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Asia’s new business centre expands its wings to bridge East and West

Article - July 7, 2016

As Japan bids to become the gateway to Asia and a new global business hub, it is expanding its aviation infrastructure to deal with rising demand

OSAMU SHINOBE, PRESIDENT AND CEO, ALL NIPPON AIRWAYS

Go to an ATM in any city in Japan and there is a good chance your bank card will not be accepted. This is because the majority of Japan’s 190,000 ATMs were not built to be compatible with foreign technologies. It is a prime example of ‘Galapagos Syndrome’, a term of Japanese origin which refers to an isolated development branch of a globally available product.

The term ‘Galapagosization’ has also been used to refer to Japanese companies and their relative isolation from the rest of the world, which has affected their ability to compete on world markets.

But after years of isolation, the island nation is breaking free from ‘Galapagosization’ and opening up to a more globalized world. An increasing number of Japanese companies have shifted attention from the domestic to the world market, and have adapted their mind set in order to do so. As a result, Japanese firms’ foreign investments and profits from overseas operations have grown significantly.  Japanese investment in the Southeast Asian region alone has almost tripled from five years ago to 20.1 trillion yen ($192.5 billion) at the end of last year.

Meanwhile, banks aim to increase the number of cash points compatible with foreign bank cards from 48,000 in 2015 to 80,000 by 2020 – the year that Tokyo will host the Olympics – as the country tries to rid itself of Galapagos Syndrome.

New global business hub

At the same time that Japan Inc. expands investment abroad, Japan is opening up to more foreign investors.

By 2020, the Prime Minister Shinzo Abe aims to double Japan’s inward foreign investment to 35 trillion yen ($335 billion), and to do so, Japan is promoting itself as the gateway to Asia and a new global business hub. Six designated special economic zones have been created that will adopt looser regulation for foreign investors. Tokyo will be a zone for international business; Kansai an area for medical innovation; Niigata in northern Japan and Yabu in central Japan were designated as agricultural zones; Fukuoka was made a special labor zone; while Okinawa will become a zone for international tourism.


“We expanded our international network to have a thicker channel for non-Japanese passengers to fly into, or via, Japan, and that is also our growth strategy”

Osamu Shinobe, President and CEO, All Nippon Airways

Japan expects its bid to become a business hub to be boosted by free trade agreements like the Trans-Pacific Partnership (TPP), which was signed by 12 member nations, including the U.S. and Japan, back in February.
Once it is ratified, the TPP could help to attract more multinationals to Japan. The government aims to bring at least 470 foreign companies to the country by fiscal 2018, under a TPP-related policy plan created last November.

Opening the skies

If Japan is to become a global business hub and reach its goal of 40 million tourists by 2020, expanding its aviation infrastructure is a prerequisite to cope with the growing demand. And the process is already underway.

Osaka’s two airports will soon be privatized and expanded to handle more international traffic. Haneda Airport in Tokyo wants to compete with other hub airports elsewhere in Asia by increasing its international flight capacity, following the opening of a new terminal in 2014. A third terminal at Tokyo’s other main airport, Narita, is also in the pipeline.

Osamu Shinobe, President and CEO of All Nippon Airways (ANA), Japan’s largest carrier and the only Japanese airline to have a five-star rating from Skytrax, says the company has already begun preparations to deal with the increase in international traffic at its operating base, Haneda. “We can increase the volume of our international business. This is in line with the opening of Haneda to international business,” he says.

“Narita is also the important part of the metropolitan airport capacity program. Narita and Haneda both expect  to increase their airport capacity by 2020. As we are working towards a new mid-term business plan that will run until fiscal year 2020, we will also focus on international business for our growth. We plan to increase international revenue capacity by 40% over the next four years.”

ANA is already expanding its services to North and Central America. In May, the airline was given two new U.S. slots at Haneda, as part of a U.S.-Japan aviation agreement signed in February that will see the number of flights connecting Haneda to the United States rise from eight to 12. ANA will launch direct flights from Haneda to New York and Chicago in October, which will join its existing routes from Tokyo to Los Angeles, Honolulu and Vancouver. A daily non-stop service from Narita to Mexico City is due to launch in February 2017.


“The Mitsubishi Regional Jet is being made in Japan and is going to have a ‘Made in Japan’ label on it. But it is substantially a jointly developed project in the sense that we work with a number of U.S. companies for the core components”

Hiromichi Morimoto, President, Mitsubishi Aircraft Corporation

ANA is also expanding its wings in the Southeast Asia region. It will launch a direct route to Cambodia and ANA’s parent company, ANA Holdings Inc., recently bought an 8.8% share in Vietnamese flag carrier Vietnam Airlines, following the lead of other major Japanese firms buying up stakes in international businesses as they bid to go global.

The Mitsubishi Regional Jet (MRJ), which made its first successful test flight in November last year, is the first airliner designed and produced in Japan since the 1960s. Once deliveries of the MRJs start in 2018, ANA will be one of the first customers to receive its order, as the airline aims to strengthen its domestic services.

“We are trying to merge our international network with our domestic network so that passengers can go to all corners of Japan,” adds Mr. Shinobe.

Hiromichi Morimoto, President of Mitsubishi Aircraft Corporation, says the MRJ has been a joint U.S.-Japan project.

“It is being made in Japan and is going to have a ‘Made in Japan’ label on it. But it is substantially a jointly developed project in the sense that we work with a number of U.S. companies for the core components.

 “Of our 407 orders, 340 are from the U.S.; so 80% of our orders are essentially from the U.S. The bulk of the aircraft that we deliver will probably be flying over U.S. skies.”

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