Like many Western countries, Canada has been paying a lot less attention to Japan in recent years as it diverts its attention to China. Japan’s poor GDP growth, its revolving door of prime ministers and the March 2011 earthquake and tsunami that led to the Fukushima nuclear disaster left indelible images of calamity and a country in decline. The attempt by the current prime minister, Shinzo Abe, to shake the country’s economy out of its malaise has been greeted by curiosity for its rare energy, along with the now-customary cynicism that nothing in Japan will change.
Ever since Japan’s economic bubble burst, ushering in two decades of low or no growth, many observers have predicted the setting of the Japanese sun, a perception that has crept into Canada’s relations with Japan. But ignoring the potential of the world’s third-largest economy has hurt us. While Japanese imports overall have more than doubled since the 1990s, Canadian exporters have not taken advantage of that growth. In 2012, Canada exported only $10.4 billion worth of goods to Japan — almost $1 billion less than we did 15 years ago. Contrast this with Australia, whose exports to Japan have tripled in the same time period. Meanwhile, in 2012 Japanese investment in Canada totalled $14.5 billion, compared with $61.5 billion in Australia.
But Japan is more than a market. On a wide range of social and technological issues, the country has many lessons to offer the world. With much of the country rated high for seismic hazard, Japan has little choice but to be a world leader in earthquake and disaster preparedness. And with its aging population — a quarter of its people will be over 65 by 2020 — Japan is at the forefront of a challenge facing almost all industrial nations. On these and other social issues, including what happens to a society that lives with chronic slow economic growth, Japan is a country whose experience we ignore at our peril.
There is certainly awareness of the potential to expand the Canada-Japan trade and investment relationship. Two rounds of negotiations have already taken place on a comprehensive economic partnership, with a third round scheduled for some time before October. Significant issues under discussion include increased access to Japanese markets for Canadian beef, pork, wheat and forest products, and a lowering of the 6.1 percent auto tariff on the Japanese side, which will require pacifying the Canadian auto industry. The 2007 Report Joint Study on the Possibility of a Canada-Japan Economic Partnership Agreement suggested a comprehensive free trade deal could add between US$3.8 billion and US$9 billion a year to Canada’s GDP. The study projected an increase in Canada’s exports to Japan by two-thirds, a multibillion-dollar injection into the economy.
Yet several issues stand in the way of improving economic ties. One is simply keeping Japan’s attention. Between Japan’s discussions on the hugely ambitious Trans-Pacific Partnership and separate trade talks with China and South Korea, it may see talks with Canada as a sideshow. Building deeper ties will require a deeper, more personal and longer-lasting Canadian engagement beyond a mere trade deal. Canada’s commitment to Japan has been undermined by the surprising decision in 2007 to close the Canadian consulates in Osaka and Fukuoka. Osaka, Japan’s second-largest city, is the hub of the Kansai region, which produces one-fifth of the country’s GDP and rivals the entire Canadian economy in size. (The slight of the consulates closing was compounded by the unofficial explanation that the move was carried out in order to divert more resources to expanding economic ties with China.) And last year, Ottawa’s streamlining of visa applications diverted Japanese visa requests to Manila. This is not the way to demonstrate a desire for stronger ties.
Perceptions of its decline aside, Japan is still a key player in science and technology. It files and is granted the most patents in the world, and remains second only to the United States in the number of patents in force. It is a world leader in its ability to commercialize, to bring products to market. The Economist Intelligence Unit ranked Japan as the most innovative country in the world in 2009, the last time it did the rankings. Japan has overturned its poor record on Nobel prizes — since 2000, its researchers have been awarded 11 Nobels in chemistry, physics and medicine. That follows the creation at the turn of the century of its Second Science and Technology Basic Plan, in which the government set a goal of producing 30 Nobel laureates in science within 50 years.
That record makes Japan an enviable partner for Canadian companies and researchers. While there are a number of existing science and technology partnerships in nanotech, stem-cell cancer research and space research, there remains a great deal of untapped potential that would be of benefit to both countries. Japan’s research on methyl hydrates may make the development of undersea Arctic energy deposits commercially feasible. Nanomaterials — industrial products that capitalize on the unique qualities of nanotech manufacturing — have many commercial and consumer applications that Japan has been exploring. Japan has important innovations in medical technologies, from inexpensive CAT scan and MRI machines to advanced telemedicine capabilities, that could be used effectively in Canada.
No country has more experience dealing with earthquakes than Japan. In unstable British Columbia, there are lessons to be learned from Japanese injury prevention ideas. Some of Japan’s new earthquake damage and injury prevention ideas merit attention, from buildings elevated onto a cushion of air when an earthquake is detected far below ground, to low-tech solutions such as removing tiles from school gymnasium ceilings, since gyms are primary evacuation centres.
Digital media is another place where ties could be deepened. Rakuten, one of the world’s biggest and best e-commerce companies, purchased the Canadian e-book company Kobo and is expanding its global presence. Rakuten is an online giant, with widely varying products such as fashion, food, travel and credit cards. Japanese digital media companies (Square Enix, Gree, DeNA, Fujitsu and most recently Bandai Namco) have set up or expanded their operations in Canada within the past two years. These are votes of confidence in Canadian talent and technology, particularly in animation and digital content, which are enhanced by attractive provincial tax credits.
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On a wide range of social and technological issues, Japan has many lessons to offer the world.
Canadian producers would do well to remember that Japan remains the global mecca of the animation industry, producing for a rich domestic market as well as a broad international audience for its video games, animation and other digital-content products. Equally important, Japanese digital media firms are increasingly engaged with the broader fast-growing East Asian digital-content sector, which has attracted little attention from Canadian digital companies to date.
Japan’s thirst for energy alone should put it on Canada’s radar. Japan has few domestic sources of energy and has relied heavily on nuclear power for about one-third of its energy needs. Two years after the Fukushima accident, only 2 of Japan’s 50 reactors have been restarted. While more reactors will likely be back in operation, Japan has focused its efforts on renewable energies and on smart grids, using information and communications technology (ICT) to manage energy demand and produce and distribute energy more efficiently and reliably. The country is also investing heavily in smart–community technologies, using ICT to integrate management of power, heat, water, transportation and communication. These technologies, which Japan hopes to sell globally, could revolutionize the way we live and manage energy consumption.
Meanwhile Japan is scouring the globe for new energy sources. In April, Prime Minister Abe travelled to Russia, Saudi Arabia, the United Arab Emirates and Turkey in search of long-term natural gas contracts. Japanese companies have recently shown an interest in investing in natural gas infrastructure in western Canada. Mitsubishi made a $2.9-billion initial investment in the Montney shale gas joint venture with Encana and is a 20 percent stakeholder in a planned $2.4-billion investment in the Kitimat liquid natural gas (LNG) terminal project. Toyota Tsusho has invested $600 million into Alberta natural gas development; INPEX put $700 million into Nexen’s shale gas reserves; and Japex made a $1.4-billion investment in the Hangingstone oil sands.
These Japanese commitments pale in comparison, however, with INPEX’s $34-billion Ichthys project near Darwin, Australia, which will be the first Japanese-run LNG project in the world. Japanese demand could expand the market for Canadian uranium, natural gas and even coal to capitalize on Japan’s renewed investments in clean coal technology.
There is also an opportunity to deepen the Canada-Japan relationship by sharing approaches to dealing with aging populations. Japan’s use of robotic and other technologies that enable seniors to remain at home longer could be valuable here. Japan’s wired home-care systems use GPS and Internet-enabled video cameras, robotic pets, rice cookers and hot pots to monitor the movements of the house-bound elderly and to notify family members and medical professionals if there are periods of inactivity or accidents. Personal GPS devices provide alerts if the senior has strayed away from home or from a care facility. The development of an exoskeleton apparatus that uses robotics to enhance the physical strength of caregivers in hospitals and at home produces significant improvements in the ability of nurses or family members to attend to the personal needs of people confined to their beds. These technological improvements reduce the requirements for human intervention and can lower costs for seniors’ care.
There is no argument that Japan faces enormous political and economic challenges. But we should not allow the rise of China to obscure the opportunities presented by Japan, whose economy is still far larger than ours, and which has interests that overlap with ours in a wide range of areas such as energy needs, digital entertainment and technological answers to increasing social challenges like aging. Canada needs to see Asia as consisting of more than China, and to recognize that Japan remains a formidable force in the global economy. Deeper engagement with Japan offers the prospect of a partner for the shared journey of coming to grips with this century’s economic and strategic challenges. It is an opportunity Canada should not miss.