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Profiting from the Japan FTA

The new free trade agreement is a big deal for

Australian business. As big as we want to make
it,that is.
Australias trade relationship with Japan has been likened
to that of an old married couple: committed, reliable, but a
bit stale.
But Japan has rediscovered its passion for growth. The
Abe government has set ambitious economic goals for
the country in the lead-up to the 2020 Olympics, and is
pursuing an aggressive reform agenda.
So the signing of a new free trade agreement comes
at a good time for Australian businesses. Its a chance
to rekindle the lost spark with our second biggest
tradingpartner.
Japan has also given Australian businesses a unique
opportunity and competitive edge to participate in its
growth. Australia is the largest trading partner to have
signed a bilateral trade agreement with Japan.
The impetus, however, rests with Australia. Businesses must
take the time to work through what the 1,100-page deal
means for them and their industries.

Key elements of Japans growth agenda:

Multiple opportunities
The good news is that in addition to lowering tariffs on specific
goods and services, the Free Trade Agreement(FTA)
covers many general business matters such as electronic
commerce, government procurement, intellectual property
and business travel.

Release of capital

Innovation and robotics

Clean and efficient energy

This means there are opportunities for a wide range of

Australian companies to benefit from the FTA, and they
should not be discouraged if they dont immediately see
their good, service or industry in the spotlight.

Training and management education

The other part of the puzzle lies in understanding how

the Japanese economy is changing as a result of both
government reforms and shifting consumer trends.

Institutional transformation

Health sector reform and deregulation

Corporate tax reform

Any business interested in Japan should familiarize itself

with the Abe governments growth agenda. It identifies
sectors and areas planned for a shake-up, pointing the way
to opportunities for Australian companies to participate
more broadly in the Japanese market.
Japanese consumers too are changing. Once considered
highly predictable in their savings and spending patterns,
consumers are now more diverse.

Playing to our strengths

Foreign workforce

To really make the most of the FTA however, Australian

businesses should focus on those areas where Japans needs
closely match our strengths.

Education

Finance

There is also a growing

demand for management
education as Japanese
companies under pressure
to transform themselves
recognize the importance of
global business thinking, as
well as English competency.

Japans ageing population is also relatively wealthy. With

more than 50 per cent of investible funds in cash, Japanese
consumers will be increasingly looking for reliable and secure
wealth management products to fund their old age.
Australian financial service providers can use their expertise
to design wealth and pension products for distribution in the
Japanese market. And this extends to property investment
products such as REITS, in which Australia has an advanced
market but Japan has only recently introduced these products.

Health

Food products

Japan has an ageing population and a

growing demand for healthcare. Australia
has an outstanding track record in medical
R&D and innovative service delivery, that
may match well to Japans needs.

Japan has historically protected its domestic agriculture

industry with sky high tariffs of up to 219%. However,
Japan has opened the door to Australian agricultural
exporters by substantially lowering its tariffs on beef,
sugar, horticultural produce, wine andseafood.

Minerals and energy

Infrastructure

To feed its economic growth, Japan has agreed

to eliminate its tariffs on the A$17 billion
worth of Australian minerals and energy it
imports annually. These tariffs cost Australian
exporters A$119 million in 2013.

With the 2020 Tokyo Olympics only six

years away, Japan is undertaking a major
investment program to update its existing
infrastructure, much of which dates back
to the 1960s when the country last hosted
thegames.

And these opportunities extend beyond the domestic

Japanese economy. Japan is significantly ramping-up its
activities and direct investment into foreign markets and
looking for partners to assist.

Importers and distributors

Australian businesses acquiring Japanese manufactured
products will also benefit from the FTA. Under the FTA, a
broad range of tariffs on Japanese goods will be eliminated
upon the agreements implementation. However, certain
sensitive industry sectors will be subject to tariffs which
phase to zero over a number of years. The benefits offered
by the FTA will only be available to businesses that
satisfy certain transformational tests and evidentiary
requirements. These requirements are complicated and
differ from product to product, but once satisfied, can
enable businesses to make substantial savings and the
ability to reduce the landed cost of goods in Australia.

Setting up for success in Japan

Doing business in Japan is not difficult, just different. And
the FTA provides the incentive for Australian business to
re-engage with our second-biggest trading partner at a time
when both our countries are sharply focused on growth.
Anopportunity there for the taking.

Get to know the Japanese market.

Find your niche.
Partner to grow in third markets.
Focus on innovation and service not price.
Utilise the FTA.

For further information contact:

Steve Billingham

Richard Gruppetta

Alexander Maron

Gary Dutton

Partner, Consulting Asia Leader

Director, Consulting Asia

Senior Manager, Consulting Asia

Principal, International Trade and Excise

+61 (2) 8266 3417

steve.billingham@au.pwc.com

+61 (3) 8603 1093

richard.gruppetta@au.pwc.com

+61 (2) 8266 1490

alexander.maron@au.pwc.com

+61 (7) 3257 8783

gary.dutton@au.pwc.com

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