Japan’s dynamic global trade

This week, I gained valuable insights into the way Japanese companies work around the world to help countries to build power stations, ports and airports.

The deals are often complex but they illustrate the smooth way in which Japan’s big institutions work together with its government to help people, especially in developing countries.

Take, for example, a geothermal power project in Indonesia which will bring electricity to 120,000 homes.

The energy will be emissions free, which means almost no pollution. Japan already produces geothermal power near its volcanos and hot springs. Some parts of Indonesia have similar geological conditions to Japan and are suited to this kind of technology.

The work on the new project will be undertaken by Sumitomo, one of the giant Japanese trading companies. Sumitomo will work in partnership with a French company, Engie, which has a subsidiary in Indonesia.

Now let us consider the funding.

The Indonesians will need to pay for the plant. They are being offered loans to $440m by Japan. Around half of that money will come from the Japan Bank for International Co-operation (JBIC), a state-owned operation which specialises in this type of loan. The rest of the money comes from a group of Japanese commercial banks including the Bank of Tokyo Mitsubishi UFJ, Mizuho and Sumitomo Mitsubishi Banking Corporation. The loan is part of a syndicate handled by the Asian Development Bank.

These are in effect high-risk loans but there is insurance to mitigate the risk. It is provided by another Japanese government agency, known as Nippon Export and Investment Insurance (Nexi).

This complex deal is a part of a huge network of trade and export finance operations which enable countries to help each other with projects which improve people’s lives. Japan and China are the biggest players. In fact, Chinese banks did $24 billion worth of trade deals in 2015. Japanese banks came a close second with $21 billion.

This thriving trade activity reveals a side to corporate Japan which is extremely international and quite dynamic. I look forward to learning more about it when I moderate the panel of Japanese experts at the TFX Conference in Nairobi, Kenya at the end of this month.

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