Japan country brief

Overview

The Australia–Japan partnership is our closest and most mature in Asia, and is fundamentally important to both countries' strategic and economic interests. The relationship is underpinned by a shared commitment to democracy, human rights and the rule of law, as well as common approaches to international security. Australia's stable political, business and investment environment makes it a critical supplier to Japan of minerals and energy, as well as high-quality food products.

In 2014-15, Japan was Australia’s second-largest trading partner and second-largest export market. Japan was also Australia’s second largest in-bound direct foreign investor in 2015. The bilateral economic relationship was further strengthened by the Japan Australia Economic Partnership Agreement (JAEPA) which entered into force in January 2015.

Political overview

System of government

Japan is a democratic, constitutional monarchy with a parliamentary government headed by a Prime Minister. Japan maintains an Imperial Family, headed by the Emperor, currently Emperor Akihito. Universal suffrage is limited to citizens of Japan aged 18 years or older. Voting is not compulsory and voting rates vary widely.

Japan’s parliament is comprised of a House of Representatives (Lower House) and a House of Councillors (Upper House). The Lower House has 475 members who are elected for four-year terms, although political conditions frequently see the House dissolved earlier. The Upper House has 242 members who are elected for six-year terms , with 146House members elected in prefecture-based constituencies and 96 by proportional representation at the national level. One half of the Upper House is dissolved for election at regular three-year intervals.

Executive power is vested in the Cabinet, which is comprised of the Prime Minister and ministers of state. The Prime Minister is selected from among members of parliament through a vote by both houses of the Diet (parliament). The Prime Minister submits bills to the Diet, reports to the Diet on domestic and foreign issues, and supervises and controls administration.

The Japanese Constitution specifies that the majority of Cabinet members must be elected members of parliament. However, the Prime Minister can appoint non-politicians to the Cabinet and as Special Ministers of State. There is no term limit for prime ministers, although individual parties often have term limits in place under party rules.

Japan's governmental structure has three tiers: national, prefectural and local. There are 47 prefectures and 1741 other local municipalities. Each tier is governed by elected assemblies. Japan does not have a federal system and the two lower tiers of government are to a large extent fiscally dependent on the national government.

Current parliament

On 14 December 2014, the Liberal Democratic Party (LDP)/Komeito coalition had a strong victory in the Lower House election. The coalition won 326 of the 475 seats in the Lower House, maintaining a two-thirds majority.

House of Representatives (Lower House) numbers (as at April 2016)
Political party Number of Members
Membership 475
Liberal Democratic Party 291
Democratic Party of Japan and Club of Independents 96
Komeito 35
Japanese Communist Party 21
Initiatives from Osaka 14
The People's Life Party and Tara Yamamoto and Friends 2
Social Democratic Party 2
Independents 14

Source: www.shugiin.go.jp April 2016

The Liberal Democratic Party and its coalition partner Komeito have held a majority in both houses of the Diet since the June 2013 election. This majority was increased by ten seats at a  half-Upper House election in July 2016.

House of Councillors (Upper House) numbers (as at April 2016)
Political party Number of Members
Membership 242
Liberal Democratic Party 122
The Democratic Party and the Shin-Ryokufukai 50
Komeito 25
Japanese Communist Party 14
Initiatives from Osaka 12
Hope Coalition 5
Independents Club 4
The Party for Japanese Kokoro 3
Okinawa Whirlwind 2
Independents 5

Source: www.sangiin.go.jp September 2016

Economic overview

Japan's highly industrialised market economy is the third-largest in the world (GDP at market exchange rates).  It was the world’s second largest from 1968 until 2010, when it was overtaken by China. Japan has a well-educated, industrious work force and its large, affluent population makes it one of the world's largest consumer markets.

From the 1960s to the 1980s, Japan achieved one of the highest economic growth rates in the world. This growth was led by high rates of investment in productive plant and equipment, the application of efficient industrial techniques, a high standard of education, good relations between labour and management, ready access to leading technologies and significant investment in research and development, an increasingly open world trade framework, and a large domestic market of discerning consumers, which has given Japanese businesses an advantage in their scale of operations.

Manufacturing has been the most remarkable, and internationally renowned, feature of Japan's economic growth. Today, Japan is a world leader in the manufacture of electrical appliances and electronics, automobiles, ships, machine tools, optical and precision equipment, machinery and chemicals. However, in recent years Japan has ceded some economic advantage in manufacturing to China, the Republic of Korea and other manufacturing economies. Japanese firms have countered this trend to a degree by transferring manufacturing production to low-cost countries. Japan's services sector, including financial services, now plays a far more prominent role in the economy, accounting for about 75 per cent of GDP. The Tokyo Stock Exchange is one of the world's foremost centres of finance.

International trade contributes significantly to the Japanese economy, with exports equivalent to approximately 17 per cent of GDP in April 2016. Key exports include vehicles, machinery and manufactured goods. In 2015, Japan's major export destinations were the United States (20.1 per cent), China (17.5 per cent) and the Republic of Korea (7.0 per cent). Despite a weaker yen as a result of stimulatory economic policies linked to the Japanese government’s ‘Abenomics’ policies, export growth remains sluggish.

Japan has few natural resources and its agricultural sector remains heavily protected. Japan's main imports include mineral fuels, machinery and food. In 2015, leading suppliers of these goods were China (24.8 per cent), the United States (10.3 per cent) and Australia (5.4 per cent).  Recent trends in Japanese trade and foreign investment have reflected a much greater engagement with China, which overtook the United States as Japan's largest trading partner in 2008.

Outlook

In the medium term, the Japanese economy faces challenges over its energy policy, as well as external risks including weak economic conditions in Europe. To address these challenges, the Japanese government is encouraging firms to secure stable energy and commodity supplies through increased investment in overseas natural resources. Australia, as well as Papua New Guinea and Indonesia, are a few of the major beneficiaries of this investment.

Economic reform and trade liberalisation will be important in helping Japan cope with these challenges by making its economy more open and flexible. Since his election to office in 2012, Prime Minister Shinzo Abe has pursued a reformist economic agenda, dubbed ‘Abenomics’, implementing fiscal and monetary expansion as well as elements of structural reform that could liberalise the Japanese economy. Although progress has been made in a number of sectors, including in agricultural reform, continued reform efforts will be needed to revitalise Japan’s business environment. The Bank of Japan introduced negative interest rates in February 2016 to encourage spending and investing. The IMF forecasts Japan’s economy to grow one per cent in 2016.

The rapid ageing of Japan's population will reduce the size of the workforce and tax revenues, while placing increasing demands on health and welfare expenditure. Labour-market reforms, such as Abe’s ‘womenomics’, are being implemented to increase participation to counter this trend. In April 2014, the Japanese government took measures to increase tax revenues by raising the consumption tax from five per cent to eight per cent, with plans to again raise the rate of this tax to 10 per cent in 2017.

Foreign Relations

Japan's foreign policy aims to promote a peaceful and stable international community to support an economy highly dependent on international trade and investment, while contributing to international solutions to shared challenges such as environmental protection, terrorism, poverty and infectious diseases.  Japan is currently a non-permanent member of the UN Security Council (2016-2017) and is the second-largest contributor to the UN budget. Japan’s  official development assistance (ODA) plays an important role in many countries, including in the Indo-Pacific region.

While Japan’s constitution limits its military role in international affairs, Japan’s Self-Defense Forces contribute actively to UN peacekeeping operations and disaster relief including to Pacific Island Countries.  In September 2015 the Diet passed security reform legislation to give the Self-Defense Forces greater flexibility to contribute to international peace and stability, including by exercising its UN Charter right to collective self-defence.  Japan is also actively engaged in nuclear disarmament and non-proliferation efforts, including its co-development with Australia of the Non-Proliferation and Disarmament Initiative.

The Japan-US alliance is the cornerstone of Japan's foreign policy and national security. Japanese cooperation with the US through the US-Japan Security Treaty has been important to maintaining stability in the region. The US military maintains a presence of approximately 50,000 personnel in Japan under the US-Japan Treaty of Mutual Cooperation and Security of 1960. The US Seventh Fleet is based in Yokosuka and the 3rd Marine Expeditionary Force (III MEF) is based in Okinawa. Plans for the relocation of the Futenma US marine air base in Okinawa have been a longstanding bilateral preoccupation.

Japan describes Australia as its second most important security partner. The Australia-Japan-United States Trilateral Strategic Dialogue is a key security policy mechanism for Japan, Australia and the US.

Good relations with its neighbours are of vital interest to Japan. After the signing of a peace and friendship treaty with China in 1976, bilateral relations developed rapidly. Japan supported China's membership of the World Trade Organization (WTO). Cooperation between Japan and the Republic of Korea (ROK), including over the threat posed by the Democratic People's Republic of Korea (DPRK), is important in ensuring regional stability. A trilateral summit process established in 2008 provides Japan, China and the ROK with a forum for leaders-level dialogue – the fifth such meeting was held in May 2012. Japanese and Chinese leaders last met in Jakarta in April 2015 in the margins of the Asian-African Summit. However, Japan's relationships with China and the ROK are complicated by territorial and historical issues.  A breakthrough deal was reached on the issue of ‘comfort women’ with ROK on 28 December 2015.

Japan and India elevated their bilateral relationship to a ‘special strategic and global partnership’ in December 2015.  The two countries cooperate in many areas in the security field.

Japan has been a member of the Six-Party Talks aimed at de-nuclearising the Korean peninsula, and continues to seek the return of and further information on Japanese citizens abducted by the DPRK.

Reflecting the importance Japan places on the Asia-Pacific region as a source of economic opportunities, its other priority relationships include those with ASEAN members and other regional countries. Japan also supports multilateral initiatives for enhanced dialogue and cooperation in the Asia-Pacific region, including Asia-Pacific Economic Cooperation (APEC), the East Asia Summit (EAS), the G20, the ASEAN Regional Forum (ARF) and ASEAN+3 (Japan, China and ROK). More broadly, Australia and Japan work closely in the United Nations.

Each year, Japan's Ministry of Foreign Affairs produces a 'Diplomatic Bluebook' that summarises its foreign policy over the past year.

Australia – Japan bilateral relations

There have been three major phases in the development of the post-war Australia-Japan relationship:

Political and security relationship

Australia and Japan have a strong and broad-ranging security partnership. The United States is both Australia's and Japan's most important strategic ally, and the three countries progress cooperation on strategic issues through the Trilateral Strategic Dialogue mechanism. A trilateral leaders’ meeting was held in the margins of the Brisbane G20 Summit in November 2014. Australia and Japan consult regularly on regional security issues, such as North Korea's nuclear activities. The growing Australia-Japan defence relationship includes regular bilateral and trilateral exercises with the United States.

The 2007 Joint Declaration on Security Cooperation (JDSC) provides a foundation for wide-ranging cooperation on security issues between Australia and Japan, including in law enforcement; border security; counter-terrorism; disarmament and counter-proliferation of weapons of mass destruction; maritime and aviation security; peace operations and humanitarian relief operations (the two countries have worked closely together in Iraq, East Timor, Pakistan and elsewhere).

The JDSC also established regular '2+2' talks between foreign and defence ministers. At the sixth 2+2 talks in Sydney on 22 November 2015, Ministers welcomed the progress made towards implementing recommendations to enhance security and defence cooperation, including the conclusion of negotiations on a defence technology and equipment agreement, and highlighted that enhanced bilateral defence cooperation is a priority for both Australia and Japan. Prime Ministers had endorsed these recommendations during Prime Minister Abe’s July 2014 visit to Australia. Previous outcomes of the 2+2 process include an Acquisition and Cross Servicing Agreement on defence logistics cooperation, which entered into force on 31 January 2013, and an Information Security Agreement on the sharing of classified information, which entered into force in March 2013.

In 2014 then Australian Prime Minister Abbott and Japanese Prime Minister Abe decided to elevate the security and defence relationship to a ‘Special Strategic Partnership’.  In July 2014 Prime Minister Abe visited Australia and in December 2015 Prime Minister Turnbull visited Japan.

Foreign Minister Bishop visited Japan in February 2016 to progress further the 2+2 agenda, explore ways to further strengthen the strong trade and investment relationship and mark the 40th anniversary of the Australia-Japan Basic Treaty of Friendship and Cooperation. During the visit, Foreign Ministers Bishop and Kishida agreed on an Australia-Japan Strategy for Cooperation in the Pacific [PDF 31 KB] to enhance cooperation in development, defence and diplomacy.

Australia and Japan closely cooperate on nuclear non-proliferation and disarmament issues. The two countries have jointly led efforts in support of the Nuclear Non-Proliferation Treaty, including International Commission on Nuclear Non-Proliferation and Disarmament (ICNND) established in 2008, and the cross-regional Non-Proliferation and Disarmament Initiative (NPDI) established in 2010. Australia and Japan are also co-Chairs of the Friends of the Comprehensive Nuclear Test-Ban Treaty (CTBT) group.

Australia and Japan are close partners in regional forums such as APEC and the East Asia Summit. Australia supports Japan's aspiration to become a permanent member of the United Nations Security Council and Japan's efforts to reform the Security Council. Australia cooperates closely with Japan in its current role as a non-permanent member of the Security Council.

In the aftermath of the Tohoku earthquake and tsunami in Japan March 2011, Australia provided extensive support to Japan, including a 72-person urban search and rescue team; a team of Defence operations-response officers; C17 aircraft for use in relief operations; and a donation of $10 million to the Australian Red Cross Japan and the Pacific Disaster Appeal. Then Prime Minister Gillard was the first foreign head of government to conduct an official visit to Japan following the earthquake, announcing a program to help fund university students, academics and professionals from those areas most affected by disasters to spend time in Australia. There was also significant grass-roots support for Japan in Australia and from the Australian community in Japan.

Australia and Japan signed a Memorandum of Understanding on International Development Cooperation between Australia and Japan (MOU) to cooperate closely in development assistance and disaster relief in Tokyo in December 2011. The MOU committed the respective parties to work more closely together to increase aid effectiveness and help developing countries lift their people out of poverty and share the benefits of economic growth. Through the partnership, the parties have agreed to increase the exchange of information, and to enhance cooperation in sectors such as education, health, food security and infrastructure.

Australia and Japan have both consistently agreed not to let our differences over whaling affect the broader bilateral relationship. We discuss our differing perspectives on whaling through our engagement in the International Whaling Commission (IWC). Our wide-ranging common interests include cooperation in Antarctica and safety-at-sea issues.

Trade and Investment

The important Australia-Japan economic relationship is underpinned by complementary strengths and needs. Australia is a safe, secure and reliable supplier of food, energy and mineral resources and a world-class centre for financial and other services. Japan was Australia’s third-largest export market by 1924-25. Following the signing of the landmark Commerce Agreement in 1957, Japan became Australia’s largest trading partner in the early 1960s—a position it maintained for 40 years. Japan is a reliable customer of Australian resources and Japanese investment has played a significant role in the development of the Australian economy.

Trade

Japan was Australia's second-largest trading partner in 2015. Japan is Australia's second-largest export market, and should remain so for the foreseeable future. Two-way goods and services trade between Australia and Japan was valued at $59.9 billion in 2015-16. Goods exports to Japan in 2015-16 were $40.1 billion, representing approximately 16 per cent of Australia's total goods exports.

In 2015, Australia's major merchandise exports to Japan included LNG , coal ($12.1 billion), iron ore ($5.28 billion), beef ($1.9 billion), and copper ores and concentrates ($1.6 billion).   Japan was Australia’s largest merchandise export market for fish, fruit and vegetables juices, animal feed, coal, liquefied propane and butane, transmission shafts, dairy products and natural gas.

On the other side of the trade ledger, in 2015, Japan was Australia's third-largest source of imports. Major merchandise imports from Japan included passenger vehicles ($6.4 billion), refined petroleum ($3.3 billion), tubes and pipes of iron or steel ($1.8 billion) and goods vehicles ($1.3 billion).

Total bilateral trade in services in 2015 was valued at over $5 billion, mostly in the recreational travel, transport and education sectors. Services exports were worth $2.1 billion and services imports were valued at $3 billion.

Investment

Japan is Australia's largest source of investment from Asia and fourth-largest overall, with an investment stock of $199.6 billion in 2015. Japan was the second largest direct foreign investor in Australia ($85.9 billion) in 2015, accounting for 11.7 per cent of total foreign direct investment. This has been essential in the development of many of the export industries that have driven Australia's growth, including in large-scale projects to meet Japanese demand for resources such as iron ore, coal and motor vehicles. Japanese investment has enabled the rapid expansion of Australia’s LNG capacity, which could see Australia become the world's biggest producer by 2017. The $34 billion Ichthys project near Darwin, headed by Japan's INPEX and scheduled to start production in 2017, will be the first Japanese-operated LNG project anywhere in the world. Japan's major trading houses continue to make multi-billion dollar investments in Australian resources.

Japanese investment has recently extended beyond the traditional areas of natural resources to sectors such as financial services, infrastructure, information and communications technology, property, food and agribusiness. JAEPA will further boost Japan’s diverse and growing investment in Australia, generating employment growth including in regional Australia.

Japan was Australia's fourth-largest destination for foreign investment in 2015 (stock of investment in Japan was $93.1 billion).

Bilateral and regional trade agreements

Australia and Japan are natural partners with highly complementary economies.

The Japan-Australia Economic Partnership Agreement (JAEPA) entered into force on 15 January 2015.  The agreement has already delivered significant benefits to Australian farmers, manufacturers, exporters, service providers and consumers. 

Beef exports to Japan grew by 14.6 per cent to nearly $2 billion in 2015. Australian exports of oranges to Japan have hit record levels, valued at more than $36 million in 2015. Other products including nickel, worth an estimated $80 million a year, and food products such as sauces and mustard worth $29 million are also experiencing significant tariff cuts.

The third round of tariff cuts was implemented on 1 April 2016, enabling 92 per cent of Australian products to enter Japan duty-free. When fully implemented more than 97 per cent of Australia’s exports to Japan will receive preferential access or enter duty-free.

To date, JAEPA is by far the most liberalising trade agreement Japan has ever concluded.

More information on the Japan-Australia Economic Partnership Agreement

Doing business in Japan

The Australian Trade Commission (Austrade) is the Commonwealth Government's agency which assists Australian companies to build and implement their export strategies. Austrade offers practical advice, market intelligence and ongoing support (including financial) to Australian companies seeking to grow their business in Japan. Austrade also works to promote the Australian education sector within Japan and attract productive foreign direct investment into Australia. Austrade has offices in Tokyo, Osaka, Fukuoka and Sapporo.

More information on doing business and opportunities in Japan

People to people links

Early Japanese settlers started the pearling industry in Australia. Larger-scale migration began after the Second World War, and Japanese continue to settle in Australia today. According to the 2011 census, more than 50,000 residents claimed Japanese heritage. Data suggests that there are approximately 75,000 Japanese nationals living in Australia (for a period of 3 months or longer) (Japanese Statistics Bureau). There were 12,960 enrolments by students from Japan in 2015, ranking Japan as 14th overall by volume of enrolments for student visa holders. The English Language Intensive Course for Overseas Student (ELICOS) sector was the most popular sector for these enrolments (48.6%). A further 28.6% of Japanese enrolments were in Vocational Education and Training (VET) and 11.7% in higher education. Students from Japan also travel to Australia on other visa types.

Since 2014, Japan has participated in the New Colombo Plan, a signature initiative of the Australian Government which aims to lift knowledge of the Indo-Pacific in Australia and strengthen people-to-people and institutional relationships through study and internships undertaken by Australian undergraduate students in the region. In the first three years of the program, more than 10,000 students are being supported to study, live and undertake work-based activities in the Indo-Pacific, with more than 1,400 New Colombo Plan students are being supported to study and undertake work-based learning activities in Japan between 2014 and 2017. Japanese remains the most widely studied language in Australian schools and universities, enhanced by over 650 sister-school relationships. Around 360,000 students study Japanese from primary to tertiary level, which ranks Australia fourth in the world in terms of the number of Japanese learners (Japanese Ministry of Foreign Affairs). In 2014, Australian universities reported 459 active agreements with Japanese institutions – 70% include student exchange and 60% include research collaboration.  Japan was the fifth most popular destination for Australian university students studying abroad in 2014.

People-to-people links are supported by 17 Australia-Japan and 47 Japan-Australia societies which provide grass-roots community support to the relationship, as well as 100 sister city and six sister state-prefecture relationships. Most Japanese come to Australia on short-term visits as tourists and businesspeople. Japan is Australia's seventh-largest inbound market in terms of short term arrivals, with 335,500 visitors from Japan in 2015.  304,700 Australians visited Japan in 2015.

High-level visits

Since 1957, when then Prime Minister Sir Robert Menzies visited Japan (the first Australian prime minister to do so) there have been 25 prime-ministerial visits to Japan, the most recent being Prime Minister Turnbull’s visit in December 2015. There have also been regular high-level visits of Cabinet Ministers, including the following visits since 2010:

Japanese high-level visits to Australia

  • Minister for Foreign Affairs Kishida and then Minister of Defence Nakatami visited Sydney for the sixth Australia-Japan Foreign and Defence Ministerial (2+2) Consultations on 22 November 2015.
  • Prime Minister Abe attended the 2014 G20 Summit in Brisbane from 15-16 November 2014.
  • Minister of State for Economic and Fiscal Policy Akira Amari visited Sydney for the TPP Trade Ministers’ Meeting on 25-27 October. 2014
  • Finance Minister and Deputy Prime Minister Taro Aso visited Cairns for the G20 Finance Ministers’ Meeting on 20 September 2014.
  • Then-Agriculture Minister Yoshimasa Hayashi and Economy Trade and Industry Minister Motegi visited Sydney for the G20 Trade Ministers’ Meeting on 19 July.
  • Prime Minister Abe visited Canberra and Western Australia from 7-10 July 2014.
  • During his first term as Prime Minister, Mr Abe visited Sydney in September 2007 to attend the Sydney Asia-Pacific Economic Cooperation (APEC) Economic Leaders meeting (AELM). Since the first post-war visit to Australia by then Prime Minister Nobusuke Kishi in 1957, 11 Japanese prime ministers have visited Australia.
  • Minister for Internal Affairs and Communications, Yoshitaka Shindo, visited Sydney on 28-30 April 2014.
  • Defence Minister Itsunori Onodera visited Perth for meetings with Defence Minister Johnston on 26-28 April 2014. While in Western Australia he visited HMAS Stirling and RAAF Base Pearce to see the operations in support of the search for missing Malaysian flight MH370 to which Japan contributed assets and personnel.
  • Finance Minister and Deputy Prime Minister Taro Aso visited Sydney for the G20 Finance Ministers and Central Bank Governors’ Meeting on 22-23 February 2014. He held a bilateral meeting with Treasurer Joe Hockey.
  • Japanese Foreign Minister Fumio Kishida travelled to Australia on 13-14 January 2013 as part of his first overseas visit as minister.

Key bilateral agreements and joint programs

Australia-Japan cooperation is assisted by a number of key bilateral agreements and statements, including the following:


Last Updated: 6 May 2016