Now is the time to focus on Japan

Japan is our third largest market and represents a massive opportunity for New Zealand. Our annual exports are worth over NZ$3.6 billion and growing. Each year, we host more than 12,000 international students from Japan and welcome more than 100,000 Japanese tourists to our shores.

It can be difficult and expensive to do business with Japan but don’t let that obscure the potential, and the changes taking place there.

The headlines look bad. GDP growth was down 3.3 percent in the last quarter of 2008, largely as a result of falling exports, and the economy recorded its worst performance in 35 years.

But on the positive side, the government has injected around 90.8 trillion yen (NZ$1.4 trillion) into the economy and identified key areas for future growth. These include transforming Japan into a low carbon society, training more nurses to care for Japan’s ageing population, working with regional neighbours on infrastructure developments and boosting tourism.

Those measures are expected to deliver GDP growth of around two per cent and create 500,000 jobs in the short term and two million jobs by 2012.

Changes creating opportunities

Japan is undergoing major change. Its population is declining with a projected loss of 14 million workers by 2030. More women are entering the workforce to make up the shortfall, fuelling greater demand for services such as child care.

At the same time, like New Zealand, Japan’s population is ageing with the percentage of people over 60 expected to rise from 22.9 to 28.6 by 2018. This is putting greater pressure on healthcare services.

Across all demographics, there is growing interest in foods and nutraceuticals that contribute to a healthy lifestyle.

All these trends present opportunities for business. There is demand for labour saving technologies in Japan, for health IT products that can save money and bring efficiencies and, of key importance to New Zealand, for both processed and functional foods.

Consumer spending in Japan has been shrinking but it hasn’t dropped as far or as fast as spending in some other areas. People still have to eat and they’re still prepared to buy from New Zealand. Food and beverages accounted for one-fifth of the 13 percent growth in our exports to Japan in 2008.

Food safety high on the agenda

Japan can provide only 40 percent of the food calories it needs, so there is a huge captive market. There’s also plenty of room for New Zealand to improve its profile as a source of high quality food. Recent food scares in parts of Asia have made the Japanese wary and New Zealand, with its clean green image, is an attractive option.

New Zealand food businesses that can provide the volumes needed to give confidence about security of supply are particularly well positioned. The Japanese are good savers and many of the major, listed companies are sitting on large amounts of cash which are available for investment offshore, particularly in food-related businesses. Others are increasing direct imports.

One sector growing steadily in Japan is processed and pre-cooked foods. New Zealand companies can benefit from demand for innovative menu items or supermarket products that are easy and quick to prepare.

Exporters are cautious about expansion during a global economic downturn and understandably nervous about Japan, given its economic troubles.

But it’s important to let the bigger picture prevail. Japan remains the second biggest economy in the world, with one of the highest GDP per capita levels and a sound legal system. New Zealand exporters are closer to Japan than their competitors in North America and Europe, and we’re well regarded there.

Importantly, recent currency depreciation provides an unprecedented chance for some quick wins in Japan.

Now is the time to capitalise on these advantages.