Japan was Australia’s largest trading partner until 2007 and largest export destination pre-2009. It is now Australia’s 3rd largest trading partner behind China and the US, with total trade (exports + imports) of A$61b in 2016, making up 9% of Australia’s trading portfolio. Australia and Japan entered a free trade agreement in April 2014, which grants more than 97% of Australian exports preferential treatment in Japanese markets.
Australian exports to Japan are dominated by coal, iron ore, beef and copper. Woodside, Mitsui and Co, MMG, Centennial Coal, and Newmont Mining are some of the Australian companies that export commodities to Japan. Teys Australia, JBS Australia and NH Foods export beef to Japan. Major Japanese imports to Australia include motor vehicles, gold, petroleum, and goods vehicles.
Japanese tourist arrivals have declined since 2004, due to the depreciation of the yen against the AUD and stagnant Japanese income growth. But Japanese tourist arrivals did grow 24% to over 400,000 in 2016 driven by a sharp rise in flightpaths available between Japan and Australia. Japanese student enrolments also increased 14% in 2016, bucking trends of generally fewer Japanese students studying overseas.
Japan is Australia’s fourth largest source of foreign investment behind the US, UK and Belgium. Japan’s stock of foreign investment was worth A$213b in 2016 (7% of total investment) centred predominantly in the resource sector. But investment in financial services, infrastructure, information and communications technology, property, food and agribusiness is growing. The free trade agreement should support additional Japanese investment in Australia as the barrier for screening by the Foreign Investment Review Board has been lifted from A$248m to A$1.1b.
Australian investment in Japan was worth A$93.2b in 2015 equivalent to 4% of Australia’s foreign investment portfolio. This is small considering export receipts from Japan. But this is a trend that isn’t unique to Australia—Japan’s inward stock of FDI is the lowest in the OECD. Deterrents to foreign investment include language barriers, the high cost of doing business in Japan, and a restrictive foreign investment regime—although the FTA will provide enhanced protections and certainty for Australian investors in Japan.