As New Zealand’s fourth largest trading partner, Japan remains a key export partner, with 50% of New Zealand exports in the food and beverage category.
Despite the serious economic impact of COVID-19 in Japan, New Zealand goods exports performed strongly in March and April and reached new record highs in April and May including a doubling of exports of fresh fruit, frozen beef, and honey.
While New Zealand's goods exports to Japan have performed very well so far in the year-to-date, there are signs that this will not continue, with goods exports decreasing 9% in June 2020 as compared with June 2019.
Key reasons for the success of New Zealand exports into Japan have been the fact that the majority of our exports are essential products such as food. Our food exports are seen as healthy and our exporters have been nimble in adapting to changing sales channels.The reduction in tariffs agreed under CPTPP has also added an extra boost in some sectors.
Despite border restrictions and the global economic slow-down, three Japanese companies have announced major new investments in New Zealand over the past few months, according to a report from the Ministry of Foreign Affairs and Trade.
A recent spike in COVID-19 cases indicates the emergence of a second wave of infections, which would likely setback Japan's economic recovery efforts. Tourism and education service exports continue to be severely hit by COVID-19, and look set to remain this way in the short to medium-term due to border restrictions. The recent announcement by Rio Tinto that it will wind up its operations at the Tiwai Point aluminium smelter in August 2021 will have a significant impact in the medium term, with aluminium making up approximately 16% of New Zealand's goods exports to Japan.
At this stage, there are no major changes to supply chain and logistics within Japan. Air New Zealand has re-started direct air freight flights from 19 May and plans to have two flights per week depending on freight loads. Sea freight has been mostly unaffected during this time.
Japanese corporates have been focused on maintaining business as-is and securing stability for the current products and relationships they have. This is a difficult time to introduce new products and concepts in Japan, given the importance placed on developing relationships in person and over a long period of time.