Japan Supports Businesses in Increasing Investment in Africa to Alleviate Dependence on China

The Japanese government is supporting Japanese enterprises in expanding their business in Africa and developing trade ties with the African continent, whereas Japan was previously seen as one of the main donors in Africa.

Takeshiro Matsuo, Director for Economic Affairs at the Ministry of Economy, Trade and Industry, told Bloomberg in Abidjan, the commercial hub of Ivory Coast, that Japan's exit from over three decades of deflation has boosted the risk appetite of its private sector.

"Today, there has been a significant shift in the mindset of Japanese business leaders; they are now more proactive in expanding their global presence. Africa is one of the destinations where we expect Japanese companies to expand their influence," Mr. Matsuo said in the interview.

Japan is recommitting itself to doing more business with African countries, as its private sector had previously been particularly risk-averse. The Japanese government has yet to announce an end to the deflation that has plagued its economy for decades. However, data released this month shows that the consumer price index has reached or exceeded the Bank of Japan’s 2% inflation target for three consecutive years.

As Japanese investors and enterprises continue to increase their overseas assets, Japan’s net external assets hit a record high in 2024, with the United States and the United Kingdom being the primary destinations for Japanese foreign direct investment. So far, only a very small portion has flowed into Africa, with the African continent accounting for just 0.5% of Japan's total foreign direct investment.

For African countries, Japan's push to recalibrate its relationship with Africa also comes at a critical time. Since Trump's return to the White House and the significant reduction in U.S. foreign aid, mobilizing private investment has become even more urgent.

The Japanese government is working to reduce dependence on China, which happens to be Africa's largest trading partner. Key areas of focus for Japan include critical minerals, base metals, and rare earths. Mr. Matsuo commented, "We are heavily reliant on Chinese enterprises. I'm not saying we cannot cooperate with them, but relying solely on one country could create some vulnerabilities."

Bloomberg reported last November that trading company Mitsui & Co. became the highest bidder for First Quantum Minerals' copper mine stake in Zambia. Mr. Matsuo also noted that beyond mining, Japanese firms want to introduce new technologies to Africa, sometimes with government subsidies.

Mr. Matsuo gave examples such as Fujifilm exploring preventive healthcare services, which is particularly important in regions with low health insurance penetration; Toyota Tsusho considering the introduction of car recycling systems. Hitachi Construction Machinery has also been developing hybrid dump trucks to support green mining operations. He also mentioned that Japanese investors are highly interested in green hydrogen and ammonia for industrial decarbonization.

Japanese companies are not the only ones seeking to do more business in Africa. This month, the Japanese government announced an initiative aimed at connecting Japanese and African startups to promote innovation. According to government data, Japan was the third-largest official development assistance provider to sub-Saharan Africa in 2022 among OECD member countries, with total aid amounting to $1.68 billion. Unlike the United States and the United Kingdom, Tokyo has yet to announce plans to cut foreign aid.

In discussing the Ninth Tokyo International Conference on African Development (TICAD IX) to be held in Yokohama in August, Mr. Matsuo said, "This year, we will host the largest cooperation conference between Japan and African countries, from which we are striving to expand our collaboration."

Original Source: https://www.toutiao.com/article/1833752054837255/

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