansai Electric Power Corporation
acquired 5% equity each in the project.
• Chevron’s Gorgon project has several Japanese partners including
Tokyo Gas, Osaka Gas and Chubu Electric Power Corporation.
Government of Western Australia
|
Department of The Premier and Cabinet
Japan - LNG Market Key Facts
Current major equity holdings by Japanese entities:
North West Shelf: MiMi (Mitsui 8.33%, Mitsubishi 8.33%)
Browse: MiMi (under negotiation)
Wheatstone: PE Wheatstone (TEPCO, JOGMEC,MC, NYK – 10%), Kyushu Electric
(1.83%)
Pluto: Tokyo Gas (3.07%), TEPCO (6.13%)
Gorgon: Osaka Gas (1.25%), Tokyo Gas (1%), Chubu Electric (0.417%)
Ichthys: Tokyo Gas (1.575%), Osaka Gas (1.2%), Chubu Electric (0.735%), Toho
Gas (0.42%)
Government of Western Australia
|
Department of The Premier and Cabinet
Japan - LNG Opportunities
• Onshore opportunities, increasing interest in shale gas, Canning
Basin exploration by Buru Energy and Mitsubishi Corporation is
positive an exciting development
• Japan’s LNG demand dependent on the energy mix but will increase
for the time being
• An important key is providing timely exploration releases to
Japanese companies – state government works in conjunction with
the federal government to provide detailed information via seminars
and meetings
• Our Agency is always willing to introduce potential equity and offtake partners
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Agribusiness Opportunities
Currently very strong opportunities exist for wheat and oranges
•
•
•
•
WHEAT: Potential deregulation on wheat imports to Japan. There is a
possibility that MAFF might allow to import noodle wheat under SBS
(Simultaneous Buy and Sell) system. Though there is no official
announcement from MAFF, major flour millers have started preparing for
this possible deregulation on wheat import.)
Though the demand for WA noodle wheat from Japan is stable, the majority
of WA farmers have been reluctant to grow noodle wheat because of the
current Japanese tender system (current tender system emphasises price
not quality, reducing the value of the noodle wheat crops.
DAFWA in cooperation with the WA government has been discussing a
potential solution with MAFF.
Successful exporters include CBH Grain, Cargilll, Emerald, etc
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Agribusiness Opportunities
•
ORANGES: WA now able to export fresh oranges (mainly navel) and
mandarins
•
AEGIC and the Tokyo Office have started looking into orange market
opportunities in Japan. Though the production of oranges in Australia is not
large, Australia is the second largest orange exporter to Japan. As the
harvest season is opposite to the northern hemisphere (US etc), there is
little competition
•
High labour costs and the fruit fly issue are the negative issues.
•
Global Produce Solutions and other growers are potentially successful
exporters to Japan
•
We are ready to assist by introducing and coordinating with importers
Government of Western Australia
|
Department of The Premier and Cabinet
Japan – Agribusiness Opportunities
• Further opportunities exist for seafood, wine and some bulk items
• Since 2004 the Tokyo Office has successfully introduced 44 WA
wine producers to importers and retailers
• WA wine has name recognition as premium wine, mostly due to
Margaret River fame, but we are promoting all regions
Government of Western Australia
|
Department of The Premier and Cabinet
Kansai Region Opportunities
•
•
The Kansai region comprises includes the prefectures of Mie, Nara,
Wakayama, Kyoto, Osaka, Hyōgo, and Shiga. The urban region of Osaka,
Kobe and Kyoto (Keihanshin region) is the second most populated in Japan
after the Greater Tokyo Area.
WA has maintained an active sister state relationship with Hyogo for 32
years – regarded as the model sister state relationship
Government of Western Australia
|
Department of The Premier and Cabinet
Kansai Region Opportunities
• Opportunities exist in the following sectors
– Infrastructure development
– Environmental and energy technologies
– Lifestyle and culture
– Life science and biotechnology
– Medical research
– Robotics and aviation
Government of Western Australia
|
Department of The Premier and Cabinet
Kansai Region Opportunities
• Successful market entry by WA industry in Kansai includes
– Fashion and textiles – high quality valued tor – WA Banshu Fashion Textile
Program
– Biotech and medical – relative expertise recognised – Trilateral collaboration
between UWA, Kobe University and Zhejiang University
Government of Western Australia
|
Department of The Premier and Cabinet
To the future…
 Strong psychological impact
 Olympic construction a
stimulus
Government of Western Australia
|
Department of The Premier and Cabinet
Contacts
Western Australian Government
Tokyo Office
Craig Peacock
Commissioner North Asia Agency
14th Floor, Imperial Hotel Tower
1-1-1 Uchisaiwai-cho, Chiyoda-ku, Tokyo
100-0011 Japan
Tel: +81 3 5157 8281
Department of State Development
Ms Amy O’Sullivan
Manager, Japan/Korea/Southeast Asia
Level 6, 1 Adelaide Terrace, East Perth
Western Australia 6004
Tel: +618 9222 0465
Web: http://wajapan.net
Western Australian Government Kobe Office
Ms Noriko Hirata, Regional Director
6F Golden Sun Bldg,4 chome 3-6 Nakayamate-dori
Chuo-ku Kobe, Hyogo 650-0004, Japan
Tel: 078-242-7705
Government of Western Australia
|
Department of The Premier and Cabinet