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The Rise of Japanese-Israeli Economic Relations

Japan's tech giants have yet to open American-style R&D centers in Israel, but that could change soon
Prime Minister Benjamin Netanyahu (right) and his Japanese counterpart Shinzo Abe, January 18, 2015. (Miriam Alster/Flash90)
Prime Minister Benjamin Netanyahu (right) and his Japanese counterpart Shinzo Abe, January 18, 2015. (Miriam Alster/Flash90)

“Israel and Japan are situated at opposite ends of Asia, but this is a fact which binds them together rather than separates them. The vast continent of Asia is their connecting link, and the consciousness of their Asian destiny is their common thought.” – Israeli Prime Minister David Ben-Gurion, July 1, 1952.

Since Israel and Japan first established diplomatic relations over six decades ago, trade relations between the two nations have been relatively modest due to a variety of circumstances, among them a lack of awareness on both sides.

But now, things are changing. Many Japanese government and business leaders are realizing that Israeli technology and innovation can be highly beneficial for Japan’s world-renowned technology sector.

The developing Israel-Japanese economic relationship was best exemplified, perhaps, by the recent visit of Prime Minister Shinzo Abe to Israel – the first by a Japanese premier to Israel in nine years. Abe was accompanied by an impressive delegation of top Japanese government officials and industry executives, including top management of NEC, Panasonic and Mitsubishi Chemical Holdings as well as Japan’s largest banks and trading companies. The business-focused orientation of the delegation underscored the importance attributed by both countries to deepening economic ties.

The historic visit came on the heels of Prime Minister Benjamin Netanyahu’s earlier visit to Japan last year, which was largely focused on tightening bilateral relations in the economic sphere. During the trip, Prime Minister Netanyahu met with Prime Minister Abe as well as key Japanese business leaders.

Former Japanese Minister of Economy, Trade and Industry Toshimitsu Motegi also visited Israel last year with a delegation of Japanese Industrialists to sign a first-of-its-kind industrial R&D collaboration MOU with Israel’s Minister of Economy Naftali Bennett.  Under the program, formulated with Israel’s Chief Scientist in the Ministry of Economy, Israeli and Japanese companies will have access to government funding for collaborative R&D projects as well as assistance in locating partners for R&D and business.

These deepening ties seem to be bearing other fruit as well. In 2014, trade between Japan and Israel rose by 9.3% to $1.75 billion – and that growth represents only a fraction of the potential. Until now, Japanese exports to Israel have far exceeded its imports, dominated by automobiles, machinery, and electric equipment. With the recent signing of several bilateral agreements, the stage is set for expanded cooperation specifically in the cyber-security and R&D sectors. Also of particular interest to Japan is the medical device industry – in which Israel is recognized as a world leader – as Japan’s senior citizen demographic is set to double in the coming decades.

Though there are nearly three-hundred R&D centers in Israel established by some of the world’s leading multinationals – including Google, Apple, Microsoft, GM and Deutsche Telekom – none of the Japanese giants have as of yet established R&D arms in Israel. Nevertheless, interest in Israeli innovation from the Japanese tech leaders is on the rise. This can be seen in a recent surge in Japanese investments in Israel in a variety of hi-tech fields. Most notably, leading Japanese e-commerce company Rakuten last year acquired mobile messaging company Viber – founded by Israelis — in a deal worth $900 million. Japan’s Pharmaceutical giant Takeda and Johnson & Johnson last year teamed up with our Chief Scientist’s Office and OrbiMed Israel to create a cutting-edge biotech startup incubator called FutuRx to create the next generation of market leaders in the life sciences.

Our government is also taking a number of additional steps to ensure that this upward trend in bilateral trade and investment continues. Just this month, the Foreign Trade Administration at the Israeli Ministry of Economy, which I head, began steps towards opening a trade office in Osaka, which comes in addition to the current office in our Embassy in Tokyo.

This is exciting news for two economically robust and flourishing nations, different in many ways yet continually discovering important commonalities.

As relationships build and our two nations better learn how to navigate one another’s customs and business norms, we expect that trade levels, investment and cooperation on research and innovation will only increase.

In the spirit of Ben-Gurion’s prophetic vision, we at the Foreign Trade Administration are working tirelessly to ensure that the ties between the two nations, spanning the far reaches of the Asian continent, only grow stronger.

About the Author
Ohad Cohen, BA, MBA, heads the Foreign Trade Administration at the Israeli Ministry of Economy, where his responsibilities include the development and implementation of Israel’s foreign trade policy and managing Israel’s foreign commercial service, which includes 40 trade offices operating in more than 50 countries. From 2007 to 2012, Ohad served as the Commercial Attaché at the Embassy of Israel in Washington, where he was in charge of promoting and facilitating trade and investment between Israel and the United States, and to enhancing bilateral commercial relations. Ohad Cohen, who started his career at Zim Integrated Shipping Services, a large maritime container carrier, joined the Foreign Trade Administration in 1997, where he has since held increasingly senior positions.
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