Japan Market Opportunities
MFA: Strategic opportunities for foreign exporters
Despite the relatively mild course of the covid-19 pandemic in Japan compared to the situation in Europe or America, the Japanese economy, the third largest in the world, has been hit in a significant way. For 2020, GDP fell by 4.8%, despite massive state support. In response to the coronavirus crisis, the Japanese government has gradually approved three emergency budget packages totaling more than 300 billion. JPY. From the beginning of 2021, a state of emergency lasted until mid-March in part of the country, including Tokyo, which, according to current estimates, reduced GDP by 2.5% and thus delayed economic recovery.
The economic situation is therefore characterized by extremely high uncertainty. In addition, the country essentially closed down last year, which not only had a serious impact on tourism, when the number of foreign tourists decreased by 87% compared to the previous year, but also on cross-border trade. Last but not least, the pandemic caused the postponement of the 2020 Summer Olympics in Tokyo to 2021. They are still expected to take place in a very limited format, where visitors from abroad will not be admitted.
The main areas to which extraordinary state support is directed relate to the strengthening of the health sector and anti-epidemic measures; extension of supports for maintaining employment; digital transformation; decarbonization; building infrastructure to strengthen resilience against natural disasters and supporting change in business models and supply chains.
The stated priorities will remain in the center of the government’s attention for the next budget period as well, as follows from the record budget approved at the end of March 2021 in the amount of 10 billion. JPY. However, its structure also confirms Japan’s long-term problems, when one third (JPY 3billion) will be used to finance the social system. Moreover, the current crisis will further deepen the known weaknesses of the Japanese economy in the form of a rapidly aging population, low female employment and declining productivity.
The main opportunities that currently appear from the point of view of opportunities for Czech companies in relation to Japan include opportunities in the healthcare and pharmaceutical sectors, in energy, ICT, the entertainment industry, as well as in the agricultural and food industry.
According to allcountrylist, the energy sector is promising for opportunities in Japan in the long term. Japan has very limited raw material resources, and after the shutdown of most nuclear power plants as a result of the Fukushima accident in 2011, the Japanese government’s interest in supporting the development of renewable energy sources has increased significantly.
One of the long-term promising options, in which Czech companies have been actively participating for many years, is the development of hydropower, because due to the mountainous terrain and the large number of rivers and canals, Japan is an ideal place for the construction of small and medium-sized hydropower plants. The government is also investing considerable resources in the research and practical application of hydrogen technologies, in which Japan sees a great future.
Due to the removal of the consequences of the aforementioned accident in Fukushima, which will take several decades, there is still a great demand for technologies to remove nuclear contamination and technologies to further increase the safety of power plants. Prospective opportunities also offer future sources of nuclear energy, especially in the area of the development of small nuclear reactors, for which Japan has high expectations, considering them to be a cheaper and, above all, a safer variant of classic nuclear power plants.
As in all other advanced economies, in the case of Japan, the rate of use of information technology in society is very high. The declared states of emergency in the spring of 2020 and the beginning of 2021 forced the conservative Japanese authorities and companies to switch to intensive online operations and only underlined the need for high-quality and reliable provision of general IT technologies, such as cyber security, processing of large amounts of data, network monitoring or high-quality localization and translation programs.
The transition of a large number of companies to at least partial home office-type operation then created a great demand for the digitization of documents, the development of an online payment system and the acceleration of preparations for the so-called “digital yen”, which should consist in the interconnection of cashless payment systems, which are independently provided at present by several different institutions (especially commercial banks, public transport operators and mobile operators).
Other prospective ICT sectors that will emerge strengthened from the current crisis include the Internet of Things, artificial intelligence, effective management of municipalities and their complete infrastructure (so-called “smart cities”) or e-commerce, where the number of purchases made is increasing online.
Entertainment and leisure
Even before the coronavirus crisis, the gaming industry was one of the fastest growing sectors of the world economy. In Japan, computer games are very popular and saw a further increase in usage during the state of emergency. Japan’s game industry market, with a size of almost 15 billion USD, is the third largest market in the world after the US and China.
From this segment, the area of mobile games is growing the fastest, which already amounted to billion USD in 2020, and with regard to the gradual improvement of powerful mobile phones, its further steep growth is expected. In addition, Japan has long been one of the countries that sets the trend in the development and future direction of this industry – local companies such as Nintendo, SEGA or Sony/Playstation are among the icons of the gaming industry.
The Czech Republic has a long-term very strong position in this sector, game studios such as Warhorse Studios, Bohemia Interactive, Amanita Design, Beat Games or DIVR Labs have achieved global success with many game titles, and most of them have already successfully entered the Japanese market.
In addition to video games, opportunities for success in the Japanese market also include a very widespread segment of educational games, simulators for practical training and entertainment, or games focused on amateur artistic creation (videos, music, design, drawings, etc.), which are also popular in Japan. and extended. This is also related to the growing interest in VR/AR/MR technologies.
Healthcare and pharmaceutical industry
The aging population and the famous Japanese longevity place significant demands on health care and its financial and personnel provision. Japan’s traditional inclination towards modern technologies and especially towards robotics creates potential for Czech companies in the field of specialized medical devices, digital technology or diagnostic devices, including devices capable of continuously monitoring the patient without being confined to a bed and calling for help if necessary, or robotic solutions that can contribute to the mobility of clients or facilitate the work of caregivers and medical staff in any way.
At the time of the strictest coronavirus restrictions, for example, humanoid robots have proven themselves very well in treatment or care facilities for the elderly, not only in the role of “feeders” of various medicines or aids, but also as substitute companions that replaced patients’ limited contact with their loved ones. The use of robotics in Japanese healthcare will undoubtedly continue to increase based on similar experiences. For Czech companies and research institutions, the post-coronavirus era will bring an increase in opportunities in the field of supplies or joint research and development in the field of medical devices, medical and diagnostic devices and hospital equipment, possibly in the development and testing of drugs and vaccines.
A separate chapter, where the pharmaceutical industry organically mixes with the field of ICT, is the planned development of so-called “Smart laboratories” for the automation, intensification and acceleration of research using artificial intelligence, IoT and robotics.
Agricultural and food industry
Japan is the fourth largest importer of food in the world and the largest importer of meat. One of the main reasons for low self-sufficiency is the relatively small area of land usable for agricultural purposes, which now accounts for around 12% of the total area in Japan. Food self-sufficiency is therefore one of the important topics of Japanese agrarian policy.
Japan now has food self-sufficiency at a record low 37%. During the state of emergency caused by the covid-19 epidemic, due to the shortened opening hours of restaurants, the demand for semi-finished products, ready-to-eat meals and basic foods, e.g. meat, increased, especially due to greater interest in cooking at home. In the post-coronavirus era, customers are expected to return to restaurants and the associated increased consumption of alcoholic beverages and ingredients used in restaurant facilities for food preparation.
Embassy of the Czech Republic in Tokyo
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