Russia and Japan are ready to increase trade

According to the Japan Association for Trade with RUSSIA and the Newly Independent States (ROTOBO), in 2020, due to restrictions aimed at combating the spread of covid-19 , the foreign trade turnover of Japan and Russia decreased by 22.8% compared to 2019. . Japanese exports decreased by 18.2%, imports - by 25.2%.

According to Russian-trade.com (accumulates data from the Federal Customs Service of the Russian Federation), the trade turnover between the two countries last year amounted to $16.2 billion (20.4% less than in 2019).

The total volume of imports and exports of the two countries in the entire history of Russian-Japanese trade relations reached its maximum in 2013 - $34.8 billion, recalls Saito Daisuke, HEAD of the ROTOBO office. Anti-Russian sanctions , and then the corona crisis, brought trade relations into a state of imbalance, he notes: “They began to fluctuate, demonstrating both a fall and an increase.”

Now there is a trend of a gradual recovery in mutual trade, ROTOBO notes: from January to May 2021, Japanese exports grew by 27%, and imports - by 0.5%.

The positive dynamics is explained, among other things, by a low base, says Yevgeny Grankin, senior analyst at the Center for Economic Forecasting.

But compared to the first half of 2019, the current trade turnover between the countries decreased by 8.5%. Japan's imports of energy products from the Russian Federation, in particular, fell by 24% compared to the first half of 2019. The reason is the slow recovery of the Japanese economy, Evgeny Grankin believes. In the first quarter, Japan's GDP fell by 3.9% in annual terms, in the second quarter, a very slight increase is expected - 0.19% in annual terms. Recovery is somewhat slower than in other Asian countries, the expert notes.

Canada's Scotiabank forecasts Japanese economic growth to pick up in the second half of this year and Japan's real GDP to grow by 3.0% in 2021, compared with a 4.9% contraction in 2020. At the same time, it is the external sector of Japan, supported by high foreign demand for equipment and electronics exported from it, that is the driving force behind the country's economic activity, Scotiabank analysts say.

Trade turnover in such items of mutual trade between Japan and Russia as transport and equipment decreased slightly compared to the pre-pandemic period, the Gazprombank Center for Economic Forecasting notes: “Equipment exports from Japan to Russia even increased by 7% compared to 2019.” These segments will make a significant contribution to the growth of trade as the economies of Japan and Russia continue to recover, Evgeny Grankin believes.

Traditionally, the main share of Japan's exports to Russia are cars - 53.8% of all Japanese exports to Russia in 2020. Japan imports from Russia mainly fuel minerals, such as oil , LNG and coal - 59.5% of all imports. The structure of trade between countries has not changed for more than 20 years, ROTOBO notes.

“When we can control the situation with the CORONAVIRUS pandemic, business and trade between countries will return to normal,” Saito Daisuke believes. Moreover, representatives of the Japanese business community are confident in the gradual diversification of economic relations between the two countries. Exports from Japan to Russia of medical equipment are increasing (in 2020 in value terms it increased by 26.6% compared to 2019), nucleic acids (85.5%), dental cement and filling materials (13.2%) , diagnostic and physico-chemical reagents and other products.

ROTOBO considers further development of e-commerce to be promising. Japanese companies through e-commerce are already exporting spare parts for cars and ships to Russia, as well as, for example, cosmetics and toiletries. However, the share of online commerce in the Russian-Japanese trade turnover is still small, ROTOBO notes.

One of the potential incentives for increasing turnover in the e-commerce sector is reducing the time and costs of transportation, Saito Daisuke believes. Now, according to him, the Trans-Siberian Railway is the fastest route between the two countries, but it is inferior in cost to sea transportation.

Recall that in 2019, the Ministry of Transport of Russia and Russian Railways signed a memorandum of cooperation with the Ministry of Infrastructure, Land, Transport and Tourism of Japan in creating conditions for the transit of Japanese goods via the Trans-Siberian Railway to Russia and Europe.

According to Data Insight, Japan is one of the top three countries with the largest e-commerce market ($187 billion) and is second only to CHINA and the  United States . The dynamics of the growth of online commerce in Russia, despite the small size of the market itself ($ 37 billion) in 2020 amounted to 58% - one of the highest rates in the world. According to the Federal Customs Service, the volume of cross-border online trade is comparable to industrial trade turnover: in 2018–2019, delivery volumes through postal channels reached 340 million parcels and up to 8 million shipments through express delivery channels.

At the same time, China is the key importer in cross-border e-commerce with Russia  — 97% of the physical flow of orders and 60% of the market value, according to the survey “Russian e-commerce market: results of 2019, trends in 2020” by the National Research University Higher School of Economics.

Trade flows between the two countries generally remain modest against the backdrop of the main trading partners, which for Japan are China, the United States and the ASEAN countries, and for Russia - Europe, said Vitaly Shvydko, head of the Japan Economics and Politics Group at the Center for Asia-Pacific Studies at IMEMO RAS.

The largest Japanese companies with foreign trade potential, according to him, concentrate their main resources on their priority markets today, to which Russia does not yet belong: “The growth potential of the Russian economy, as a rule, is not highly estimated by them.” Anti-Russian sanctions also play a deterrent role, especially for high-tech companies that value their presence in the United States and contacts with American high-tech.

In addition, the restrictive measures of the Japanese government in the digital services markets close a number of opportunities for the Russian IT sector, despite its institutional benefits and advantages, in particular when registering in special zones in Russia, says Vitaly Shvydko.

For Russian-Japanese trade and economic relations, the resumption of political dialogue at the highest level is important, says Oleg Kazakov, senior researcher at the Center for Japanese Studies at the Institute of the Far East of the Russian Academy of Sciences.

Since the new Prime Minister of Japan, Suga Yoshihide, took office in September 2020, the summit meeting has not yet taken place. The business community of the two countries, due to restrictions on interstate travel, has also resumed communication on international business platforms, so far only online. Thus, in June, the traditional Russia-Japan business dialogue took place at the St. Petersburg International Economic Forum. It will continue on the sidelines of the Eastern Economic Forum.