Hiroaki Hara, Foreign Investment Director, INVEST JAPAN

Aside from keeping its own economy in order, Japan has urged its Asian neighbors to boost financial cooperation and maintain existing regional development initiatives. Japan is among the many countries that view Asia as a vital contributor to growth for its companies during this current global economic downturn.

According to figures from the International Monetary Fund, China is now the world's fourth largest economy, behind the USA, Japan and Germany. Figures released by the National Bureau of Statistics, show that China's gross domestic product grew by 9.9 percent in the fi rst three quarters of 2008, confirming its role as one of the chief drivers of economic growth and underlining its importance as one of Japan's most important trading partners.

In 2008, China and Japan celebrated the 30th anniversary of their bilateral Treaty of Peace and Friendship. It was a fitting occasion and marked the fact that the two countries now represent the two most important economies in Asia. China is now Japan's largest trade partner with their interdependence growing ever greater.

Commenting on the latest figures, Masako Yabuuchi, director of the Overseas Research Department of Japan External Trade Organization (JETRO), said: "Exports from Japan to China increased by 23.9 percent to total $62.36 billion in 2008, while imports from China increased by 11.7 percent and reached $68.4 billion and these amounts keep on increasing."

The figures underline how the two economies have become increasingly intertwined, with exports to China now playing a significant part in Japan's economic development. Japanese businessmen have been quick to identify China's importance as a trading partner.

Yukio Sakamoto, CEO and president of Elpida Memory Inc, one of Japan's leading manufacturers of Dynamic Random Access Memory (DRAM) integrated circuits, said: "Our business grew more than 100 percent within China in 2007 and we expect further growth of around 300 percent within the next three years."

The electronics industry is a vital part of the Japanese economy and represents around 25 percent of Japan's total exports. It has a total value of around $15.3 billion and grew by 10.9 percent in the first half of 2008. Other sectors have proved similarly buoyant, with general merchandise reporting a growth of 23.3 percent while transportation reported a massive 55.1 percent surge during the same period.

Chinese investments
INVEST JAPAN is the government agency charged with overseeing the $150 billion worth of foreign investment in Japan. Hiroaki Hara, one of the organization's directors, is very clear about the importance of Chinese investors: "We have seen a lot investment in the wholesale and information systems sectors from Chinese companies, such as Lenovo and Shanghai Electronic Group."

His sentiments are echoed by JETRO's Yabuuchi: "The economic relationship [between China and Japan] is very tight. Japan and China are part of one economic organism. This is the economic reality. We should maintain and develop this key relationship."

Some foreign investors have adopted a "China-plus-one" strategy, which is about balancing their presence in Asia through investments in China and in another of the region's strong economies, such as South Korea and Singapore, and thus reducing overdependence on one economy. Several Japanese companies, however, have started to adopt a different policy. Recognizing the need for Japanese companies to succeed in China, a number are now moving towards a "China-plus-China" strategy where the country is no longer just treated as a lowcost manufacturing hub but also as a valuable target market for potential consumers.

This realization is prompting a major re-thinking on strategy for a number of Japanese businesses. Hiska Nobumoto, chairman, president and CEO of Akebono Brake Industry Co Ltd, one of Japan's most successful OEM brake manufacturers, typifies this new thinking: "I think the biggest challenge for all of us is to find out what products would be the most appropriate for the (Chinese) market. It should have the Japanese specifications but the price should be lower."

This new thinking has seen many Japanese companies actively seek out local partners to enable them to enter the Chinese market through a joint venture route. The Japanese metal trader, ALCONIX, is an enthusiastic proponent of this philosophy.

Hideo Yamashita, the company's senior managing director, said: "The joint venture gives us access to a new market to sell the products of the combined business. We also have freer access to raw materials. The combination of the two puts us in a very strong position to develop the business."

Wider cooperation
Japan is now one of the leading foreign investors in China. Aside from a substantial cash injection into the economy, China also benefits from its strategic partnership with Japan through increased employment levels, greater access to R&D facilities and technology transfer, as well as greater scope for human resource development.

It is the potential of the Chinese workforce that has appealed to companies, such as the Nikkei-listed Asahi Kasei Corp, one of Japan's leading chemical manufacturers. Shiro Hiruta, president of the Tokyo-headquartered company, said: "For a large conglomerate such as ours in Japan, China is, of course, a very important potential market. We must therefore look at the business trends and opportunities in China, but at the same time we must also think of the people of China and how we can contribute to their livelihood."

Increasing environmental concern has created another important area for cooperation for companies on both sides. A number of Japanese companies have already shifted toward a more environmentally friendly business model. AEON, the supermarket retailing group, for instance had already hosted a number of environmental summits", aimed at creating greater sustainability and more ecofriendly trading.

Commenting on this new source of cooperation, Akihito Tanaka, AEON's Head of China Business, said: "AEON has planted more than 1 million trees along the Great Wall since 1995. When looking at how to help the environment, companies must be ever vigilant as to how their operations can be more energy-efficient."