Japan isn’t trying to join an Asian Union – so Britain shouldn’t be afraid of being outside the EU

Japan isn’t trying to join an Asian Union – so Britain shouldn’t be afraid of being outside the EU

I recently returned from my first business trip to Japan for 20 years and the long distance from London gave me a new perspective on Brexit. Bear in mind that no serious Japanese politician has suggested signing up to an “Asian Union”, as a counterweight to the USA and EU. For all its amazing achievements – and economic troubles – Japan will drive ahead as a sovereign nation. But many in the UK have their doubts that it can do the same.

I see three reasons for confidence, when comparing the UK with Japan.

1. The UK has growth

The trains around Tokyo all seem very organised and plentiful. Busy yes, but no busier than five or ten years ago because ridership numbers are flat. Compare this with 31% growth in rail ridership around London (between 2011 and 2016) and the consequent seemingly constant need to re-prioritise trains, rebuild stations and add capacity: a challenge of too much growth for the UK. Some (1%-2% a year) of this is population growth which Japan does not have, but the rest is increases in mobility and rail’s share gains under privatised models – signs of dynamism.

A key part of this growth is immigration. People want to come to Britain and they are welcomed here and provide a wealth of global connections. The UK experienced over 300,000 net immigration in 2015, versus 100,000 into Japan. Even more starkly contrasting, 83,000 were naturalised as British (including my Australian wife) versus just 9,000 in Japan (2015).

According to the OECD Economic Outlook, Japan’s GDP will grow at only 1% or less per annum in 2016-18. This is a step up versus recent history – Japan has suffered four technical recessions since 2000. Since 2011, UK GDP has grown about three times as fast.

2. The UK has far more sustainable jobs

Japanese manufacturing swept the world a couple of generations ago and they remain among the world leaders in automotive and hi-tech manufacturing. Manufacturing makes up 19% of value added in Japan’s GDP (World Bank, 2014), down from 22% twenty years earlier. For the UK, it is 11%, down from 19% in the late Major years.

They are engaged in a race between Japan’s ability to innovate and automate faster, whilst Chinese wage inflation is higher: will it catch up before Japan loses too much of its manufacturing base? China overtook Japan in share of global merchandise exports in 2004 (crossing over at 10% share each). This is Japan’s strong suit – as of 2015, Japan was the world’s fourth largest exporter of merchandise – and the UK’s weakest (but still 10th out of 204 listed countries).

In my own field of transport, Japan has been losing global market share. They make fantastic fast trains, and visiting one of the manufacturers was the primary purpose of my trip, but in exports they face strong competition from cheaper Chinese units. And in shipbuilding, Japan made more than 60% of commercial vessels a generation ago and is now a distant third to China and South Korea.

Wherever this race ends, manufacturing is not such a sustainable source of employment in Japan in the medium term as the labour content falls year on year. Will this go faster or slower than the decline in population? Neither outcome is exciting.

In the UK, only 8% of jobs are in manufacturing and our jobs are more oriented towards services, which are far more sustainable versus automation than manufacturing. Moreover, analysis of the UK jobs market shows that, in recent years, jobs are becoming more sustainable with respect to automation as the balance moves to more complex, social and creative jobs.

3. The UK is a world leader in soft power

Ranked first by Portland, and second or third by others, the UK’s soft power provides stability and confidence as we go out into the new world. What is soft power? The English language, common law, cultural and educational exports, human rights leadership and world class start-up buzz. It is hard to put a value on these, but they ought to bolster our confidence no end.

During my visit to Tokyo, I presented to a room of 30 top executives of major Japanese firms. I spoke in English and the only lady in the room was doing simultaneous translation, for one of older members of the audience. The rest listened (and gave me a tough grilling on my analysis of rail travel) in English. Imagine the reverse situation?

But interestingly not once did I hear any of my Japanese hosts wishing they had an Asian Union to turn to. There seems to be no doubt that Japan is best placed to manage through tough times as a sovereign nation.

Contrast this with the UK and the anxiety (or even bitterness) around Brexit seems impossible to understand.

We have growth, sustainable employment in world class business services and world-leading soft power. And some are scared of being independent and sovereign?

Japan is a great country, a sovereign nation, and so should the UK be after Brexit.