70 years and growing strong: Japan and Israel mark a momentous milestone

Koichi Mizushima, Ambassador of Japan to Israel

How has the 70th Anniversary of relations between Japan and Israel benefited both countries and how would you characterize the current state of bilateral relations between the two countries?

Through this anniversary we have witnessed that Japan and Israel has been getting increasingly close in various fields although we are located at two distant ends of the Asian continent.

What are some recent milestones in collaboration and exchange shared between both countries?

In 2021 the investment from Japan to Israel reached a record high of approximately 2.9 billion USD accounting for about 16% of all foreign investment to Israel.

In which areas, particularly in trade are there opportunities for cooperation between both countries?

Taking advantage of each other’s strong points, individual businesses of both countries could jointly cooperate and tackle the challenges that human beings are now facing with.

What can we expect from the Israel – Japan partnership moving forward?

We share the desire to strengthen and deepen our partnership in a wide range of fields in the coming years including business, security and others. This is beneficial not only bilaterally but also globally.

Read full interview here.

Gilad Cohen, Ambassador of Israel to Japan

How would you characterize the relationship between Israel and Japan today?

“Our relations with Japan are constantly growing, especially in the past few years; the potential for future opportunities is exceptional. We view Japan as a strategic partner with whom we share similar interests, based on mutual democratic values.”

What areas for cooperation and opportunity exist between both countries?

“Our cooperation in the areas of innovation and advanced technologies are the driving forces of our relations; this contributes greatly to the economic security of both countries. With the current global situation, defense is another notable field on which we focus.”

Tell us about Israel’s most popular tourist attractions for Japanese, and what sites are yet to be explored?

“Israel is an amazing destination that encapsulates many diverse attractions. From the vibrant beaches of Tel Aviv to fascinating historical sites in Jerusalem, desert exploration in the south, and mountain hiking in the north—all within a short distance from one another.”

Daniel Kolbar, Minister for Economic Affairs, Embassy of Israel in Japan

How has this relationship evolved in the last seven decades, in relation to sectors like technology transfer and people-to-people exchange?

“Until the 1980’s, bilateral commercial relations were limited, mostly due to Japan’s concerns about the Arab boycott. During the 90’s trade volume started to pick up but the main development occurred over the last decade, when Japanese companies discovered the great potential of partnering with Israeli innovation. Both governments also stepped up collaborations and signed many agreements, including on protection and promotion of investment in 2017.”

How important is Japan as a market to Israeli industry and as a source of foreign investment?

“Japanese investment in 2021 registered a record of $3 billion, representing nearly 16% of foreign investments in Israeli High-Tech. Japan has become increasingly important over the last 7 years, attracting the interest of many Israeli VC’s and start-ups.”

Advocate Zeev Weiss, Chairman of the Israel-Japan Chamber of Commerce and Friendship Society

What was the nature of the economic-commercial relations between Japan and Israel in the first years after the establishment of the relations?

“In the first few years, trade and investments hardly existed. Japan was reluctant to upset its oil suppliers, many of whom belong to the Arab League, which has long backed a boycott of Israel, the ABC-Arab boycott considerations.”

Which Japanese industries operated in Israel in those years?

“Subaru cars were the only Japanese car imported to Israel. Sony Corporation exported from Europe, and CNC machines were imported from Japan. Israel’s main exports to Japan were diamonds, orange juice, and Sweetie. In the early 90s following the gulf war and peace process with Jordan and the Palestinians (Oslo Agreement) Japanese SOGO SHOSHA opened small liaison offices in Israel. At that same time more Japanese automakers entered gradually the Israeli market.”

What were the barriers to or reasons that it took time for Japanese companies to penetrate the Israeli market?

“Arab Boycott considerations, Israel being a small market for consumer goods, cultural gap, long distance, In the Japanese corporations’ structure, Israel in many cases was put under the Middle East HQ (many times in Dubai). These all made things difficult; back then there were no relations between Israel and the UAE.”

What happened in 2014 that marked a turning point in economic relations between the countries?

“The initiative of then-PM of Japan, the late Shinzo Abe, to travel to Israel to promote business and political relations; a shift in global geopolitics; the realization of Japanese corporations and decision makers that Israeli innovation can make significant contributions to their ability to compete, and that they were ‘losing the race’ to attract  Israeli innovation to neighboring Chinese and Korean companies; and, the maturing of the Israeli innovation industry, as well as entrepreneurs realizing that the Japanese market is worth the effort, and not just the US and European markets. Also, alternative energy resources were developed, and the Arab world lost its central place in that sector.

The first major Japanese investment in 2014 was when Rakuten purchased Viber, an Israeli messaging and calling application, for almost 1-Billion U.S. dollars.”

If you had to name the milestones in economic relations between the two countries, what would they be?

“In addition to Abe-San’s visit to Israel, I would note the Bilateral Investment Protection Treaty of 2017. This treaty provides investors with significant protection.

It envisions Japanese investment and involvement not only in tech but also in infrastructure, tenders, energy, etc. It is a signal of the Japanese government that investment in Israel is not only legitimate, but is to be encouraged. It is the most advanced Investment Protection Treaty signed by Israel, and it grants investors special rights, for example Most Favored Nation.”

Has there been a change in the way the political-governmental level sees the importance of promoting and strengthening economic relations between the two countries?

“Recently, with the rise of US-China rivalry, Israel is being asked to reduce dependence on Chinese companies for infrastructure projects. Another recent important factor, of both political and economic perspective, is the Abraham Accords. The warm Israeli relations with UAE and other gulf countries create a tremendous opportunity for a Japanese-Israeli-UAE triangle.”

How has the nature of investments changed in recent years and where do you expect it to go?

“In addition to Japanese companies scouting for innovation in the Israeli ecosystem, there is a scale-up in the cooperation; Japanese strategic companies are looking for synergy with Israeli companies, and more financial institutions are investing in Israeli startups looking for the financial merits of exits.”

How will economic relations be characterized a decade from now?

“Tourism, both from Israel and from Japan, will flourish after the end of COVID closure; this will be facilitated by direct flights between Japan and Israel. The Abraham Accords will lead to mutual projects between Japan Israel and UAE. The trend of Israeli companies establishing themselves in Japan and M&A’s where Israeli companies purchase Japanese companies will grow. Involvement of Japanese companies in infrastructure projects in Energy, transportation, Ports will likewise increase. The signing of an FDA agreement between Japan and Israel.”