Kaizen meets Vision 2030: Japan’s expanding role in Gulf growth

SPA

The Gulf is undergoing rapid change, fuelled by infrastructure development, digitalisation and growing consumer markets. These trends align closely with Japan’s areas of expertise, where national companies have built a reputation for innovation and long-term commitment.

In 2023, Japan ranked as the fourth-largest trade partner for the GCC in both imports and exports. The GCC exported goods worth $76.7 billion to Japan, while imports from Japan totalled $22 billion.

This upward trend is bolstered by the recent initiation of negotiations for a Japan-UAE Economic Partnership Agreement, alongside ongoing discussions for a Free Trade Agreement between Japan and the GCC.

As Gulf nations pursue ambitious long-term economic diversification plans, Japan has much to offer. Both regions are known for valuing sustainable progress, making them solid partners in navigating future challenges.

Japan’s business culture of “kaizen”, or continuous improvement, chimes with the Middle East’s focus on strategies that extend decades into the future. 

In particular, Japan is well-positioned to support the Gulf’s digital ambitions. As the Middle East focuses on areas such as smart cities, e-governance and fintech, Japanese companies’ strengths in robotics, artificial intelligence and the Internet of Things become increasingly relevant. 

Another avenue for cooperation is climate change. Both Japan and the Gulf have committed to ambitious climate goals.

Japanese corporations have already developed hydrogen fuel cells and are exploring partnerships in hydrogen infrastructure in the Gulf, while Japan’s experience in carbon capture, utilisation and storage can help support regional net-zero goals.

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The Gulf’s expanding population and increasing affluence are fuelling the growth of its consumer markets, especially in industries such as automotive, retail and electronics.

Japanese brands already have a loyal regional customer base and are well-positioned to meet the demands of Middle Eastern consumers, who are increasingly drawn to sustainable and premium products.

The data supports the case for growing Gulf-Japan trade. Japan’s foreign direct investment into the GCC states and wider Middle East exceeded 1 trillion yen ($6.6 billion) in 2023, reflecting growing business ties, especially in sectors such as energy, petrochemicals and technology. 

According to statistics from the Japan External Trade Organization, the trade exchange volume between UAE and Japan during the first five months of 2024 amounted to approximately $21 billion, marking a growth rate of 5 percent.

Just this year, Marubeni Corporation announced an agreement for Al-Ghat and Waad Al-Shamal Wind IPP Projects in Saudi Arabia, the first wind projects to be implemented in Saudi Arabia by a Japanese company. 

Mitsui & Co also announced it will invest in Abu Dhabi National Oil Company’s Ruwais LNG project, a natural gas liquefaction plant scheduled to commence production in 2028.

Other recent deals include Mitsui’s investment in Wadi Poultry in Egypt and Itochu Corporation partnering with the Dubai Municipality on its first Waste to Energy projects.

Japan’s SoftBank, led by its chairman and CEO Masayoshi Son, continues to focus on AI and has formed partnerships in the past with Gulf sovereign wealth funds including Saudi’s PIF and Abu Dhabi’s Mubadala.

We predict that commercial ties between the two regions will grow significantly, especially as Japan ramps up its strategy of expanding partnerships beyond traditional markets.

David Walker is head of corporate banking at Citi Japan