In the Asian Century, China is clearly one of the most important economies to consider, and most business leaders around the world are seeking to take advantage of this market in one way or another.  However, there is a risk that while many experienced exporters have taken a strategic approach to the Asian region, many newly internationalising companies are missing out on one of the best opportunities available; Japan. The questions that business leaders should be asking are; Where are the opportunities in Japan? and how does the Japanese market compare to the Chinese market?

In 2014 China was Australia’s largest trading partner, however Japan was the second largest trading partner, It has only really been in the past five years or so that Japan has been surpassed by China as our number one trading partner, but not many business leaders ask me about the opportunities for their business in Japan. If we compare the Chinese, and Japanese market we can see that there are quite a bit in common in terms of the key commodities that are being exported (see table below)

Australia’s Top 10 Exported Commodities

China – A$89,998 million                            Japan – A$48,193 million
1. Iron Ore    $50,582 million                        1. Coal    $11,868 million
2. Coal    $8,326 million                               2. Iron Ore    $8,408 million
3. Gold    $7,023 million                              3. Beef    $1,646 million
4. Other Ores     $2,074 million                   4. Copper Ore    $1,538 million
5. Copper Ores    $2,056 million                  5. Aluminium    $1,220 million
6. Copper    $1,756 million                           6. Propane & Butane    $$735 million
7. Wool    $1,683 million                               7. Copper    $569 million
8 Barley    $1,257 million                              8. Other Ores    $388 million
9. Cotton    $1,117 million                              9. Cheese     $374 million
10 Hides and Skins    $861 million                10. Wheat    $318million

There are a few things that stand out in this comparison between China and Japan. The first point I would make is that if we take away the overwhelming impact of Iron Ore exports to China, then the difference in exports between China and Japan become negligible. Indeed if we subtract Iron Ore from both China and Japan, then we can see that exports to China (non –iron ore export total) would be $39,416 million, which is still around 4 times the size of our third largest export market (United States), but marginally lower than Japan (non – iron ore export total) $39,785 million. I will let that sink in for a minute.

If Australia didn’t export Iron Ore, Japan would have been Australia’s largest export partner in 2014.

I wouldn’t necessarily expect that to be the case in the near future however, as we have continued to focus government and business attention on China, combined with improved trading conditions as a consequence of the China Australia Free Trade Agreement in 2015. However it should demonstrate that Japan should be discussed if not in greater terms, then at least in equal measure to Japan.

I would also make the point that exports to Japan include a some interesting commodities including Cheese, and Beef. These commodities are in many cases high value consumer items, and include beef exports such as high grade Wagyu, and craft cheeses. Japan’s appetite for high grade Australian food products is long established, and a good example is the Tasmanian Truffle growing industry and its exports to Japan. The Truffle industry has been growing over the past two decades in Australia and has a geographic advantage over competitors in the northern hemisphere, as truffle harvesting is essentially seasonal, with fresh truffles not having a good shelf life. Tasmanian Truffles come into season when there are no northern hemisphere fresh truffles available, and so this niche market opens up. A tray of premium black truffles can be in the restaurant in Tokyo around 24 hours after been harvested from the ground in Northern Tasmania. These products fetch high prices, and although niche demonstrate the Japanese desire for premium foods.

There are opportunities in Japan that go beyond the traditional mineral and agricultural exports, with similar opportunities for Australian companies to re-approach this market and look for new opportunities.  We need government and business in Australia to refocus on Asia and not forget that Australian trade with Asia started with Japan, the market hasn’t gone away, and continues to grow despite the comparatively limited promotion amongst government and business leaders in Australia. Its time that we put some energy into helping our newly internationalising companies, and prospective exporters find a way to enter the Japanese market. It couldn’t hurt.

Dr Nathan Gray is Managing Partner of AsiaAustralis – a strategic management advisory firm that specialises in markets throughout Asia. Over the past three decades our consultants have assisted companies achieve their market objectives in Asia.