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The Bay Area and Japan expand fields of investment

A container ship crosses under the iconic Golden Gate Bridge in San Francisco Bay. Every year, an estimated 1.24 million metric tons of cargo passes through the Port of San Francisco.

California and Japan’s shared heritage can be traced back to the first significant wave of Japanese immigrants that arrived in the late 1800s to work on the state’s fruit and produce farms. While those farms might have benefited from the additional workforce, California likewise acquired centuries-old knowledge in agriculture, particularly in the cultivation of rice.

Serving as an initial pillar of that relationship, agriculture still plays a major role in the relationship between California and Japan. In fact, the Asian country imports more agricultural products from the United States than from any other country. In 2012, exports of agricultural products to Japan reached $7 billion.

“California’s relationship with Japan is very important. It is one that we value greatly because of how long we have been trading partners,” stated California Department of Food and Agriculture Secretary Karen Ross.

Of the many relationships that have prospered between Japan and the state’s agriculture sector, California rice has been the most notable success. In the last 20 years, California has grown from a provider of bulk commodity rice to an exporter of high quality short– and medium-grain Japonica varieties not only to Japan, but also the rest of the world.

“About half of the annual rice harvested in California is exported and Japan is, and has been, our largest export market for decades. Japan takes about 25 percent of our total crop every year, which is very consistent,” explained California Rice Commission President Tim Johnson.

As California’s agricultural exports to Japan grew, so did its understanding of the high standards set by the Japanese market. This has resulted in the consistent improvement in quality from the American side.

“I have seen the influence of the Japanese consumer on our industry being very pervasive. Rice mills in California have the ability to mill to the highest standards of Japanese quality. California rice mills use Japanese equipment, handling technology and taste machines for rice. The Japanese consumer has influenced our industry and allowed us to harvest rice to a gold standard of quality,” stressed Johnson.

With that strong commitment to meet the demands of each other’s market, businesses have identified other investment opportunities that capitalize on their own strengths and expertise.

“I think science and technology are areas where we have huge common interests. There are many opportunities for us to assure each other that we will keep our markets open and provide the protection we want for our countries,” said Ross.

While their shared history may have begun with agriculture, California and Japan are also bringing their relationship into the 21st century. Arguably the center of the
global technology sector, the Bay Area, specifically Silicon Valley, has attracted the attention of tech-savvy Japanese for the new way it is doing business and developing a new breed of companies dominating the digital economy.

Consul General of Japan in San Francisco Masato Watanabe

“Many Japanese political leaders and companies are very interested in looking at Northern California and the Bay Area specifically for innovation,” said Consul General of Japan in San Francisco Masato Watanabe.

Whether it is in information and communications technology, biotechnology, clean technology or regenerative medicine, American and Japanese companies are identifying new industries wherein they can collaborate.

“The Bay Area presents many new areas of business opportunities for the Japanese to get involved in. If we can promote a model here for future American-Japanese business collaboration, then that would contribute to strengthening ties between both countries,” stressed Watanabe.

While competition from other parts of Asia has emerged, Japan’s reputation for innovation remains intact.

“The Bay Area presents many new areas of business opportunities for the Japanese to get involved in."

Consul General of Japan in San Francisco Masato Watanabe

“From a technology perspective, Japan is still the No. 1 country in the region when it comes to setting the gold standard,” said Nadeem Sheikh, Vice President and Managing Director for Asia Pacific & Japan of U.S.-based software company Opower.

Patrick Harshman, President and Chief Executive Officer of Harmonic Inc., which develops video delivery technology for media providers, has also staked his future in Japan: “Right from the beginning of the founding of the company, we identified doing business in Japan as a core aspiration and a strategic imperative.”

“We have always looked at Japan as a real leader in terms of what is coming next,” he added.

Such sentiments only highlight the huge potential that exists for collaboration between two places that put a huge premium on innovation. In July 2013, Japanese telecom
and Internet giant SoftBank Corp. increased its stake in U.S. telecom company Sprint Corp. to 80 percent via a $21.6 billion investment, clearly showing a very optimistic view of how global business will develop.

“Mankind has had the agricultural revolution, the industrial revolution and now this third one — the information revolution,” said SoftBank Corp. Chairman and Chief Executive Officer Masayoshi Son in an interview earlier this year.

On the other hand, the enormous success of big American companies such as Yahoo!, Salesforce.com and Evernote in Japan has heightened interest among small U.S. startups hoping to find similar success across the Pacific.

While most American corporations have been concentrating their international expansion toward China for the past two decades, there is a growing consensus that Japan needs to make its investment climate more attractive to U.S. businesses.

The Japanese government, through the Ministry of Economy, Trade and Industry, has recognized the situation and set up the Invest Japan program, which aims to attract foreign direct investment and promote the country as Asia’s leading business center.

“The United States and Japan are very important partners, not just economically, but also politically and in many other areas. Closer ties, as well as more extensive and intensive collaboration, will certainly help the U.S. and Japan in their activities in other parts of the world. Maybe the U.S. and Japan can also do better in other parts of the world to promote peace and stability,” said Watanabe.

Note: This Special Report on Northern California originally appeared in The Japan Times on July 29, 2014 (Credit: Philippe Le Saux

Northern California 2014 was prepared for and originally printed in The Japan Times Newspaper.

PDF of the printed report

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