Section 3 Economic Diplomacy

Overview

(Recognition of the Economic Situation and Japan's Economic Diplomacy)

In 2016, in addition to actions by the U.S. toward the normalization of monetary policy, trends in crude oil prices, economic prospects for emerging countries including China, the impact of growing uncertainty in future economic relations between the UK and the EU after the UK's withdrawal from the EU attracted attention. Given this situation, the world economy showed signs of weakness among some developed countries in the first half of the year, but these signs began to fade in the latter half of the year, along with signs of recovery in the Chinese economy, leading to the continued moderate recovery of the overall world economy. Although the Japanese economy also had shown weakness, but it has continued a moderate recovery, helped by an improvement in the situations in employment and income.

Based on this recognition of the economic situation, the Government of Japan approved the “Japan Revitalization Strategy 2016” (hereinafter the “Growth Strategy”) in June with the aim of “achieving a 600 trillion yen GDP, Japan's largest GDP in the post-war era, by turning the current virtuous economic cycle into sustainable economic growth.” The “Growth Strategy” shows a course to incorporate the world's growth into Japan's growth through Japanese companies and citizens proactively entering into overseas markets and attracting the “global flow of people, goods, and money” into Japan.

Strengthening economic diplomacy as a means of driving the growth of the Japanese economy is regarded as one of the three pillars of Japan's foreign policy, alongside strengthening the Japan-U.S. Alliance and enhancing our relations with neighboring countries. Japan has made earnest efforts to strengthen it. In 2016, while taking into account the “Growth Strategy,” Japan carried out economic diplomacy from three aspects: (1) rule-making to bolster free and open global economic systems, (2) supporting the overseas business expansion of Japanese companies through promotion of public-private partnerships, and (3) promoting of resources diplomacy along with direct investment toward Japan.

〈Rule-Making to Bolster Free and Open Global Economic Systems〉

(1) Promotion of Economic Partnerships

The promotion of high-level economic partnerships constitutes one of the pillars of the Growth Strategy, which aims to raise the FTA ratio to 70% (18.9% in 2012) by 2018. The Trans-Pacific Partnership (TPP) Agreement signed in February 2016 establishes new trade and investment rules among 12 Asia-Pacific countries. When the agreement enters into force, a huge economic zone that accounts for 40% of the world's GDP and 10% of its population will be realized. Furthermore, Japan will aim to contribute to global rule-making on trade and investment, by carrying out various negotiations in parallel, including the Japan-EU Economic Partnership Agreement (EPA), the Regional Comprehensive Economic Partnership (RCEP), and the Japan-China-ROK FTA.

(2) Multilateral Trade Liberalization (WTO)

Although negotiations to liberalize multilateral trade have been in a deadlock for many years, the multilateral trading system centered on the World Trade Organization (WTO) has played a vital role in making new rules and putting existing rules into practice, including disputes settlement.

Negotiations have continued since 2001 in the Doha Development Agenda (DDA), but its future prospects are uncertain due to disagreements between developed and developing countries. On the other hand, success in the Information Technology Agreement (ITA) expansion negotiations, and agreements on export competition in agriculture, including export subsidies, at the 10th WTO Ministerial Conference (MC10) showed that the WTO's negotiation function is indeed still working and effective. There is a need to consider new ways of dealing with issues, including those that change with the times, from the perspective of revitalizing and bolstering the negotiation functions of WTO, and Japan also intends to take active part in the discussions. At WTO's Informal Ministerial Meeting held in October in Oslo, Norway, participants shared view such as on the importance of mutual confidence building under increasing pressure for protectionism, the need to avoid the risks of setting overambitious goals, and the need to carry out negotiations to ensure the achievement of incremental results in achievable fields at every ministerial conference etc. Progress is being made in discussions to achieve steady results at the 11th WTO Ministerial Conference (MC11) to be held in December 2017.

(3) International Discussions Led by Japan

The G7 summit is a meeting where leaders of developed countries meet to discuss policy cooperation, and in 2016, Japan, as the G7 presidency, hosted the G7 Ise-Shima Summit on May 26 and 27. G7 countries confirmed their solidarity at the summit, while Japan exercised leadership as the presidency not only in discussions on the summit's main focus of the global economy, but also Japan's top-priority issues on “quality infrastructure investment,” “health,” “women” and maritime security. By achieving results through specific action, Japan succeeded in making an impact on the global arena. Regarding the global economy in particular, G7 leaders reaffirmed the importance of taking a three-pronged approach of implementing monetary, fiscal and structural policies, pledging to work hand-in-hand to tackle risks and lead the sustainable, strong growth of the global economy.

Moreover, the global economy was also the main theme of the G20 Hangzhou Summit (in China), following the G7 Ise-Shima Summit. On the basis of the discussions at the Ise-Shima Summit that Japan, as the G7 presidency, stressed, with the world economy facing various risks, it is important that we strengthen international cooperation. The leaders of the G20 concurred on the need to take all appropriate policy responses including monetary and fiscal policies, as well as restructuring. The leaders, including emerging economics such as China, were able to reach the agreement on steadily addressing structural problems, such as excess capacity.

Asia Pacific Economic Cooperation (APEC) is an economic cooperation framework participated in by 21 countries and regions (economies) in the Asia-Pacific Region. At the APEC Economic Leaders' Meeting in Peru in November, under the general theme of “Quality Growth and Human Development,” extensive discussions took place focusing on advancing regional economic integration and quality growth, enhancing the regional food market, towards the modernization of micro, small and medium-sized enterprises in the Asia-Pacific, and developing human capital. Prime Minister Abe stressed that free trade is the foundation of global economic growth, and expressed Japan's intention to promote free trade by progressing policies to bring about inclusive growth.

The Organization for Economic Cooperation and Development (OECD) is the “world's largest think tank,” covering a wide range of economic and social issues. Discussions were held at the Ministerial Council Meeting held in June on the theme of “Enhancing Productivity for Inclusive Growth.” Acting as vice-chair for the tenth time, Japan contributed to the discussions by playing a leading role in the setting of the theme and efforts to prepare and negotiate documents, and communicated the need for a “positive cycle between economic growth and enhanced opportunities and income.” Moreover, Japan returned to the OECD Development Centre (development think tank of the OECD) on June 1 for the first time in 16 years.

〈Supporting the Overseas Business Expansion of Japanese Companies through Promotion of Public-Private Partnerships〉

(1) Support for Japanese Companies' Overseas Business Expansion

The Government of Japan places great importance on promoting the overseas businesses of Japanese companies to incorporate the vigorous economic growth in foreign countries, including emerging countries, and to promote the steady growth of the Japanese economy. Under the command of the Headquarters for the Promotion of Japanese Business Support which is headed by Foreign Minister Kishida, MOFA proactively supports the overseas business expansion of Japanese companies. These initiatives are centered on the “Division for Promotion of Public and “Private Partnership,” established in September 2015, working closely with diplomatic missions overseas under the leadership of ambassadors and consul-generals.

In addition, to “achieve the Government's target of approximately 30 trillion yen in infrastructure exports by 2020,” set in the “Growth Strategy,” Japan is engaging proactively in top-level sales to sell the country's infrastructure and technology overseas. This has resulted in steady progress being made toward attaining the goal, with the value of orders reaching around 19 trillion yen in 2014.

Moreover, with the aim of achieving the Government's target (Economic Measures to Realize Investments for the Future) of “one trillion yen in exports of agricultural, forestry, and fishery products and food by 2019,” MOFA has utilized its diplomatic missions overseas to allow companies involved in exporting agricultural, forestry, and fishery products and foods to provide consultation and hold events to promote Japanese products. In particular, Japanese business support officers (in charge of the food industry) at 58 diplomatic missions overseas in 54 countries and regions have been assigned by MOFA to bolster initiatives. Moreover, the governments of the ROK, Taiwan, China, Hong Kong, Macao, Singapore and Russia continue to place import restrictions due to the Great East Japan Earthquake and the accident at TEPCO's Fukushima Daiichi Nuclear Power Plant. MOFA has been providing accurate information promptly to these countries and regions, and has been urging them to relax or remove the restrictions as soon as possible based on scientific evidence.

〈Promoting of Resources Diplomacy along with Direct Investment in Japan〉

(1) Energy, Mineral Resources and Food Security

In the field of energy and mineral resources, Japan led international discussions on energy issues as the G7 presidency in 2016. Japan also took a leading role in issuing the Guiding Principles towards Sustainable Development regarding the strengthening of assistance for complex contract negotiations in extractive industries (CONNEX Initiative) and the holding of the G7 CONNEX Initiative International Conference on Capacity Building and Transparency in September. In November, Japan also hosted the Meeting of the Energy Charter Conference as the first chair from East Asia, as parts of outreach efforts of the Energy Charter Treaty, which aims to promote the protection and deregulation of energy investments. Moreover, Prime Minister Abe and the leaders of the main resource-rich countries took these opportunities to bolster bilateral ties.

As for food security, Japan has been making efforts to lay down specific measures to be implemented by the G7 in aiming to achieve Sustainable Development Goals (SDGs), and organized the G7 International Symposium on Food Security and Nutrition in October. Faced with the possibility of global food shortages in the future, Japan has been implementing initiatives to secure a stable food supply through balancing the world's food supply and demand by increasing the world food production.

(2) Sustainable Use of Living Marine Resources

As one of the responsible major fishing and consuming countries in the world, Japan has a basic policy of proper conservation and management and sustainable use of living marine resources. As such, Japan plays an active role as a member of many Regional Fisheries Management Organizations (RFMOs), which are the most important international organizations to decide and enforce conservation and management of fisheries resources. On the whaling issue, although the international situation remains difficult, Japan is making persistent efforts to deepen understanding among the international community, based on international law and scientific evidence, under the basic policy that diversity in culture and customs should be respected in the sustainable use of whale resources.

(3) Promotion of Foreign Direct Investment in Japan

The Council for Promotion of Foreign Direct Investment in Japan, formed in 2014, has been spearheading government-wide initiatives to find or attract investments, or realize the necessary systematic reforms in aiming to achieve the goal of doubling foreign companies' direct investment in Japan to 35 trillion yen by 2020, as addressed in the government's Growth Strategy.

As an initiative to make use of diplomatic resources, MOFA has been engaging proactively in calling for investments in Japan and holding events to promote it through “contact points for Direct Investment towards Japan,” established at 126 diplomatic missions overseas. Additionally, a variety of strategic initiatives have been implemented both domestically and internationally through top-level sales carried out by government officials, and cooperation with related organizations such as the Japan External Trade Organization (JETRO).