Japanese Market: Opportunities and Challenges

At the workshop, most of the experts agreed that with large market potential and an increasingly favourable legal and economic environment, Vietnam can find many export opportunities in Japanese market. Ms Le Hoang Oanh, Deputy Director of Vietrade, said: “Japan is one of Vietnam’s most important partners in economy, trade and investment. Vietnam-Japan cooperation has developed sustainably since the two countries established diplomatic relations in 1973. Along with the ASEAN-Japan Comprehensive Economic Partnership Agreement (VJEPA), the two countries signed a bilateral agreement in 2008, creating a favourable legal framework for the development of economic and trade relations between the two countries.

 

In recent years, many of Vietnam’s goods have managed to enter Japan and gained a strong foothold in this market, including seafood, garments, furniture, coffee, plastics, leather, footwear, wire and cable, electronic products and components.

 

Two years after VJEPA came into effect, numerous of Vietnam’s goods have increased their presence in the Japanese market by taking advantage of preferential tariff treatment. Many of Vietnam’s main items such as agricultural, forestry and aquatic products have advantages in Japan, enjoying the tax rate of 0 percent as soon as the VJEPA came into effect. The industrial goods exported to Japan also have a low tax rate from 0-5 percent.

 

In 2011, although Japan suffered from the devastating earthquake and tsunami and severe crisis, cooperation in economy, trade, industry and investment between the two countries still developed. According to the General Department of Customs, Vietnam-Japan bilateral trade turnover reached US$21.1 billion, up 26 percent year on year; of which export turnover of Vietnam to Japan was US$10.7 billion, increased 39 percent compared to 2010. In the first three months of 2012, Vietnam’s exports to Japan reached US$3.1 billion and imports US$2.5 billion.

Statistics of Japan External Trade Organization (JETRO) showed that every year, Japan imports about 70 percent of its agricultural products, including corn, soybean, processed agricultural products and fruits; and 20 percent of seafood, with shrimp as the main product. This is an opportunity for Vietnam’s agricultural processing businesses. Currently, Vietnam’s manufacturers have created many value-added products such as flour fried shrimp and split shrimp used to prepare sushi.

 

On investment, in the first three months, Japan was the leading investor among 26 countries and territories having investment projects in Vietnam, with total newly registered and added investment capital of US$2.3 billion, accounting for 88.8 percent of total investment capital in Vietnam.

 

At the workshop, experts pointed out the difficulties and challenges for Vietnamese enterprises when entering the Japanese market. First are the strict technical standards of industry and agriculture. Besides, the distribution system in Japan is quite complex, the goods have higher prices than imported ones when they come to the market due to many intermediaries, so enterprises must suffer price pressure to meet importers’ demand, while most input costs increase.

 

According to Mr Vo Thanh Ha, Head of Northeast Asia Division, Asia-Pacific Market Department (Ministry of Industry and Trade), those are the biggest difficulties and challenges for Vietnamese enterprises when entering the Japanese market. Vietnam’s goods must meet the standards to circulate. He recommended that to enter the Japanese market, Vietnamese enterprises should obtain information and understand Japanese business customs. Besides, the preparation of customer information prior to the fair industry in Japan will help achieve effective negotiation and more cost savings.

 

Not only that, exports to Japan also cost much money with rising costs of design, engineering, maintenance, and transportation, because Japanese customers pay attention to quality, reliability, convenience and after-sales service.

 

The understanding of Japanese culture and business customs is also very important. Using business cards, company catalogues and being punctual are crucial elements to create trust with Japanese businesses in the first meeting.

 

Another point is that the Vietnamese enterprises must also calculate and reduce costs to compete with other cheap supply sources (from India, Pakistan and Bangladesh). A short term goal is to win market share and build relations, and a long term goal after crisis is effectiveness.

 

Mr Ha emphasized that in order to take full advantages of the opportunities of this market and the support channel of Vietnam and Japan, Vietnamese enterprises should fully exploit the incentives of bilateral and multilateral agreements. The understanding of regulations and safety standards on food hygiene and quarantine practice in Japan will also help businesses deliver consistent, quality products, with limited returns and shortened quarantine time.