When Christopher Luxon and his delegation touch down in Tokyo next week, they’ll step into a country where Kiwi footprints are increasingly visible.
We have a growing physical presence in Japan. There are more than 100 Kiwis playing professional rugby in Japan and, last year, more than 72,000 New Zealanders chose the country as their holiday destination, with that number projected to surge even higher this year.
The admiration goes both ways. According to recent surveys, 41 per cent of Japanese travellers have a strong intention to visit New Zealand within the next few years.
Yet, amidst all this mutual admiration, why does it feel like our economic partnership needs to catch up?
Japan is our number four overseas market and, on the surface, our trade numbers tell a story of stability and steadiness. But, in reality, it’s a slow decline.
Total exports are around $4.1 billion to $4.5 billion per annum, but as a percentage of our total exports Japan has declined. During the same period, exports to China jumped from $7 billion per annum to over $20 billion, or from 12.4 per cent of exports to almost one third.
Now is the time for us to turn our attention back to growing our economic relationship with Japan because it is evolving as a nation and New Zealand faces particular challenges post the Covid pandemic.
The first concerns investment in our economy. As a nation with low savings rates and an infrastructure deficit, we should be looking to tap into Japan for foreign direct investment. We should be actively courting more Japanese capital to help jump start our economy.
ANZ has been in Japan for 55 years and we have many customers actively looking to invest internationally with some already setting foot in New Zealand.
Currently Japan is on a buying spree, fuelled by its vast capital reserves and low domestic interest rates. With a net international investment position of around US$3.46 trillion ($5.65t) as of December 2023, Japanese companies are actively seeking sustainable, long-term assets and opportunities to diversify their portfolios abroad.
The sectors Japan is eager to invest in, from technology, renewable energy and agriculture to high-quality food and beverages are precisely where New Zealand excels and where an injection of capital could propel our innovation, exports and growth.
Japanese investors are also renowned for their long-term focus, commitment to partnerships, and preference for stability and growth over short-term gains. This makes them an ideal match for New Zealand businesses – particularly Iwi - seeking enduring partners rather than investors driven by quick returns.
Japanese investment in New Zealand has a history of generating jobs and export revenues too.
Just look at Rinnai New Zealand. They used Japanese manufacturing expertise to develop and export innovative LPG gas heaters, creating more local jobs than if they had just stayed a distributor.
Another example is Robotics Plus, a Kiwi maker of autonomous agricultural vehicles that got a US$10 million ($16.3m) cash injection from Yamaha Motors to develop technology destined for high value global markets.
The second big economic opportunity for New Zealand is the Japanese domestic market for Kiwi goods.
The reason is simple: The Yen is at an historic low.
But economists don’t expect the exchange rate to stay like this for the long term, which means Japan is effectively ‘on sale’ for a period.
For New Zealand brands, this makes it the ideal time to invest and expand in Japan.
We should not be put off by sensational headlines about Japan’s declining population, including fears of a shrinking workforce and a contracting domestic market. Japan’s major urban centres and premium consumer base remain robust and vibrant.
Japanese consumers have a deserved reputation as the world’s most discerning and will pay premium prices for genuine quality products.
While we’ve already had some successes building premium brands like the All Blacks and Zespri the fact is many of our big retail names have struggled to establish an enduring presence in the country.
Current exchange rates mean it’s unlikely ever to be cheaper to invest in brand building in Japan which demands long-term commitment, strong protection of intellectual property, and, according to the Asia New Zealand Foundation, better story-telling that highlights our achievements and future possibilities.
So, the timing of the Prime Minister’s visit to Japan this month could not be better. It will be a chance to reinforce the trust and warmth that have long characterised our relationship.
But, more importantly, it should send a strong signal to both Japanese investors and New Zealand businesses that the time is ripe to capitalise on the favourable economic conditions.
It’s time to move beyond mutual admiration to mutual advantage.
