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UK Japan Relations under a Labour Government

The Labour Party are now in power in the UK, so what does this mean for Japan UK relations?


Japan UK relations revival

Japan UK relations are undergoing a recent ‘revival’ with Japanese firms recently committing almost £18 billion investment into the UK, the signing of a recent defence deal between Japan, UK and Italy and an increased interest from UK companies looking to export to/work with Japan.

Due to Japan’s immature start-up scene, many Japanese companies are looking overseas to get more global innovation into their larger companies. The Japanese labour/consumer market is shrinking so many Japanese companies are seeking more global market share. Pushed on by activist investors, traditionally cash-rich Japanese companies have gone on a global M&A spending spree, from which the UK has benefited with significant investments into energy and infrastructure. 

A recent article by Politico recently claimed that Brexit and Conservative party policies such as their Global Britain campaign/ Indo Pacific focus are key reasons for this UK Japan revival. Given that the levels of Japanese investment in the UK have only recently come back to their pre-Brexit levels after many Japanese companies re-shored operations to Europe, this revival would be better described as a ‘rebalancing’ and awareness that the UK had damaged its relationship with Japan-a country that offers long-term loyalty and huge strategic advantages.

The reason that the Conservative government embarked on a ‘Global Britain’ campaign and re-negotiated trade agreements with Japan was that it needed to: mitigate the huge economic damage done by Brexit to our economy in losing access to a huge market, re-establish the benefits that many UK and Japanese companies lost from leaving the EU Japan Economic Partnership Agreement and re-build the trust lost by Japanese companies in the UK, who felt let down by the uncertainty of a no-deal Brexit and felt that there was a lack of recognition/respect of the added value and long-term nature of Japanese investment in the UK.

How Japanese investment fits with a Labour Government agenda.

One of the key benefits to the UK economy from Japanese UK based FDI has been investment in skills and education through apprenticeship programmes and investment into education initiatives, which fits in well with Labour’s focus on up-skilling younger people through high quality apprenticeship programmes.

Based on statistics from the Office for National Statistics, FDI received from Japan is, on average twice as productive as FDI from the US-this aligns with the Labour industrial policy on driving economic growth in order to fund public services.

An incumbent Labour government are also well-placed to create a domestic environment palatable to the Japanese way of working with better employee-employer relations/less strikes and a rebalancing of the importance of shareholders over other stakeholders, which aligns with a Japanese view on corporate governance. According to Japan’s Business Federation, the Keidanren:

How can a Labour government develop the UK Japan relationship?

The Labour government will need to continue to treat the UK relationship with Japan as a ‘special’ relationship and reassure them that they are a valued partner and recognise that although the Indo Pacific tilt may have been in many ways rhetoric, and that membership of economic partnerships such as the CPTPP is mainly strategic, these developments have been important in that they signal to Japan that nurturing the economic and bilateral relationship with them is of top importance to the UK. This has not always been the case, as outlined above regarding Brexit. A lack of understanding of this was also demonstrated by David Cameron and George Osbourne at the Hitachi Rail opening ceremony in Newton Aycliffe in 2015, who talked about a ‘special relationship with Japan’, thanked the Japanese for many years of investment in the rail industry, and then hotfooted it to China the next day to tout Government bids for rail contracts there!

 

Like many other people working within in the UK-Japan business area, I am thrilled to see this relationship flourish and am confident that the UK and Japan business will continue to be part of the ‘growing of the UK economy’ that we all need.

 

Sarah Parsons is Managing Director of East West Interface, a consultancy that facilitates better cross border communications and strategies, working with MNEs, SMEs and Government organisations across all industries. Sarah is recognised as a leading expert on business communications between Japan and the UK and has appeared on various media outlets speaking about this topic including BBC World News, BBC World Service, BBC Radio 4 and CNBC. She has also written about UK-Japan cross-cultural communications and M&A considerations for Forbes Japan and in other trade publications.


Sarah has also worked with UK government organisations such as the Department for International Trade and Innovate UK and has delivered regular briefings for European SMEs as an expert for the EU Japan Centre for Industrial Cooperation. She has received a ‘Commendation from the Japanese Ambassador to the UK’ for her work as UK Chair of the Japan Exchange and Teaching Programme Alumni Association and has sat on the board of trustees for the UK Japan Society

She is a Research Associate at the Japan Research Centre, SOAS and an Associate within the Centre for International Studies and Diplomacy at SOAS, University of London and is an Associate at Warwick Manufacturing Group, University of Warwick.

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