Victoria – Japan
Market Engagement Plan
2014 –2016
Department of State Development, Business and Innovation
State Government of Victoria
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Table of Contents
Introduction ............................................................................................................................................ 3
Victoria – Japan Relations ....................................................................................................................... 3
People to People ................................................................................................................................. 3
Investment .......................................................................................................................................... 3
Trade ................................................................................................................................................... 4
Trends driving current and future opportunities.................................................................................... 4
Wealthy population ............................................................................................................................ 5
Energy security .................................................................................................................................... 6
Food security....................................................................................................................................... 6
Globalisation ....................................................................................................................................... 7
Ageing population ............................................................................................................................... 7
International sporting events ............................................................................................................. 8
What we will do ...................................................................................................................................... 8
Investment .......................................................................................................................................... 8
Trade ................................................................................................................................................... 9
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Introduction
Japan is the third largest economy in the world, Australia’s second largest trading partner
and Australia’s third largest source of foreign direct investment. Hit by financial crises in
1997 and 2008, Japan’s economy has until recently been characterised by weak growth
interspersed with periods of recession and deflation. The International Monetary Fund has
projected growth for Japan of 1.4 per cent in 2014.1
The Japanese Government is undertaking a three-pronged strategy to return the country’s
economy to sustained growth. Elements of the strategy include aggressive monetary policy,
flexible fiscal policy and structural reform. The first two elements have contributed to an
increase in business confidence in Japan, which has bolstered consumption, investment and
economic growth.
Victoria – Japan Relations
People to People
The Victorian Government, Japanese community leaders and locally based trade bodies
have sought to capitalise on the strong people to people links between Victoria and Japan,
to drive economic growth and opportunities for collaboration. The Victorian Government’s
sister-state relationship with Aichi Prefecture, established in 1980, has been a pillar of
Victoria’s relationship with Japan, while the sister city relationship between the Cities of
Melbourne and Osaka, Japan’s second largest city, has also been important to the
development and deepening of ties.
Victoria is home to a fast-growing Japanese community, with 6,820 Victorians born in Japan,
and 9,789 identifying with Japanese ancestry. The community is supported by the
Consulate-General of Japan in Melbourne and a range of active community organisations,
including the Japanese Society of Melbourne, which contributes to the development of
cultural relations between Australia and Japan. There are 92 sister school partnerships
between Victorian and Japanese schools.
Investment
Over 140 Japanese companies operate in Victoria, employing more than 10,000 people
across a wide range of industries. A significant amount of recent investment into Victoria
has been the result of re-investment by Japanese companies seeking to expand operations;
for example, Nippon Paper’s 2012 investment of $90 million to increase recycled paper
production at its Maryvale mill and Kagome Australia’s investment of an additional $21
million to expand its vegetable processing facility, announced in 2014.
1
International Monetary Fund, World Outlook Economic Database, April 2014, (accessed 5 May 2014).
3
Key factors attracting Japanese investment to Victoria include: a growing population;
political and economic stability; a transparent and navigable regulatory regime; a highly
skilled and educated workforce; access to inexpensive raw materials; and long established
business and cultural exchanges.
Trade
Japan is a mature market for Victorian exports; the merchandise trade relationship has been
relatively stable for the past 10 years (see Figure 1).
Figure 1: Victoria/Japan merchandise trade FY 2003 – FY 2013
Exports from
Victoria
Imports from
Japan
2003
1786
2004
1629
2005
1756
2006
1684
2007
1764
2008
1843
2009
1731
2010
1561
2011
1593
2012
1712
2013
1739
5216
4963
5026
4934
4933
5380
4834
5108
4669
5223
4507
Source: DSDBI using ABS data – (A$ million)
In 2012-13, Japan was Victoria’s third largest merchandise export market. Victoria’s trade
relationship with Japan was valued at around $6.3 billion with the balance of trade in
Japan’s favour.2 Victoria’s goods exports to Japan totalled $1.7 billion in 2012-13, with major
items including cheese and curd ($368 million), aluminium ($174 million), wood chips or
particles ($144 million), and liquefied propane and butane ($142 million).3
Victoria’s goods imports from Japan totalled $4.5 billion in 2012-13. Major items included
passenger motor vehicles ($1.9 billion), goods vehicles ($378 million), vehicle parts and
accessories ($271 million) and internal combustion piston engines ($158 million).4
International education and tourism remain Victoria’s key service exports to Japan. For the
year ending June 2013, there were an estimated 39,800 Japanese overnight visitors to
Victoria, a 3.9 per cent increase on the previous year.5 Visitors from the market are forecast
to have a 1.7 per cent annual average growth rate out to 2022-23.6
In the year to December 2013, 1,974 international student enrolments from Japan were
recorded onshore in Victorian institutions. Japan is the largest source market for study tours
in Victorian Government schools.
Trends driving current and future opportunities
The Japanese market offers many opportunities for Victorian businesses now and into the
future. Victoria is well placed to take advantage of investment from Japanese companies
seeking to grow and diversify. The Australian Government announced on 7 April 2014 the
2
Australian dollars used in this MEP unless otherwise specified.
3
DSDBI using ABS data.
4
DSDBI using ABS data.
5
Tourism Research Australia, International Visitor Survey, June 2013.
6
Tourism Research Australia Forecast, Spring 2013.
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conclusion of negotiations on the Japan-Australia Economic Partnership Agreement. When
in force, the agreement will provide improved access to the Japanese market for a range of
Victorian goods and services.
Wealthy population
Japan has a wealthy population with nominal gross domestic product per capita of
US$38,491 in 2013 (ranked 24 globally).7 Despite the country’s economic challenges,
Japanese households continue to enjoy a high disposable income.8 Japan has a strong
savings history and has been the world’s largest creditor nation for the last 22 years.9
Japanese households and institutions hold investable wealth of around US$17.2 trillion.10
Significant opportunities exist for Victoria to increase the proportion of Japanese spending
on Victoria’s goods and services, appealing to the Japanese demand for quality and value.
Tourism and information and communications technology (ICT) are two industries with good
growth prospects. With regard to the former, although Japan is a long standing tourism
market for Victoria, the State receives only a small share (13 per cent) of the total Japanese
visitor market to Australia. On the latter, the market size of Japan’s ICT industry in 2010 was
98.8 trillion yen and the industry contributed 10.7 per cent of the industry component of
Japan’s GDP – larger than the contribution of construction, transport and retail.11
The announcement by Jetstar Airways in December 2013 that it would commence a new
direct service between Melbourne and Tokyo (Narita) from 29 April 2014, the first direct
aviation service between Melbourne and Tokyo since September 2008, presents Victoria
with a significant opportunity to grow tourism market share from Japan. Regular direct
flights will ensure Japanese visitors can experience Melbourne, a world class tourism
destination with a range of international events throughout the year. These events include
the Australian Open Tennis Championships and the Australian Grand Prix, as well as
unspoiled natural attractions and unique wildlife, all of which are attractive to the Japanese
market and provide a good basis for driving growth.
Victoria boasts a robust technology export trade based on capabilities attractive to the
Japanese market. Victoria’s information and communication technology strengths include:
telecommunications and broadband solutions and services; niche software development;
games and animation; web applications; and interactive media.
In addition to increasing the proportion of Japanese spend on Victorian goods and services,
Victorian firms are well placed to attract Japanese capital and provide asset management
services. Australia is home to one of the largest and fastest growing managed funds pools in
7
International Monetary Fund, World Outlook Economic Database , April 2014, (accessed 5 May 2014).
8
Higher than the OECD average. Source: Organisation for Economic Co-operation and Development (OECD), OECD Better Life Index ,
www.oecdbetterlife index.org/countries/japan/, (accessed 5 May 2014).
9
Wall Street Journal Online, Japan World’s Largest Creditor for 22nd Straight Year, 28 May 2013.
10
Boston Consulting Group, Global Wealth 2013 - Maintaining Momentum in a Complex World, 2013.
11
Japan External Trade Organisation (JETRO), Japan ICT Overview , November 2013.
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the world and Melbourne is its centre of excellence in asset management and private
pension funds. Many of Australia’s leading financial services organisations are
headquartered in Melbourne’s Docklands, a rapidly growing precinct that is now an
established financial services industry cluster.
Energy security
Japan continues to recover after the March 2011 natural disasters and Fukushima nuclear
crisis, rebuilding infrastructure and repairing supply chains. The Government is also
considering options for securing and diversifying energy supplies in the wake of Fukushima,
presenting potential opportunities for prospective energy exporters.
The Fukushima nuclear disaster highlighted significant energy related challenges that Japan
faces. Nuclear facilities across Japan were shut down and imported energy accounted for 94
per cent of energy used in 2012, up from 80 per cent in 2010.12 With the overall
contribution of nuclear power to Japan’s energy requirements likely to remain below 2011
levels, demand for diversified offshore oil, gas and coal resources will remain high.
A number of Japanese firms are likely to be interested in pursuing investment opportunities
related to Victoria’s brown coal reserves. Victoria’s plentiful supply of brown coal has the
potential to deliver the economic efficiency and energy security Japan is seeking. Japanese
companies are currently developing clean coal technologies, including gasification and the
production of hydrogen and other liquid fuels and products from Victorian brown coal.
These products represent significant future export opportunities for Victoria.
Food security
There is strong interest in Japan in ensuring the safety and security of food and beverage
supplies, particularly since the 2011 Fukushima disaster. Japan’s food self-sufficiency has
declined over time, due in part to an increasing preference for Western foods such as meat
and wheat based products. As a result, the Japanese Government has set a target of 50 per
cent food self-sufficiency by 2020. This target is challenging given that the current food selfsufficiency rate has remained constant at 39 per cent for the past three years.13 Imports will
continue to be important in meeting Japan’s food needs.
Victoria is very competitive in food and associated food technology exports and has a
reputation for clean, safe and green food production, including in Japan. Victoria is also well
regarded as a reliable supplier of products such as processed dairy, meat, beverages and
grains. The Victorian Government’s Food to Asia Action Plan launched on 5 March 2014
identifies strategies to help Victorian producers and food processors to capitalise on
growing demand in Asia and to grow food and beverage exports.
12
International Energy Agency and United Nations, Energy Statistics Yearbook, via the World Bank, Energy imports statistics, (accessed 5
May 2014).
13
The Japan Agri News, Japan’s food self-sufficiency rate for 2012 stays flat at 39 per cent, 9 August 2013.
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Globalisation
Japanese Prime Minister Shinzo Abe has stated that economic recovery requires Japan to
open its doors to global investment and trade opportunities. However, Japan has recognised
that its workers currently lack the skills required to compete in international markets. 14 The
Government’s global outreach strategy is encouraging universities to globalise and
businesses are demanding graduates with international experience beyond short-course
English.
Following on from the Japanese Government’s September 2012 Global 40+ initiative ($625
million in funding to support student mobility projects), the Abe Government has launched
a new program to encourage Japanese students to study abroad. The program titled
“Tobitate Japan” (Go abroad! Study Overseas, Japan) is part of the wider Abe Government
2013 initiative, “Japan is Back”. The project aims to raise the number of Japanese University
and vocational college students studying abroad from 60,000 (2010) to 120,000 (by 2020),
secondary school students studying abroad from 30,000 (2010) to 60,000 (by 2020), as well
as increasing the number of international students studying in Japan from 140,000 (2012) to
300,000 (by 2020).
With Victoria’s outstanding academic and study environment within close proximity to
unique nature based experiences, Victoria continues to be an ideal destination for Japanese
international students, school excursions and study tours. On 28 October 2013, the
Victorian Government released its International Education Strategy for Victoria 2013-2018,
which will assist Victoria’s education and training sector to capitalise on global education
opportunities, including with Japan.
Ageing population
Japan’s population has been ageing over recent decades due to a low fertility rate and high
life expectancy. The population has been in decline since 2007 and in 2013 fell by 244,000
people. One quarter of the population is over 65 years of age.15 As the population continues
to age, Japan’s healthcare needs continue to increase. This trend provides opportunities for
Victorian health care service providers and research and development organisations.
Victoria has internationally recognised health and aged care capabilities and expertise in
planning, designing and building health and aged care facilities. Victorian health and aged
care companies are also globally regarded for their skills in developing management systems
and providing formal management training. On 30 April 2014, the Victorian Government
launched its Global Health Melbourne Plan to promote Victoria’s healthcare expertise
internationally.
An important consequence of Japan’s demographic profile has been the move offshore of
Japanese companies in pursuit of new markets and growth as Japan’s domestic market
14
IMD, Skill Shortages in Japan, September 2013.
15
Statistics Japan, Ministry of Internal Affairs and Communications, Population Estimates, April 2014.
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shrinks. This trend has supported Japan’s status as a leading international investor, the
second ranked country after the United States in 2012.
While Victoria is already an important destination for Japanese investment, scope exists to
increase Victoria’s share of Japan’s offshore investment, including in relation to food and
agriculture given the reputation of Victoria’s food industry capabilities in Japan.
Exemplifying this, the Victorian Government is working with Mitsubishi Plastics and the
Kaiteki Institute on a pilot hydroponic production project to grow spinach crops, with a view
to undertaking an investment in a full commercial production facility.
International sporting events
Japan is hosting both the 2019 Rugby World Cup and the 2020 Tokyo Summer Olympic and
Paralympic Games, which will require stadium construction as well as sporting products,
services and event management capabilities. The total cost of building and refurbishing
venues is expected to reach approximately US$3.7 billion.16 Victorian firms are experienced
in delivering world class sporting infrastructure and events and are well placed to meet
Japan’s requirements.
What we will do
Investment
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Deepen engagement with existing Japanese key investors in Victoria to identify
opportunities for re-investment.
Promote investment opportunities in Victoria to Japanese companies with the largest
investable cash reserves.
Actively promote the potential development of Victoria’s brown coal reserves.
Increase engagement with the top five Japanese trading houses to influence the
investment leads of their partners.
Maintain relationships with intermediary organisations such as Japanese commercial
banks, law firms, the Japan External Trade Organisation and Japanese local government
entities to identify potential investors. The Tokyo VGBO will continue to strengthen and
widen the scope of its cooperation with intermediary partner, Bank of Tokyo Mitsubishi
UFJ with which a MOU was signed in 2012, for the further promotion of Japanese
investment into Victoria.
Japan Daily Press, Tokyo’s Olympic construction costs likely to double the estimates, 7 April 2014.
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Trade
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Promote Victoria as a trade partner and tourism destination.
Encourage and assist Victorian companies to participate in Victorian Government-led
trade missions in-market and also Victorian Government-sponsored inbound missions.
Help Victorian organisations understand and leverage the Japan-Australia Economic
Partnership Agreement.
Continue to work with the Australian Government to progress Victoria’s market access
interests in the Japanese market.
Continue to encourage and facilitate visits by Japanese Government, industry and
research delegations to Victoria.
Support ministerial and senior Victorian Government executive visits to Japan to deepen
relationships and to discuss collaboration with government, industry and research
organisations (and investment opportunities).
Equip Victorians with the knowledge and skills to engage with Japan through initiatives
such as the Hamer Scholarships Program for language and cultural studies, the Trade
Mission Export Ready Program (delivered in partnership with the Victorian Employers’
Chamber of Commerce and Industry) and through continued emphasis on sister school
partnerships and language learning in schools.
Leverage trade, investment, and education (particularly school visits) opportunities
arising from the commencement of direct flights from Tokyo to Melbourne in April 2014.
Work with intermediaries and other associations such as Austrade, Meat and Livestock
Australia, Dairy Australia, Wine Australia, the Australian and New Zealand Chamber of
Commerce in Japan and the Australia Japan Business Co-operation Committee to
promote Victorian goods and services in Japan.
This document sets out the Victorian Government’s strategy to help deepen the State’s engagement with Japan.
While every effort has been made to ensure accuracy and currency at the time of publication, you should verify
information for yourself and obtain independent professional advice regarding any investment or other business
decision. Authorised by the Victorian Government, Melbourne. © Copyright State of Victoria, June 2014. To receive
this publication in an accessible format email: info_invest.vic.gov.au
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