, ,

As Japan struggles to recover from the devastating effects of last year’s earthquake as well as the ensuing tsunami and nuclear crisis, the EU has given encouraging signals of progress in negotiating a free trade agreement with Tokyo.

In talks in Tokyo recently, Denmark’s Minister for Trade and Investment, Pia Olsen Dyhr, Japan’s Foreign Minister Koichiro Genba and Yukio Edano, Minister for Economy, Trade and Industry, agreed to try and speed up the so-called “scoping” exercise aimed at exploring the pros and cons of an EU-Japan FTA.

They said negotiations on the free trade pact should start during the Danish EU Presidency which ends on June 31.

Denmark’s determination to get the ball rolling on the trade deal is good news. Apart from the obvious trade benefits of such an agreement, the FTA will also help strengthen the EU’s still under-developed strategic relationship with Japan.

If both sides play their cards right, the EU and Japan could agree to launch the FTA talks at their annual summit in May in Japan. Both sides will have to work hard, however, to try and reach that goal.

Interestingly, Japan is also considering participation in negotiations for the Trans-Pacific Partnership free-trade initiative launched by US President Barack Obama last year.

It is not proving easy, however. Other TPP participants, including Australia, have called on Japan to eliminate tariffs on beef, dairy products and sugar in order to join the initiative.

Japanese officials say they will place all items, including politically sensitive farm items, on the table for discussion once Tokyo fully joins the TPP talks. Japan needs to secure approval for its participation from all nine countries currently involved in the TPP talks.

Among the nine TPP participating countries, Brunei, Chile, Malaysia, Peru, Singapore and Vietnam have already informed Japan of their support. However, US officials have not given Japan the go-ahead.

Meanwhile, Japan’s economy continues to feel the effects of the March 11 catastrophe. Rebuilding the country’s infrastructure is proving difficult. Many people in the affected areas, whose resilience and perseverance impressed everyone last year, are still striving to rebuild normal lives.

The country posted a record 19 billion dollar trade deficit in January as the yen’s strength and weaker global demand eroded manufacturers’ profits.

Exports of cars and electronics have been hit by damaged plants and infrastructure. In the latter half of the year, floods in Thailand knocked out more Japanese production capacity, while overall shipments were hurt by a strengthening yen, up 17 per cent against the euro over that period.

Adding to the economic burden, following the shutdown of nuclear plants in Japan, the country has increased its reliance on expensive foreign oil and gas.

Japanese consumers and companies, however, are now proactively reviewing their energy usage, with energy consumption reduced by 10 to 20%.

The Fukushima crisis has also prompted a national debate on nuclear energy and nuclear safety. Prime Minister Yoshihiko Noda has admitted that the government, bureaucracy, utilities and experts share the blame for being blinded by the myth of nuclear safety.

He admits that Japan will have to cut its dependence on nuclear power, though the government is likely to settle for a long gradual process when it formulates a new energy policy this summer.