With Japan’s vaccine rollout gaining speed, how should Japanese business leaders capitalize on economic recovery and leverage on opportunities as the market starts warming up?
As consumers have been noted to be more financially prudent during the pandemic, there will be an expected surge in spending once the economy recovers.
This increased spending will be particularly prominent in the food and travel industry – where consumers previously held back from spending during the pandemic. The per capita consumption is expected to reach higher than pre-pandemic times, and signs of “revenge consumption” will likely be observed. By offering more value-added services such as F&B options and travel lifestyle offers, business leaders can increase their profit margin and sales.
At the same time, due to the resumption of the global economy and the onset of winter, prices of resources such as food and energy have been on the rise and this is likely to rise even higher moving forward. It is important for business leaders to reconsider procurement routes so that they can acquire such costlier resources at more reasonable prices in preparation for the economic resumption.
As the government recently lifted the state of emergency declaration, and events related to the autumn tourist season, Christmas, and New Year’s approach, inbound tourism can be expected. However, despite the increase in vaccinations in Japan, this will all coincide with the dry winter season, and may cause a slight resurgence of COVID-19 infections. As such, leaders will also need to be vigilant about the outbreak of the disease among unvaccinated children, which may lead to a spread in household infections. There is a possibility this may lead to another round of restrictions such as the previous state of emergency declaration, and we should be prepared for such risks nonetheless.
The outlook on Japan’s vaccination rollout, its significance on the economy and its position as a leading investment destination.
Based on statistics seen in countries with high vaccination rates, vaccination uptake tends to slow down once vaccination rate exceeds 65%. It will become essential to strengthen incentives, in order to further increase vaccination rates to nearly 90% of the population.
This is because even in Singapore, where vaccine coverage has exceeded 80%, the virus is still spreading. At the same time, it is crucial to invest in therapeutic drugs and expand medical facilities that accept and treat coronavirus patients in a more effective manner. It is also important to protect children who are not currently vaccinated due to the medical limitations and as such, creates the demand for vaccines suitable for children.
As Japan looks to regain economic recovery, how can Asia’s businesses leverage on the opportunities that abound in the country and plug market gaps? Which specific industries should capitalize on this trend? What types of business synergies can local companies look for internally and across markets?
There are two major considerations in the lead up to potential opportunities. One is the restructuring of Japanese companies. There are conglomerates discounting of large Japanese companies, and they will start selling off divisions, like Hitachi. I believe that many of the sectors that Japanese companies are selling off are good buys for the emerging economies in Asia. In doing so, we will see more Asian companies in those sectors benefitting from technology and human resource development.
The other is the development of Japanese technologies and patents in Asia by Asian companies. These will mainly be those owned by Japanese universities and small and medium-sized Japanese companies. Japanese universities and small and medium-sized enterprises (SMEs) have wonderful technologies in agriculture, materials, engineering, biotechnology, etc., but these technologies have not yet been commercialized. Commercializing these technologies in the wider Asia region, which is a larger market than Japan, is a great opportunity to note only increase Japan’s reputation as a technology leader but also provide even more business opportunities across markets. Beyond technology, other potential sectors include art and crafts, animation, and even manga.
As Japan lags behind in digitalization, I think we will see more Asian companies that are ahead in digitalization curve entering the Japanese market. That once again brings about more business/employment opportunities domestically, and greater exchange of ideas.
Given Kishida’s latest appointment as the new Prime Minister, what does this mean for Japanese business leaders looking to scale domestically and abroad, and what are some of the expected policies of significance as compared to before?
First, the new prime minister needs to win this month’s lower house election and next summer’s upper house election. If he can do so, he will have a three-year election-free period, which is rare in Japan’s election cycle. This is a unique opportunity for the new prime minister, and he will probably aim to win the two national elections first.
In order to achieve this goal, we can expect to see a significant fiscal stimulus in the short term. The budget and supplementary budget will be huge, and the Bank of Japan’s easing regime will continue, introducing greater cash flow into the market. For the time being, the economy will expand, coupled with the impact of the economic resumption. However, this may lead to a weakening of the Japanese yen in the short term, so we must be careful of soaring import prices.
Regulatory and structural reforms, which can be distressing for LDP supporters, will probably occur after the LDP wins the Upper House election next summer. Since there is a three-year period in which the LDP will not have to worry about elections, we can expect ongoing regulatory and structural reforms, which will create great business opportunities and trade relations.
There will be increased collaboration between Japan and the U.S., as well as QUAD, which includes India and Australia. As what I’ll be sharing more during my online course titled Insights into Regional Politics, Economics and Culture, there will be great opportunities for Japanese companies to tap into the vitality and markets within Asia. In its 19th run, this course will take place from 15 to 19 November 2021.
How can businesses benefit from political trade developments based on Quad nations’ announcements of new initiatives for an open Indo-Pacific collaboration?
One potential benefit is the further shift of Japanese companies into Southeast Asia and India markets due to the geopolitical risks and uncertainties in China. Currently, Vietnam and Indonesia are the key markets that businesses are moving their supply chains from China to, but considering human resource development, cost, and market access, it would be best for Singapore, Indonesia, and Malaysia to provide such support to Japanese companies, once again opening up business and employment opportunities in the respective local markets.
The same goes for financial investments. Business and start-up investments in China are gradually shifting funds into Southeast Asia and India due to security and intellectual property protection and volatility in China. We need to gather more accurate and timely information on investment in India and Southeast Asia.
High-tech science and technology among US allies will also accelerate. Japan’s advanced technologies in quantum computing, robotics, space exploration, AI, material development, food production, and biotechnology will be shared and commercialized by our allies. Nations being part of this collaboration will achieve a meaningful partnership.
Japan needs to tap into the vitality of Asia, and to do so, it needs to be more connected to Asia. Concurrently, there is no other country that has the resources that Asia needs and that is as well liked by Asian counties as Japan.
Kotaro Tamura, Adjunct Professor, Lee Kuan Yew School of Public Policy at the National University of Singapore (NUS)
Tell us more about how you currently work with Lee Kuan Yew School of Policy and share insights on Regional Politics, Economics and Culture for policy makers and business leaders.
Japan needs to tap into the vitality of Asia, and to do so, it needs to be more connected to Asia. Concurrently, there is no other country that has the resources that Asia needs and that is as well liked by Asian counties as Japan. At the same time, there is no other country that is as complementary to Asian countries in terms of economy, technology, and demographics as Japan.
However, Asia is diverse, in terms of religion, ethnicity, governance and economic maturity. As such, it is essential to first learn more about these relationships, history, culture, and economy of each and every country and each other. We also need to be able to network with the people in the most efficient way possible, given the ways of connectivity in today’s world.
In order to provide such insights and networking opportunities to connect business and even political leaders, I have been creating, improving and running a program for Japanese leaders for over 7 years at Singapore’s Lee Kuan Yew School of Public Policy at the National University of Singapore (NUS). We have had more than 500 graduates in the past 18 sessions, including executives from large corporations, managers with responsibility for Asia, small business owners, start-up entrepreneurs, investors, lawyers, doctors, and government officials.
The lecturers are also of diverse backgrounds, including former ministers of Asian countries, faculty members who serve as advisors to other countries, and top executives of international organizations. Our course has even led to several new projects and collaborations among the students and instructors on the business and political stage. I hope you will join us to learn more about what the opportunities Asia can bring to you and your businesses/organizations! Find out more and register here. (Registration closes on November 13, 2021)
From November 15-19, 2021, Kotaro Tamura will be conducting a virtual course on Insights into Regional Politics, Economics and Culture for Japanese Business Leaders and Policy Makers at Lee Kuan Yew School of Public Policy (National University of Singapore). Readers can find out more on course details here:
