Could Japan be a land of opportunity for UK SMEs?

As the Trump tariffs rollercoaster continues to hurtle on with no sign of abatement, business owners, especially those who are reliant on US customers, are understandably jittery. 

As we covered earlier this year, the tariff saga is negatively impacting one in five UK SMEs. With no indication of when this turbulence will end, it’s only natural that business owners will start investigating other potential markets – and Japan might just be the place to start.

A blossoming trade relationship?

In February, the Government announced it had signed a science and technology deal with Japan to facilitate collaboration between ventures in the two countries. The statement on the deal, which focused on life sciences, quantum technology and digital infrastructure, came right after the Prime Minister’s visit to Japan. 

Science minister, Lord Vallance said that the deal would be a boost to both countries’ economies and could help create more jobs. 

Other important free-trade legislation that has been signed between the two nations over the past five years includes the 2021 Comprehensive Economic Partnership Agreement (CEPA) which means there are no tariffs on the majority of products, and the 2024 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was designed to reduce trade friction between the UK, Japan and several other major global economies.

The two nations have also worked to cut down on red tape in other areas, with goods not requiring a statement of origin if they are entering Japan from the UK and below 200,000 yen (just under £1000) in value or entering the UK from Japan and below £1000 in value. 

Investment is a one-sided tale… so far

Japan is the world’s fourth largest economy and is pushing hard for more foreign investment. The UK is firmly in its line of vision. 

The Department for Business and Trade writes that the investment each country has been making in the other is growing each year; but that “UK investment into Japan is only around 3% that of Japan into the UK.”

In October, Business Matters reported that “Japanese investors have poured almost £118 million into Greater Manchester over the past year…led by companies such as Astemo, Daikin and Mizkan, which have expanded their presence or established new operations in the area.” It adds that the region now hosts more than 25 Japanese firms. 

There is now a push for UK ventures to do the same. The two nations have just set up an initiative called “Expand in Japan”, for instance, to drive growth and to make it easier for businesses to open trade links – or even premises – in Japan. 

Although aimed at specific sectors – clean energy, life sciences and digital technology – and largely a push for investment, the deal reflects a wider desire to strengthen trade links. 

Other initiatives launched by the Japanese government in recent years include the Tokyo Innovation Base, designed to attract international founders with its networking and on-site consultation opportunities.

Japan wants founders and innovators

Perhaps more so than at any point in modern history, Japan is trying to attract talent with international events and by pumping resources into accelerator programmes headed up by world-renowned Japanese corporations. 

Sifted.eu wrote just last week about the burgeoning number of British and European startups attending SusHi Tech Tokyo, which it says is now billed as Asia’s largest innovation conference. International collaborations, it seems, are a key tool in the country’s goal to create 20 unicorns by 2035.

However, Japan also has stringent rules for its business manager visas, including a six-fold increase in minimum capital to 30 million yen ($204,000), which came in last August. 

Another crucial stipulation is that at least one person from the venture must be in full-time employment in the country, and you must have physical office space. 

It’s worth noting, however, that founders can apply for a startup visa before this and have between six months and two years before they have to apply for and meet the business manager visa requirements.

A golden opportunity?

For business owners who don’t want to move to Japan or set up an office there, but do want to tap into this huge market, the Government has published an online guide specifically for SMEs. 

For those able, time in one of the country’s startup hubs could be the key to testing the waters – and meeting potential Japanese partners who could facilitate access. 

For all businesses, it might be worth starting to delve into what Japan could offer; conduct risk assessments as to what the pitfalls might be, and take advantage of what is a strong headwind from the Government to boost trade between the two island nations.