The UK and Japan have just announced an £18 billion investment agreement “to build a new era of co-operation” between the two nations.
Our Deputy MD for Japan, Richard Lyle, gives us his perspective on this landmark announcement based on his three decades’ experience in Tokyo of nurturing connections between international and Japanese companies …
The trading relationship between the UK and Japan has been growing rapidly, with this deal the latest in a series of agreements, stemming from the Hiroshima Accord in 2023. Investments will be in areas such as clean energy, like hydrogen and offshore wind, helping the UK achieve its renewable energy targets.
From this perspective, this new, deeper collaboration is a natural progression. And the trading relationship feels stronger now than at any point in my 30 years’ experience of working in Japan to foster business links between the two countries.
Japan has always been a major investor in the UK, but the relationship has transformed since the 1990s, when we saw traditional Japanese manufacturing companies such as Toyota, Nissan and Sony establishing operations in the UK. Today, Japan’s priority is to invest more in infrastructure – especially energy and property.
The nation has also set out to become self-reliant in emerging technologies, including semiconductors, clean energy and AI. Limitations in its domestic capabilities mean it urgently needs support from friendly nations such as the UK to fill technology and supply chain gaps in these critical sectors.
This demand, boosted by the new agreement, represents a significant opportunity for British tech companies to secure strategic funding from Japanese corporates, sell their technologies in Japan and do business with Japanese companies as they expand their UK investments. Essentially, there’s a huge opportunity to bring together the UK’s strengths in software, scientific advancements and R&D with Japan’s prowess in hardware and advanced manufacturing.
Defence is another important opportunity area. It’s been a sensitive subject in Japan since World War II. The country has a pacifist constitution, and defence contractors here don’t openly talk about their work. But, with growing geopolitical tensions and the nation feeling it can’t rely on the USA anymore, there’s a need for more self-reliance and – perhaps somewhat ironically – Japanese companies are increasingly looking for overseas collaborations to achieve this, including in advanced tech areas such as cyber security, quantum computing and space innovations.
Japan is also looking to double its foreign direct investment by 2030, and its government is keen to encourage overseas companies, including those from the UK, to enter the country. Many British firms have already done so successfully. Fusion energy company Tokamak Energy is one example, as is Octopus Energy, through its joint venture with Tokyo Gas.
Japan is already an attractive market for UK tech companies thanks to its scale, industrial base and available capital. This latest agreement brings the two countries even closer together and the growing collaboration between the UK and Japan presents significant opportunities for UK tech firms in a market that’s actively seeking British innovations.
Entering Asian markets is often perceived as challenging, and there’s a tendency among UK companies to regard it as ‘too difficult’. But the prospects now on offer in Japan are too good to be missed, and a growing number of UK companies are already demonstrating that, with the right approach, the opportunities are well within reach.