Britain’s historic post-Brexit trade pact with Japan offers companies incentives to grow their market in Asia

The UK says its free trade agreement will boost digital and creative industries. Japan hopes it will bring more supplies of British delicacies, such as Scottish shortbread.

By Duncan Bartlett 

When Joseph Walker first opened a bakery in Scotland in 1898 with the ambition to bake “The World’s Finest Shortbread”, Japan was far from his mind. 

Yet today, Joseph’s grandchildren and great-grandchildren see Japan as one of their most important overseas markets. They therefore take a keen personal interest in how the brand is marketed there.

Last year, at a promotional event in Osaka, Walkers created excitement among shoppers by baking Highlander shortbread inside the famous Hankyu department store. Assistants sold warm biscuits to customers, while staff waved union jacks, as well as the blue and white Scottish saltire flag.

Jim Walker, the Managing Director of Walkers Shortbread, says that foreign companies require persistence when it comes to establishing brand awareness in Japan, which he describes as “a difficult market.”

“It took us a long time to develop a brand presence there. We had 15 years of relatively low scales, concentrated on the top end of the market, such as the leading department stores. But now our shortbread is available in convenience stores and groceries, so we’re proud of what we’ve achieved.”

Mr Walker says it seems that some Japanese people who visited Scotland and the UK on holiday enjoyed the shortbread during their trips, and wanted to share it with their friends when they returned home. He thinks this has helped to create demand.

“In terms of food, once Japanese people have developed a taste for something special, they really want to buy it, even though imported products are more expensive,” he says.

The International Trade Secretary, Liz Truss, is confident that now a provisional comprehensive free trade deal has been reached between the UK and Japan, there will be more opportunities for British companies, including speciality food producers. 

She is also keen to establish bridges between Britain and Japan for the tech sector. Japan’s new prime minister, Yoshihide Suga, is urging his country to catch up with Britain in its use of fintech and the IT sector.

PM Boris Johnson says Global Britain can thrive post Brexit

Boris Johnson has said the UK’s free trade deal with Japan – the first major deal of its kind since Brexit – shows Britain will continue to thrive outside the European Union.

The Prime Minister says it will boost trade between the two countries by about £15 billion pounds, thus providing many long-term benefits for business. For example, 99% of British goods entering Japan will soon be free of tariffs and charges.

Before Brexit, trade terms were covered by a pact between Japan and the EU. The British Conservative government had identified opening up trade routes to Japan and other countries in Asia is a key priority. There are already approximately 8,000 small and medium sized businesses exporting goods to Japan, including Walkers Shortbread, which has twice won the Queen’s Award for Export Achievement. Walkers Shortbread has also been granted a Royal Warrant of Appointment from The Queen for the supply of shortbread to the Royal Household.

As the UK government smoothes the way for these exporters, it is placing a special emphasis on the opportunities for the manufacturers of luxury clothing. It is also looking to support the providers of professional and financial services, as well as fintech companies, such as those offering data and digital services.

Japan’s new prime minister, Yoshihide Suga, has said that greater productivity should be a key economic goal for the nation. He has pledged to reduce bureaucracy for small and medium sized enterprises. As part of the trade deal with the UK, visa restrictions are to be eased for British people who are offered work in Japan, enabling them to work there for five years, accompanied by their spouses and children.  

Building on long established links between British and Japanese businesses

Among the British companies which do well in Japan are the cosmetics retailers Body Shop, Neil’s Yard and Lush. They have popular boutiques in upmarket Tokyo locations, including Omotesando. One of the major challenges for such companies is to find cost-effective ways to connect with their potential customers and build awareness of their brand. 

For new entrants to Japan, online campaigns, including targeted advertising, are seen as a way of establishing a route to market. One of the organisations best placed to assist the foreign firms is Digital Marketing For Asia (DMFA), an agency run by SoftBank Telecom Europe, which is a wholly owned subsidiary of the Japanese corporation, SoftBank Corp. It has a team of professionals who are fluent in English and Japanese and have considerable experience in Japanese online marketing. 

DMFA is particularly keen to connect with entrepreneurs, start-up founders and export managers from British businesses in order to guide them through the complex Japanese consumer landscape. It offers strategy consulting and guidance on online advertising and social media campaigns.

“Despite the mood of economic uncertainty, Japan is still the second largest luxury market in the world, after China,” says SoftBank Telecom Europe’s Managing Director, Akihiro Kato. He cites research from McKinsey and Co which shows that the luxury market in Japan is worth around 3.6 trillion Yen (approximately 25 billion pounds) annually.

“There are plenty of foreign brands that command premium prices from Japanese consumers but companies appreciate guidance on how to promote their services online, as well as in the retail environment. Especially when it comes to attracting younger customers, it’s about having a strong internet presence and scoring high on the search engines,” says Mr Kato.

Google dominates much of the world as a search engine but Yahoo! JAPAN is a major rival in Japan

“What we’ve found is that new entrants to the Japanese market assume it will be similar to the situation in Europe or the US but it has many unique characteristics,” says DMFA’s Head of Marketing, Nanako Aramaki. “For example, Google does not dominate online activity as it does in other countries. In fact, Yahoo! JAPAN gets more engagement with PC users than Google does.”

Yahoo! JAPAN’s platform is another SoftBank subsidiary and thus a close partner of DMFA. The two companies share data on consumer trends in ways which are not available to rival agencies. DMFA also has extensive experience in creating online campaigns which suit Yahoo! JAPAN. It curates content aimed at reaching maximum engagement with a Japanese audience.

Another way in which the Japanese internet environment differs from elsewhere in the world is the dominance of LINE, a social messaging app which is similar to WhatsApp and WeChat. With 84 million users in Japan, LINE is the most popular messaging system and it is also used for shopping and has a barcode payment system. 

DMFA works with clients to use both websites and messaging services to highlight the attractive aspects of their goods or services in a way that is meaningful to Japanese customers. “It’s not just about translating the marketing materials into another language. You need to be able to understand the mindset of potential Japanese customers and use your digital marketing campaign to bring them to the point where they’ll trust your brand and want to build a connection,” says Ms Aramaki. 

About the author:
Duncan Bartlett manages the news portal Japan Story, which includes articles, films and a podcast. He is a former BBC Tokyo correspondent and continues to broadcast regularly. He edits the monthly magazine Asian Affairs and is a columnist for China Plus, Japan Forward and the Economic Times of India.