Japan, the land forgotten by exporters?
The allure of Japan has faded by comparison with the shiny bauble of China.
Once upon a time in New Zealand, Japan was more or less "it" when it came to Asia. Around the late 1960s, a wave of commercial and cultural engagement started with our former war-time aggressor in the Pacific.
The Japanese language entered the secondary school curriculum by the late 1970s. Investments were in productive industries rather than real estate and accompanied by promises of sustained, long term investment.
Polling in 2014 for the Asia New Zealand Foundation found Kiwis warmer in their view of Japanese people (73 per cent favourable) than of Chinese people, who nonetheless still garnered 68 per cent favourable ratings.
However, the same poll also showed concern growing about the levels of Asian investment in New Zealand jumping 5 percentage points to 41 per cent in three years. Anecdotally, that concern has been mostly directed at Chinese investors and will only have intensified in the last two years.
Take, for example, the political blocking of the sale of the Lochinver station to Chinese conglomerate Shanghai Pengxin, last year. At the same time as that was happening, a Tokyo-based multinational and shareholder since 1971 in the PanPac pulp and paper operation bought Graeme Hart’s remaining stake to take 100 per cent of Carter Holt Harvey.
In the process, the iconic Carter Holt name changed to Oji, which now owns the Kinleith and Tasman pulp and paper mills, all with barely a whimper. That says something about a different view of Japanese money in New Zealand.
Yet equally inaudible, trade officials argue, is the pulse on the Japan-New Zealand trade relationship. While still our fourth largest trading partner, the allure of Japan has faded by comparison with the shiny bauble of China.
Two-way trade with China is closing on $20 billion a year, running $1.7b in China’s favour, after a massive run-up following conclusion of the China-New Zealand free trade agreement in 2008. Two-way trade with Japan is stuck at a bit above $6b a year, running in Japan’s favour by about half a billion dollars in the year to March. Is that really all it’s good for?
Setting aside 25 years of economic stagnation, Japan remains the world’s third largest economy and a highly profitable market for New Zealand companies with established operations there.
Fonterra, for example, sells just 5 per cent of its total annual production by volume in the Japanese market, but it accounts for 20 per cent of the global group’s operating earnings. Barely a kilo of infant formula makes it into this market, where the product mix is high value ingredients for health foods and drinks, and cheese and butter for combination into Japanese manufacturers’ products. Here, Fonterra is doing what it says it aims to do everywhere – go up the value chain for high margin products at lower volumes.
ANZCO, the jointly owned Japanese-New Zealand beef and lamb processor, tells a similar story. "China versus Japan is a growth versus a wealth story," ANZCO’s president in Japan, Makoto Kinjo, said. "Japanese consumers are sophisticated, welltravelled, well-educated and they know what they value and are prepared to pay for that."
Finding pockets of growth in Japan’s high margin environment might be harder, but rewarding nonetheless.