Perspectives on Doing Business in Japan in 2017
Mark Dearlove, CEO of Barclays, Philippe Fauchet OBE, President of GlaxoSmithKline KK, and Magnus Hansson, CEO of Jaguar Land Rover Japan, participated in a panel discussion organised by the BCCJ and moderated by William Mallard, Japan Bureau Chief at Thomson Reuters.
Topics covered included Trump’s policies, Brexit and Japan’s economy, and the panelists offered their points of view in a personal capacity rather than on behalf of their firms.
Trump and Key Industries in Japan - Trumponomics
Trump has been vocal about the number of American cars sold in Japan, suggesting that Japan has been engaging in unfair trade practices on automotive imports and exports.
He has also suggested that this is not limited to the automotive sector but also to fiscal policies, including deliberately weakening the yen.
Hansson, who is the CEO of Jaguar Land Rover Japan, clearly explained that Japan is not at all a closed market for vehicles, quite the contrary, especially in comparison with most other markets, but that the challenge comes in selling.
The reasons why Japanese consumers do not purchase American cars are because there is little product localisation and adaptation, for example with steering wheels, lack of fuel economy, and fragmented effort son marketing and brand development.
The difficulty lies in competing within the Japanese market, which is a different matter altogether. High-end foreign cars sell in Japan, and premium cars are a big profit business in spite of the low volume.
Another challenge to the automotive industry in general is that it needs predictability, but the current situation globally is one of unpredictability.
Donald Trump has also voiced reservations about pricing for medication in the US markets.
Philippe Fauchet OBE, President of GlaxoSmithKline KK, acknowledged that price increases in the industry need to be reviewed, but that amazing discoveries have taken place within the past two years alone due to better and faster innovation, especially in oncology. In addition, research and development is always being done in the US.
CEO of Barclays, Mark Dearlove, explained that volatility is good for business, but the challenge comes with the uncertainty of the current situation.
Currency is often a point of contention and a political hostage in negotiations, contributing to the uncertainty in the markets globally.
While it will be necessary to wait and see how the situation with the markets plays out, Dearlove did reveal that the markets are very big and very liquid at this time, and that Japanese financial institutions are investing overseas.
Business With a Side of Brexit
The question on everyone’s lips is, “Will the City of London continue to be a pre-eminent financial centre post-Brexit?”
Mark Dearlove strongly believes that London will continue to be significant, as it possesses the necessary infrastructure to make it so in the first place. The talent pool is already there – the bankers, lawyers and accountants – and the labour laws are already in place. In addition, the weak pound is good for business. However, current challenges include the unknowns of the conditions of leaving the EU, such as passporting rights.
With a number of European elections scheduled for 2017, it seems that Brexit encompasses more than just Britain; it includes Europe too, and uncertainty is clouding the continent’s future at this time. Of course, Barclays is anticipating contingencies to prepare for the future.
The automotive industry in Britain is facing total uncertainty and Jaguar will need to remain competitive.
Strong businesses are always able to respond to challenging situations, said Hansson, but for the UK, which is already struggling with a shortage of engineers, attracting and retaining global talent may become even more of an issue.
With 220,000 employees within the pharmaceutical sector in the UK and GBP 60 billion being contributed to the economy, as well as the UK benefiting from EU grants and funding for research and development projects Brexit is causing upheaval in the pharmaceutical industry as well.
“Extra funding will be needed to maintain the research and development projects and the pharmaceutical industry in Britain,” said Fauchet.
The drug approval agency for the EU, the European Medicines Agency, and the EU patent office are likely to move to the Eurozone, and other companies and agencies may follow.
Like with the automotive industry, it will be imperative to attract and retain talent in the pharmaceutical industry as well.
Abenomics and Business in Japan
Japan is considered one of the more difficult markets for overseas companies to find success.
Abenomics is very dependent on the Japanese automotive industry for further growth and development. This coupled with the fact that there are several globally competitive Japanese automotive manufacturers who understand the customer and make excellent products means that imported cars face a tough market.
Hansson believes that a harmonisation of standards, which authorities are currently working on, and allowing more types of products to be sold in Japan will help to grow the import market in Japan and make overseas automotive manufacturers more competitive here.
On the topic of the pharmaceutical industry Fauchet commented that there were some rules and hurdles, but that Japan is generally quite an open market as it is the quality of the product that makes the difference in this case. As disease and illness is not country specific, it is the best product that works that is chosen.
The financial services industry in Japan is also open, according to Dearlove, something that he greatly appreciates in his role as CEO of Barclays. This aligns with the Tokyo Metropolitan Government’s efforts to establish Tokyo as one of the financial capitals in Asia and also globally.
With the volatile and unstable markets and political atmosphere settling around the world in 2017, it is important for companies to reflect and be vocal about their political stance while working for the good of the employees and the economy, suggested the panel.
Article and photo by Vanessa Holden, February 2017.