Asian growth is projected to increase this year, signaling a departure from negative trends inflicted by the Asian crisis. As regional growth rises, U.S.-Asian trade will move into high gear. But that’s not all.

Japan, which has not yet escaped economic malaise, also should benefit from more economically vibrant neighbors. Furthermore, as the world’s second largest economy and the United States’ third largest export destination, Japan represents a huge market. And although its economy is predicted to remain flat, it continues to offer a variety of export, import, and investment opportunities you may wish to consider.

Japan’s Economy Is Struggling

Among other problems, Japan is trying to recover from high levels of debt and low levels of confidence in the financial sector caused by the bursting of the economic bubble in the late 1980s and early 1990s. Additionally, many Japanese sectors, especially transportation, construction, labor, power, telecommunications and energy, are highly overregulated.

Consequently, competition has been constrained and inbound investment has been limited. In response, the Japanese government has taken strong steps to stimulate the economy and lighten the regulatory burden. According to the office of the U.S. Trade Representative, the Japanese government estimates that if deregulation plans are fully implemented, by 2003 Japan’s gross domestic product (GDP) will grow by an additional 0.9% annually.

Japan Represents a Huge Market

Japan’s GDP per capita exceeds $29,000. This is slightly less than the United States’ $31,000, and 38 times more than China’s. Due to the purchasing strength of Japan’s 126 million consumers, U.S. exports there, although down, are still tremendous as compared to other markets.

For example, U.S. exports to Japan last year reached almost $58 billion. Although this is down from its high of $67.5 billion in 1997, it’s still just 10% less than all U.S. exports to the Newly Industrialized Countries (NICS), and more than a third of the total U.S. exports to the Pacific Rim.

U.S. Technology and Service Firms Are Very Competitive in Japan

U.S. high-tech companies, primarily those producing computers, semiconductors, software, pharmaceuticals, medical devices, and aviation products, are extremely competitive in Japan. And many of these large firms have established a solid presence there.

As a result, these firms have learned what it takes to introduce new products quickly. Smaller, new-to-market U.S. firms with innovative technology are often able to find an agent or joint venture partner and begin exporting to Japan with few regulatory hurdles.

Through foreign direct investment, U.S service companies are gaining a greater foothold in Japan. In fact, U.S. providers of retail, entertainment, internet, franchise, restaurant, hotel, marketing, and design services are finding Japan an accommodating market.

U.S. Exporters of Agricultural and Consumer Goods Remain Optimistic

Japan must continue to increase its imports of processed foods to compensate for declining agricultural labor output, according to the U.S. Department of Commerce. This means U.S. exporters of processed food stand to benefit.

Additionally, U.S. suppliers of consumer goods are making Japanese inroads through new marketing channels, including direct marketing, private label, discount shopping and foreign-owned retail stores.

Export Opportunities to Consider

The U.S. Department of Commerce has identified products in strong demand in Japan. These include:

• Electronic components & power equipment
• Software, computers & peripherals
• Telecommunications equipment
• Automobiles
• Medical equipment & devices
• Auto parts & accessories
• Building products
• Cosmetics
• Dietary supplements
• Machine tools & metalworking equipment
• Scientific equipment & services
• Pollution control equipment & services.

Trade Barriers Can Be Complex

Reportedly, many U.S. firms have found it difficult to obtain information on Japanese duties and taxes, as well as standards, regulations and other barriers. And the process often can be cumbersome, slow and discouraging.

However, steps have been taken by Japanese authorities to simplify the process. Nevertheless, it is recommended that U.S. firms work closely with a Japanese partner to obtain guidance and an understanding of the culture and business environment.

Asia Appears Back on Track

Asian output no longer is falling. Improvements in the region’s trade surplus, combined with an easing of local monetary and fiscal policies, have resulted in growth. Thus, all regional economies, except Japan’s, are predicted to achieve annual GDP growth in the 0% - 3% range in the year 2000.

Korea is recovering well, and in some cases, leading the pack. China, which partially has been insulated from the Asian crisis, has taken steps to stimulate its economy. The result: an increase in domestic demand that has somewhat offset a deteriorating trade balance. By mid-1999, however, China’s currency may be allowed to gradually depreciate — which may make your exports less price competitive.

About The Author John Manzella [Full Bio]

John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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