Japan- Your Next Export MarketJune 23, 2016
Andrew Wylegala is a Senior Commercial Officer for the International Trade Administration
Last month was an exciting time for us in Japan. Not only did the President participate in the G-7 Summit hosted by Prime Minister Abe, but he also made a historic visit to Hiroshima. Throughout his visit, the President underscored the enduring friendship between the United States and Japan since the end of WWII, and how together we provide leadership and stability in the Asia Pacific region. The President’s words provided a timely reminder of what makes the Trans-Pacific Partnership (TPP) agreement so important in strengthening and growing our economies—and our relationship. I no sooner finished watching the President’s closing remarks at the Hiroshima Peace Memorial, than I caught the breaking news of the Japanese government’s intent to take up passage of TPP legislation in a special fall session of the Diet.
As the two largest economies party to the agreement, the United States and Japan hold the key to TPP’s realization. The U.S. exported over $66 billion in goods and over $46 billion in services to Japan in 2014. Both also stand to benefit greatly, especially as we look to our future in the digital economy. Japan’s e-commerce market is one of the largest and fastest growing in the world. The global business-to-business (B2B) e-commerce market was estimated at $1.5 trillion with an annual growth rate of about 4%, with even faster double digit growth in the business-to-consumer (B2C) market. Combine this with the fact that Japan has one of the highest per capita income level in Asia — with a GDP per capita of $37,800 — and middle class consumption that ranks second only to the United States and that means that maintaining and expanding access to the Japanese e-commerce market will become increasingly more important for both U.S. exporters.
And the TPP e-commerce provisions do just that. The TPP includes a complete prohibition on customs duties for digital products. This means that U.S. exporters will not have to pay duties on the sale of their music, videos, games or software distributed to the Japanese consumer electronically. Another key provision commits TPP partners to allowing cross-border information and data transmission by electronic means, and prohibits measures that compel companies to conduct digital trade-related activities within a country’s borders, such as requiring data servers to be located in-country or requiring local content for digital goods and services. This is particularly important as more and more Japanese consumers and companies adopt cloud computing. In fact, Japan is considered our top cloud computing export market in Asia with continued robust growth anticipated through 2018 at an annual rate of 9% from a current market of about $2.1 billion.
In addition to e-commerce, the TPP agreement provides U.S. exporters increased access to many other sectors of the Japanese market ranging from agricultural products to industrial and consumer goods and financial services. For more information on specific export opportunities to Japan under TPP, please visit our Japan TPP report. I hope to touch upon these market prospects in my future blogs. In the meantime, I highly encourage you to reach out to us here in Japan or through your closest USEAC to discuss the new and expanded export opportunities that will be afforded your company by the TPP.