Japan is overshadowed by China but is still WA’s second largest trading partner.
Japan is overshadowed by China but is still WA’s second largest trading partner.
IN the Olympic Games, like in most sporting events, coming second doesn’t count for much. While everyone remembers the gold medalist, the silver medalist is barely recalled unless they were the pre-race favourite, in which case they may be labelled a failure.
Australia’s relationship with Japan seems to be seen in a similar light.
Japan is considered a chronic underperformer, having languished economically for the better part of two decades.
Its financial and economic woes follow a spectacular property crash in the early 1990s. Japan has never really recovered from that, and its glory days in the 1960s, the 1970s and the 1980s, when it was the global economic powerhouse, are a fading memory.
With a large public debt and institutional inertia, Japan is generally not considered a country with bright prospects.
Yet it is still Western Australia’s second largest export market. The latest annual data from the Department of State Development valued WA exports to Japan at $22.7 billion.
That’s an impressive number, except when it’s put up against WA’s exports to China, which were valued at $52.6 billion.
Notably, the growth in China exports has been much faster and more consistent.
The two countries account for a huge share of WA exports – China is 43.2 per cent of the total, Japan is 18.7 per cent, according to Department of Foreign Affairs and Trade data.
These numbers make it clear why there is such a strong focus on China. But looking after our relationship with our number one trade partner does not mean we should ignore our second biggest trade partner.
Woodside managing director Peter Coleman has a lot riding on the Japan relationship.
Eight Japanese power utilities, including Tokyo Electric and Kansai Electric, were the foundation customers for the North West Shelf venture’s liquefied natural gas (LNG) development, and a majority of its gas still goes to Japanese customers.
Speaking at an Australia Japan Business Co-operation Committee function last week, Mr Coleman said Woodside varied its normal trade terms after the Fukushima nuclear accident in order to support its long-term interests in Japan.
This included easing the credit terms applied to Japanese utilities, which he said were effectively insolvent at the time.
Woodside also sped up the LNG tankers travelling to Japan, reducing their fuel efficiency but getting their cargoes to Japan faster.
Woodside’s support for its long-term customers at that time of difficulty is likely to have a pay-off in future, because Japan’s decision to close nuclear reactors has led to a sharp increase in its demand for gas.
Allens partner Tim Lester is another business executive with a keen interest in Japan.
Having lived and worked in Tokyo for many years before moving to Perth, he laments the deteriorating relationship.
This is evidenced in many ways – the halving in the number of Japanese tourists coming to Australia during the past decade, the lack of direct flights to Tokyo from all cities except Sydney, and the complete absence of any PhD students in Australia studying Japanese language or culture.
Mr Lester said Japanese is the most widely taught language in Australian schools, but mostly it is taught to primary school students. Few go on with their studies.
He said Japan still had a lot to offer, describing it as a highly innovative country and the world’s largest creditor nation.
Company director Sir Rod Eddington, who moderated the discussion at the UWA Club, said Japan needed to reform its economy and improve its fiscal position, but played down alarmist concerns over the country’s ability to manage its large public debt.
He acknowledged Japan’s debt was equivalent to 200 per cent of GDP, larger than some European countries in the midst of financial crises, but the critical difference was that Japan’s debt was held domestically, and it continued to benefit from high savings rates.
Mr Coleman said Australia and Japan needed to refresh their relationship, citing Woodside’s recent deal to sell equity in the Browse joint venture to Mitsui and Mitsubishi.
This deal included agreements to collaborate on global opportunities.
