Prime Minister Abe made a short, punchy speech at the “Invest in Japan” event I attended yesterday in London. Perhaps not quite as passionate as his longer speech at the Guildhall last year, but his key message was clear, that Foreign Direct Investment was an important pillar of his growth strategy and that he was aiming, with Abenomics, to make Japan a more market friendly, more exciting destination for foreign companies.
The current fashion is to say that Abenomics is losing steam, because of the lack of progress with what Abe has termed the third arrow – deregulation and structural reform. My view on this is that the Japanese government can deregulate and pass new, more liberal laws all it likes, but without significant support and action from major Japanese companies, not much will happen.
So foreign investment might be a way to stimulate action and change, if foreign competition is able to enter the Japanese market more aggressively. There is something of a chicken and egg situation, however, in that foreign investors often say they need to see deregulation and structural reform implemented before they will invest in Japan.
There is also a concern, voiced by ex ambassador Sir David Wright at the event, that foreign companies are still seen as “foreign” and may not get equal access to the benefits of any reforms or incentives. The mayor of Kobe was quick to pick up on this point – “foreign companies in Kobe will be seen as Kobe companies” he said, which is no doubt a legacy of Kobe’s long standing history as an international port. Certainly we felt very at ease when we lived in Kobe, as long ago as the 1970s, despite not being members of the rather snobby expat Kobe Club.
So Abe gave concrete examples of where there had been deregulation, in the energy sector and pharmaceutical sectors and also a strengthening of corporate governance, based on British standards. The rest of the morning was given over to presentations by the mayors of Fukuoka and Kobe, and the governors of Mie and Hiroshima prefectures, who were keen to emphasise another area of reform – the new national strategic special zones, where regulations will have a lighter touch, to enable innovation.
It seems Japan’s mayors and governors have more autonomy than in the UK, so many of them were able to showcase particular initiatives and tax breaks they had introduced to encourage investment into their regions. I had been dreading these presentations, expecting a succession of grey men explaining word for word, dreary, text box heavy powerpoint slides in incomprehensible or badly interpreted English, but to the audience’s great delight, the 4 regional leaders wowed us all with their youthful energy, dynamism and sometimes excellent, but always bravely and strongly delivered English, which seemed to come from the heart rather than a script written by someone else.
These men (there was supposed to be one woman too, the mayor of Yokohama, but she was unwell) could be Abe’s fourth arrow – if they can make a convincing case for a Japan as an Asian hub, beyond the bureacracy and vested interests of Tokyo – but I think a bit more strategic thinking behind the marketing is needed. Some sectors in the UK are already aware of Japan’s potential – I was delighted to see Paul Alger of the UK Fashion and Textile Association steer Hawick Knitwear towards Japan as a basis for entry into China, in the recent BBC programme The New Troubleshooter.
The Fukuoka mayor got some way there, with his eyecatching map showing that Fukuoka was equidistant to Shanghai, Seoul and Tokyo. Not to mention the fact that KLM has just started flights from Amsterdam to Fukuoka – a point that caught my attention, as we are about to move to Norwich, and I am looking forward to using Norwich International (sic) Airport to get to Japan, as it has several KLM flights to Amsterdam a day.
There was rather too much emphasis on the nice lifestyle to be had in Japan’s cities (and it made me very nostalgic for the lovely times I had living in Hiroshima and Kobe) and not quite enough hard headed business appeal, particularly along the lines of the point that Steve Crane, of Business Link Japan, made in the final presentation of the day, that it is important to move near your ecosystem and supply chain, when considering location.
The leaders did note the various industries or specialist zones that they were focusing on regionally, but it’s possible that they took it too much for granted that we would understand how industrial clustering works in Japan. Actually, as most of the audience were the usual Japan gang, this kind of marketing would have been wasted on us anyway.
Which brings me to my biggest constructive criticism – the government bodies that organised this seminar, Ministry of Economy, Trade and Industry, Embassy of Japan in the UK, the Japan Local Government Centre and JETRO, really need to network more with the various regions, cities and companies in the UK, so that more representatives of UK companies come to these seminars. JETRO is apparently about to hire some industry sector specialists in Europe as consultants – I presume to help with that. The JLGC head told me that twinning Japanese cities with regional governments in the UK has proved difficult, as no British politician or bureaucrat in this current climate of austerity wants to be seen to be jetting off to Japan on a sushi and sake junket.
As Sir David Warren, former ambassador to Japan, succinctly put it, “it needs to be proved that Japan can be more than a profitable niche”.
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