Strong yen opens Japan’s door for Irish exporters
The three arrows policy of the premier Shinzo Abe, now tagged by pundits as ‘Abenomics’, was central to her letter: Bold monetary easing, flexible fiscal policy and a growth strategy to promote private investment.
But there are increasing signs that the policies are not having the desired effects.
The yen has continued to strengthen against all major currencies and inflation has stayed stubbornly below zero. Bank of Japan governor Haruhiko Kuroda is sounding increasingly desperate of late.
Last month he introduced something called “QQE — Quantitative and Qualitative Easing — with yield curve control” and an “inflation overshooting commitment”.
More recently he said he will loosen the central bank’s monetary grip “without hesitation” if conditions make that the sensible thing to do.
That immediately drew reminders from his global finance colleagues of the commitment at the G20 summit a few weeks ago in Shanghai where the G20 nations agreed as a group to refrain from competitive currency policies or competitive devaluation, to communicate with each other so there are no surprises, and to refrain from exchange rate targeting in policies.
Whereas the strong yen presents the Japanese premier with many a conundrum, it has been good for Ireland’s exporters who have benefited from a 15% fall in the value of the euro against the yen since the start of the year.
Exports for the first six months of the year have increased 11% and that’s on top of a phenomenal doubling of Ireland’s exports to Japan last year, pushing exports to €3.9bn.
Japan now represents the largest market for Ireland’s exporters in Asia, almost double its nearest rival China.
After the US, Japan is the largest information technology market in the world and a voracious consumer of leading edge technology which has enabled our computer services companies to expand successfully there.
It is the second largest pharmaceutical market and took €2.2bn of pharma exports from Ireland last year.
And a further expansion of trade with Japan is likely as Brexit fears grow, with Ireland able to offer a stable market base within the EU.
Brexit is potentially a huge issue for the 1,000 Japanese companies located in Britain. Ambassador Miyoshi points out in her letter that Japan is the second largest investor in the UK and that Japanese politicians and businessmen are very keen to know what the process and future of Brexit will be. This, I take, is diplomacy talk for being “very worried”.
The ambassador also explains in detail prime minister Abe’s 2016 growth strategy involving a €5 trillion package to stimulate demand in new market sectors such as big data, robotics and the Internet of Things; enhance drastically productivity to overcome decreasing population which is a major problem in the agricultural sector; and enhance the capabilities of individuals to facilitate this transformation.
The size of the stimulus package offers wide-ranging opportunities for Ireland’s exporters, particularly for firms in the healthcare sector which is promised a large slice of the stimulus funding.
The programme outlines the use of robots and sensors to reduce hospital burdens, promote medical care through using the internet and use big data to monitor patients at home.
These are all niches that Irish businesses have secured.
With Japan being the host nation for the Rugby World Cup in 2019 and Tokyo hosting the Summer Olympics in 2020, there will be significant business opportunities for a wider range of Irish firms in the construction and services sectors.
Ambassador Miyoshi signs off by reminding us that next year marks the 60th anniversary of diplomatic relationships between Japan and Ireland and poses the question, “what can we do together?”
The joint research on ageing being conducted between Fujitsu and Dundalk Institute of Technology is one example of what can be done together.
