Japan Inc. to explore new wave of European acquisitions on back of historic EU-Japan trade deal

Japan Inc. to explore new wave of European acquisitions on back of historic EU-Japan trade deal

With Japanese businesses sitting on more than $900 billion dollars in cash, analysts expect a “spending spree” as Japanese companies target new acquisitions abroad. The European Union is becoming the likeliest target for a wave of new deals as Japanese companies take advantage of the investment environment created in part by a historic trade deal.

The EU-Japan Economic Partnership Agreement (EPA), which entered into force on February 1 2019, established the largest open trade zone in the world. Under the EPA, the European Union and Japan committed to a vision of a global economy built on high standards, shared values, and an embrace of free trade. The European Union estimates that bilateral trade with Japan could increase by €36 billion with the EPA fully implemented.

This week, EU Commissioner for Trade, Cecilia Malmström, will join a senior gathering of business leaders and policymakers to highlight the investment potential represented by the EPA. The EU-Japan EPA Forum, which takes place on May 16-17 in Milan, Italy, has been organized in consultation with the EU, Italian, and Japanese governments.

Ambassador Kazuo Kodama, Japan’s emissary to the European Union, will open the event. Michele Geracci, Secretary of State at the Italian Ministry of Economic Development, who recently unveiled Italy’s strategy to engage with China’s Belt & Road, will highlight Italy’s ambition to attract a new wave of foreign direct investment, building on the successful track record of Japanese-Italian joint ventures.

While primarily focused on reducing barriers to trade, the timing of the EPA has corresponded with new interest among Japanese multinational companies—known collectively as Japan Inc.—in cross-border merger and acquisition activity. Last week, Italian automaker Fiat Chrysler Automobiles completed the sale of its car parts unit, Magneti Marelli, to Japan’s Calsonic Kansei in a €5.8 billion deal. In January, Japanese pharmaceutical giant Takeda completed a €51.5 billion takeover for Irish drugs maker Shire.

Underlining the renewed interest in Japanese deal making, the EU-Japan EPA Forum includes participation from leading investment banks. Kathy Matsui, Vice Chair of Goldman Sachs Japan and Hernan Cristerna, Global Co-Head Mergers & Acquisitions, J.P. Morgan will give keynote speeches at the EU-Japan EPA Forum outlining how their banks are gearing up to structure and execute the new deals.

The potential for new EU-wide deals spans sectors, including automotive, aviation, pharmaceuticals, agribusiness, and consumer goods. Of special interest are new partnerships that will help European and Japan ensure they remain globally competitive in strategic technologies including robotics and artificial intelligence. A senior leader of Japan Inc., Masaki Sakuyama, Chairman of Mitsubishi Electric Corporation, will explain why his company considers Europe to be a cornerstone of its global strategy.

The EU-Japan EPA Forum takes place in a challenging geopolitical climate.

The US-China trade war and the aftershocks of Brexit have shown the vulnerable nature of a global economy built on multilateralism and shared political institutions. Through closer cooperation between government and business and through the international partnerships and jointventures that bring economies closer together, the EU and Japan are working to strengthen the foundations of the global economy.