Trade between Israel and Japan became lopsided when Japanese cars and electronics began flowing over. Now the scales are tipping back due to Israeli high-tech.
By Avigayil Kadesh
When Israeli messaging app Viber was acquired earlier this year by the Japanese company Rakuten for over $900 million, Japan-Israel Chamber of Commerce Chairman Roni Bornstein began fielding a flurry of inquiries from other Japanese companies interested in Israeli technology.
Commercial ties between the two countries are not new. The chamber began in 1956, when diplomatic relations were established, and has served as the address for import-export activity ever since. Japan’s Foreign Ministry bestowed an award on the chamber last year.
However, the Viber deal is a harbinger of a new era in Israeli-Japanese trade, says Bornstein, who attended a May 2014 luncheon with 150 senior Japanese business leaders and opinion-makers at which Israeli Prime Minister Benjamin Netanyahu lectured on Israel as a center of innovation and global cooperation.
“Business between Israel and Japan started with traditional exports such as diamonds, fruits and chemicals,” Bornstein says. “At a certain point, the trade was balanced — $1.5 billion for each side.”
The balance became lopsided after 1995, when the Japanese started exporting cars to Israel, followed by electronics and machinery for high-tech industries, such as equipment for cutting computer chips.
“Israel has developed in areas such as high-tech, medical devices and pharmaceuticals. Now you even have some Israeli companies such as Iscar and Teva Pharmaceuticals taking over Japanese companies,” Bornstein relates.
Next goal: R&D centers in Israel
As the third largest economy in the world, Japan represents a big market for Israeli companies. Israeli companies with successful branches in Japan include retailers Max Brenner, Laline, Ahava, Sabon and Michal Negrin, as well as software companies including Check Point.
But partly as a consequence of the former Arab boycott, the presence of Japanese corporate branch offices in Israel is still small-scale.
“We don’t see joint ventures or R&D centers like you do with so many large American companies such as Microsoft, IBM and GE,” says Bornstein. “I’d like to see Panasonic, Toshiba and Toyota do the same, and one of my missions is to convince the Japanese to do this.”
He is optimistic that this will happen soon. “Japan is more open to collaborations with other countries after the tsunami and [resulting] economic crisis in 2011. Last fall, a delegation from Keidanren [Japanese business federation] headed by Yoshiyu Nakamura came to Israel to visit various industries, and we think it’s an important turning point.”
Bornstein predicts that the Viber acquisition will be the first of many in the high-tech sector.
“Japan still is not very strong in Internet technology, so they’re looking for opportunities in Israel. There is a Japanese saying, “Let’s join hands and cross the river together,” meaning they don’t take big steps alone. Viber shows a new trend in Japan, that companies — not even necessarily the biggest — are moving independently and without hesitation.”
Nevertheless, just as with Israeli companies doing business in China, a go-between is necessary to smooth out linguistic, legal and cultural wrinkles. For example, in Japan it’s considered proper to present one’s business card with two hands.
“Japan has its own mentality and language, of course, as well as its own business manners,” Bornstein says. “These are not clichés. When you go there, you need to know the cultural traditions, and we at the Japan-Israel Chamber of Commerce are bridging that gap.
“Our second task is providing information to people who want to import or export, helping them swim in the big ocean of Japan. We have experts who give tips and can refer people to certain companies.”
In addition, the chamber hosts business delegations from Japan and holds events where its members can meet them. “The personal touch is important. When you do business with Japan, a lot is based on loyalty and personal relationships rather than contracts,” Bornstein says.
Another potential area of growth is tourism. Whereas many Israelis visit Japan — last April, more than 140 Israeli tour groups visited in time for the Cherry Blossom festival – there are no direct flights between the two countries.
“We are trying to push the government and El Al to open a direct line to Tokyo,” Bornstein says. “To be profitable, you have to have three flights a week.”
Bornstein comes to his position with years of experience. He is CEO of Rakuto Kasei, a 25-year-old multinational chemicals company headquartered in Otsu City, Japan, with offices in Yokneam, Israel. More recently, he established Rakuto Diplomat, which manufactures and exports enzymes for textile, pharmaceutical and food industries, and is the biggest distributor of Japanese food brands in Israel, including Kikkoman soy sauce and Sapporo beer.