Tusk Abe Juncker
European Council President Donald Tusk (left), Japanese Prime Minister Shinzo Abe (centre) and European Commission President Jean-Claude Juncker, (right) meeting in Tokyo, July 2018.
Economic analysts in the EU are forecasting a Japanese "spending spree" off the back of a historic trade deal. Businesses in Japan are sitting on over €800-billion combined and it is expected that the European Union will be the most likely target for the coming wave of acquisitions and investments.
The EU-Japan Economic Partnership Agreement (EPA), came into force on 1 February 2019, committed both the EU and Japan to a vision of the world economy which embraced free trade and was based on shared values. Once in effect, the EPA established the world's largest free trade zone and covers almost a third of the global economy and more than 635 million people. It has been estimated that when the EPA is in full flow, bilateral trade between Japan and the EU could increase by €36-billion.
This week, the EU-Japan EPA Forum took place in Milan, Italy. The event was aimed at highlighted the investment potential of the EPA and was attended by a variety of senior business leaders and policymakers including the EU Commissioner for Trade, Cecilia Malmström. The opening speech was given by the Japanese ambassador to the EU, Kazuo Kodama.
While the EPA is largely focused on removing trade barriers between the EU and Japan, the timing of the deal corresponds with a resurgence in interest among Japanese companies - collectively known as Japan Inc. - in mergers and acquisitions abroad.
Recently Fiat Chrysler Automobiles sold its car parts unit, Magneti Marelli, to Japan's Calsonic Kansei for €5.8-billion. In January, Irish pharmaceutical company Shire was bought by Takeda, a Japanese pharma giant, for €51.5-billion.
The potential for future deals spans many different industries and sectors including pharmaceutical, automotive, agribusiness, aviation, and consumer products. Certain strategic industries are of key interest, including robotics and artificial intelligence.
The EU-Japan EPA Forum comes at a difficult time geopolitically. The aftershock and associated uncertainty of Brexit, and the escalating trade war between China and the US have both played their part in demonstrating the vulnerability of the global economy and political institutions. Closer cooperation, through the EPA, is also intended to provide some economic and political stability in both Europe and Japan.
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