Japan-Canada Relations (Economic Relations) 
Economic Relations
- (1) Japan-Canada economic relations are fundamentally in good shape. The trade balance is roughly equal.
- (2) Trade between Japan and Canada is mutually complementary. Japan's main imports from Canada are raw materials such as coal, lumber, copper ore and agricultural products such as canola and pork, while its exports to Canada are manufactured goods centered on automobiles and automotive parts.
- (3) A Joint Study agreed upon in the Japan-Canada Economic Framework document signed by the leaders of the two countries in November 2005 was completed in October 2007, and the First Trade and Investment Dialogue was held in November 2008 to further promote bilateral trade and investment, and other cooperative issues.
1. Trade Trends
(1) The Japan-Canada trade balance is roughly equal, where until 2001 Japan was regularly in deficit but in 2002, 2006 and 2007, Japan registered an export surplus. In recent years, the trade balance showed a deficit for Japan. Both imports and exports have decreased in 2009 with Japan's exports to Canada being 722.8 billion yen (35.24% decrease from the previous year) and Japan's imports from Canada being 857.5 billion yen (35.18% decrease from the previous year), resulting in a trade deficit of 134.7 billion yen for Japan .
(2) For Canada, Japan used to be the second largest trading partner in terms of both exports and imports, after the United States, but after 2002, China, United Kingdom and Mexico have outstripped Japan in terms of trade value. Japan ranks 5th with a share of 2.8%. In terms of Canadian imports, Japan ranks 4th (2009 share: 3.4%) following the United States, China and Mexico. In terms of Canadian exports, Japan ranks 4th (2009 share: 2.3%) following the United States, United Kingdom and China.
For Japan, meanwhile, Canada ranks 14th among trading partners for imports (2009 share: 1.7%) and 16th for exports (2009 share: 1.3%).
| Exports to Canada | Value (1,000 yen) |
Share | Imports from Canada | Value (1,000 yen) |
Share | ||
|---|---|---|---|---|---|---|---|
| 1 | Automobiles (1,500 cc to under 3,000 cc) | 169,288,352 | 23.4% | 1 | Bituminous coal (coking coal with strong coking property) | 163,453,376 | 19.1% |
| 2 | Automobiles (3,000 cc and over) | 73,956,552 | 10.2% | 2 | Canola (low erucic acid type) | 81,913,261 | 9.6% |
| 3 | Gearboxes and other parts | 42,798,590 | 5.9% | 3 | Pork (frozen) | 62,513,895 | 7.3% |
| 4 | Automobiles (1,000 cc to under 1,500 cc) | 31,471,895 | 4.4% | 4 | Copper ore (including refined ore) | 55,449,343 | 6.5% |
| 5 | TVs, cameras, digital cameras, video camera recorders | 26,056,521 | 3.6% | 5 | Non-tropical coniferous timber | 54,303,399 | 6.3% |
| 6 | Aircraft and helicopter parts | 23,285,132 | 3.2% | 6 | Pork (fresh and refrigerated) | 27,762,247 | 3.2% |
| 7 | Re-export products | 22,422,572 | 3.1% | 7 | Maslin and other wheats | 24,654,511 | 2.9% |
| 8 | Automotive gasoline engines (over 1,000 cc) | 16,209,018 | 2.2% | 8 | Soy bean | 22,859,205 | 2.7% |
| 9 | New rubber made passenger automobile air-filled tires | 14,497,699 | 2.0% | 9 | Weathered and chemically treated bark of coniferous tree (soda pulp, etc) | 17,815,898 | 2.1% |
| 10 | Longitudinal submerged arc welding transportation pipes (external diameter over 406.4 mm) | 11,333,580 | 1.6% | 10 | Potassium chloride fertilizer | 16,041,453 | 1.9% |
| (Total 1-10) | 431,319,830 | 59.6% | (Total 1-10) | 526,766,588 | 61.6% | ||
| Total Exports | 722,761,037 | 100.00% | Total Imports | 857,526,049 | 100.00% | ||
(Created based on the Trade Statistics of Japan)
(3) Trade relations between Japan and Canada are mutually complementary. In recent years Canada has been making efforts to expand exports of high-value-added products, such as high-tech and IT-related products, but Japan's main imports from Canada remain raw materials and agricultural products, and its main exports to Canada are manufactured products.
(4) The Canadian economy has a high degree of external dependence, and the total value of exports accounts for about 28.6% (2009) of its gross domestic product (GDP). From the standpoint that international competition gives vitality to the Canadian economy, accelerates innovation, increases foreign investment, and creates many jobs, the Canadian government, while removing obstacles from its main markets, has focused on strengthening systems and regulations relating to international trade and investment, and on building relations with new partners.
2. Investment Trends
(1) In the 1990s Japan's direct investment in Canada hovered around 100 billion yen. The figure increased sharply in 1999 partly due to a large M&A deal (about 240 billion yen), but then it remained stagnant from 2000. However after 2006, due to expansion of Japanese automotive plants and growth in the financial and insurance industries, investments increased. In 2009 with effects of investment withdrawal for transport machinery and instruments, investment became once again stagnant.
Source: "Foreign Direct Investment" "Japan's Balance of Payments and International Investment Position" (Ministry of Finance)
(2) Canada's investment in Japan was at a low level in 1998, registering 11 cases worth 1.7 billion yen (0.1% of total inward foreign direct investment). In 1999, however, following a large capital tie-up (about 140 billion yen), it increased sharply. Since 2000, it has again been stagnant, and in 2006, due to the withdrawal of investment in the field of the financial and insurance industry, total investment amount was minus 320.9 billion yen. In 2009, the total investment amount was minus 11.1 billion yen, and the increase of Canada's investment toward Japan has become one of the important challenges.
Source: "Foreign Direct Investment" "Japan's Balance of Payments and International Investment Position" (Ministry of Finance)
3. Individual Issues
(1) Japan-Canada Economic Framework
At the Japan-Canada summit that took place when then Canadian Prime Minister Paul Martin visited Japan in January 2005, the leaders of the two countries agreed to launch the Innovative Japan-Canada Economic Framework in order to strengthen bilateral economic relations. It was agreed to study efforts to maximize the potential of Japan-Canada economic relations based on three pillars: (a) strengthening the Joint Economic Committee (JEC) that oversees Japan-Canada economic relations, (b) specifying priority areas for cooperation, and (c) conducting a one-year joint study program to analyze the current state of Japan-Canada relations with regard to trade and investment and to consider policies for strengthening various facets of the relationship. Subsequently, the Japan-Canada Economic Framework, which was compiled after consultations between the two countries and signed by Prime Minister Junichiro Koizumi and Prime Minister Martin at a bilateral summit in November 2005, specified and listed 15 priority areas for cooperation, including investment, the promotion of tourism, a social security agreement, and tariff cooperation. The framework also agreed to conduct a Joint Study to further promote bilateral trade and investment and other cooperative issues. The two countries subsequently implemented this Joint Study and drew up a report in October 2007.
The report summarized Japan-Canada cooperation in the economic field until then, and suggested measures that should be taken to strengthen bilateral economic relations from now on, proposing enhanced cooperation in the fields of (a) regulatory reform dialogue, (b) promotion of investment, (c) revision of taxation treaty, (d) food safety, (e) energy, (f) science and technology, (g) air service, (h) intellectual property, and (i) mutual approval of telecommunication equipment. At present Japan and Canada are considering specific cooperation in these fields bearing in mind the contents of the report.
In October 2008, priority areas for cooperation were revised and they include holding the Trade and Investment Dialogue, and intellectual property rights.
(2) Regular Consultations Between Japan and Canada in the Economic Field
At present, as comprehensive regular consultations between Japan and Canada in the economic field, at the government level there is the Joint Economic Committee (JEC). In addition, following an agreement reached at a JEC meeting in Tokyo in January 2008, the Trade and Investment Dialogue (TID) was held for the first time in November of that year to further promote bilateral trade and investment and other cooperative issues. At the first TID, discussions took place on improvement of the business environment, regulatory cooperation, and trade policy.
At the private-sector level, the Japan-Canada Business Council (JCBC) used to meet once a year, but it ended after its twenty-fifth meeting in Sendai in May 2002. As a new forum for dialogue, the first Japan-Canada Business Conference, organized by the Committee on Canada of Nippon Keidanren (Japan Business Federation) and the Canadian Council of Chief Executives (CCCE), was held in Tokyo in September 2004. (The second meeting took place in Toronto in November 2005.) Besides these, consultations in specific sectors include bilateral consultations on finance, bilateral consultations on fisheries, bilateral consultations on information and communications policy, regular consultations between the public and private sectors of Japan and Canada on tourism, bilateral rapeseed consultations, and a trilateral (with the United States) committee of architectural specialists.
4. Agreements Concluded Recently Between Japan and Canada
(1) Agreement between Japan and Canada Concerning Cooperation on Anticompetitive Activities
The Japanese and Canadian governments, which had been negotiating a bilateral agreement relating to cooperation on anticompetitive activities, reached broad accord on the main points in January 2005. The agreement was signed on September 6, 2005, and went into effect on October 6 of that year. As a result of the agreement, it is hoped that (a) the enforcement of the anticompetitive laws of the two signatory countries against anticompetitive activities that might spread internationally will be strengthened, (b) cooperation between the competition authorities of Japan and Canada will further develop, and (c) friction over application in other regions will be avoided.
(2) Agreement between Japan and Canada on Social Security
In October 2004 the governments of Japan and Canada commenced negotiations on the conclusion of a bilateral social security agreement so as to resolve such problems as double contributions as a result of compulsory subscriptions to the pension systems of the two countries. After two more rounds of negotiations, an accord was signed in Tokyo in February 2006. After the exchange of diplomatic notes in November 2007, the agreement went into effect in March 2008. As a result of the agreement, (a) in principle, subscription is compulsory only for the pension system of the country where a person is working (although if the period of detachment is less than five years, subscription is compulsory only for the pension system of the dispatching country) (thus resolving the problem of double subscription); and (b) contributions in both countries can be aggregated to establish a person's right to receive pension benefits in one of the countries (thus resolving the problem of forfeiting contributions).
(3) Mutual Recognition Agreement (MRA) on Authorized Economic Operator (AEO) programs between Japan and Canada
On June 25, 2010, the customs administrations of Japan and Canada signed the MRA on AEO programs. The programs allow freight transport operators that have been certified for security management and legal compliance to use simplified and fast-tracked customs proceedings. This arrangement will contribute to furthering secure and facilitated trade between two countries.
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