An enforced period of transition for Japan offers Scotland new opportunities
Times are tough for Japan. Last month, it reported its biggest annual trade deficit; a contrast from decades of surpluses, as its nuclear power crisis boosted expensive oil and gas imports. All but one of Japan’s 54 nuclear power plants are offline after March’s tsunami caused three reactors to meltdown, setting off the world’s worst nuclear disaster since Chernobyl.
The country has been forced to rely on oil and gas-fired generation to supply electricity.
Although the central government, eager to restart some of the reactors, has been carrying out safety tests on the nuclear plants, local officials have been wary of giving a go-ahead.
The earthquake and tsunami also hurt manufacturing, not only in northeast Japan where they struck but for those companies that had counted on supplies from that area. Exports for the fiscal year dropped 3.7 per cent from the previous year, while imports climbed 11.6 per cent, according to the Finance Ministry.
Japanese companies have also been gradually moving production overseas to lessen the impact of the strong yen, which erodes the value of export earnings.
The trade deficit is striking given Japan’s past politically sensitive reputation as a major exporter; like China today, it was often the target of international criticism for running huge trade surpluses. Economists believe it will return to surplus later this year; exports to Europe, where national economies are in trouble, remain weak but in North America, Asia and other parts of the world they are recovering.
However, the events of recent months have caused the country’s leaders to rethink domestic energy policy and international partnerships. In to this equation falls Scotland, previously recognised by Japan mostly for whisky, golf and Sean Connery – but now increasingly for its expertise in renewable energy, financial services and technology.
“Scotland and Japan share the common aim of developing renewable energy resources,” said Crawford Gillies, chairman of Scottish Enterprise. “Scotland has a very strong vision and has aggressively innovated in this area. Japan has the technology and manufacturing capability so, by working together, we can realise our common aim.
“Since the crisis at the tsunami-crippled Fukushima nuclear plant, I see there has been a lot of debate on the use of energy sources other than nuclear power. The Scottish and Japanese governments can provide an environment to accelerate important developments in the field of renewable energy.
“Scotland is a leader in the development of clean, green energy and boasts a world-class research and development base that is pioneering technologies expected to have global impact on combating climate change.”
A partnership between one of Japan’s largest companies and a Scottish energy firm was announced last month. Mitsui & Co will take a 25 per cent equity share in Global Energy Group, allowing the company to take forward its investment plans, which include the transformation of the recently-purchased Nigg fabrication site at Cromarty Firth in the Highlands into a renewables hub.
The deal was announced during Finance Secretary John Swinney’s recent trip to Japan and South Korea to meet business leaders and government ministers. Swinney visited Tokyo, Osaka, Pusan and Seoul to showcase the innovation and skills of Scotland’s energy sector and promote Scotland’s food and drink.
In March Swinney welcomed a deal between the Orkney-based European Marine Energy Centre (EMEC) and the Ocean Energy Association of Japan (OEAJ) to develop Japan’s first marine energy test centre. Scotland already enjoys successful commercial relationships in the energy sector with major Japanese and Korean firms such as Kawasaki Heavy Industries, Doosan and Samsung.
There are currently 65 Japanese companies that have invested in Scotland resulting in over 4,000 jobs, and four Korean companies, including Samsung Heavy Industries which announced in January that it is to base its first European offshore wind project in Fife in a £100m inward investment venture expected to create more than 500 new jobs in Scotland.
Gillies pointed to the announcement by Mitsubishi Power Systems Europe that it will invest up to £100m in a research and development centre in Scotland, to develop technically advanced offshore wind turbines, as another significant example.
“I believe Mitsubishi’s decision to invest in Scotland demonstrates how Scotland’s renewables revolution is gathering pace, and that we have the quality infrastructure and skilled workforce to deliver success in this rapidly growing industry.” He said that Japan’s established base of multinational and global companies is of particular interest to Scottish firms who are looking for global partners in the areas of financial services, life sciences, biotechnology, renewable energy, electronics, textiles, food and drink.
“Financial services is a well-established industry in Scotland, and we have been promoting it in Japan for some time. Today, almost all key Scottish asset managers have created partnerships with Japanese financial institutions. Examples are Baillie Gifford & Co, Standard Life plc, Aberdeen Asset Management plc and Scottish Widows.” The electronics market, including the gaming sector, offers many opportunities for Scottish firms with niche technologies or products to work together with Japanese companies, he added.
“The Japanese food and drink sector is another one that we are encouraging Scottish firms to explore. Japanese consumers are discerning and open to buying branded products that are natural, healthy and produced in a sustainable way.”
Scottish food and drink took centre stage in Japan during April at a major trade event aimed at boosting Scottish exports. A range of Japanese importers, chefs and buyers, including the executive chef at world-renowned restaurant Nobu Tokyo, attended ‘Scotland – the land of food and drink’ at the Imperial Hotel in Tokyo to try Scottish food with a Japanese twist.
Food and drink exports to Japan are currently worth £91m. In 2011, Scotch whisky exports increased 25 per cent to £74.5m while imports of food such as smoked salmon increased 24 per cent to £16.2m.
“And in the area of life sciences,” said Gillies, “since the Japanese market is open to new ideas to drive business, in January we hosted a Life Sciences Mission with a focus on drug discovery.” He shrugged off the sometime uneasy relationship between Scotland and Japan over the latter’s whisky industry: “Over the past ten years or so, the increased recognition – particularly overseas – of the quality of Japanese whisky has created a niche category, distinct from scotch or bourbon.
“It is fast becoming a must-have category for any self-respecting liquor shop or bar. In the Japanese market, imported whiskies have made up only a small share of total sales, but the renewed interest in whisky overall will ultimately benefit both domestic and overseas products.
“The relationship between Scottish and Japanese distillers is a long and close one, dating back to a study visit to Scotland by Taketsuru Masataka nearly 100 years ago.
“Rather than being seen as a threat, the recent success of Japanese whisky around the world can be seen as a vindication of the quality of that Scottish spirit from which Japanese whisky was born.”