Israel & Japan: Konnichi Wa to Collaboration, Sayonara to Stagnation

Israel & Japan: Konnichi Wa to Collaboration, Sayonara to Stagnation

Japan is the world’s #3 economy…but not for Israel. It is not even a top 10 trading partner. To strengthen bi-lateral trade, Avi Hasson, Chief Scientist and Chairman of the Israeli Innovation Authority, led a delegation of 11 Israeli IoT startups this month to Tokyo and Osaka. The visit generated buzz (including the cover story of Wired Magazine) and a major announcement. In September, NEC becomes the first Japanese multinational to launch an R&D Center in Israel, focusing on cyber security. They join six other Japanese multinationals in the Japan MNC Program, administered by the Israel Innovation Authority- Terumo, Panasonic, NEC, Ricoh, NTT, DNP and Fujitsu.

Chief Scientist, Avi Hasson; Ambassador to Japan, Ruth Kahanoff; Tokyo Economic Attache, Noa Asher; Osaka Economic Attache, Ken Harada and eleven Israeli startups at the IoT Forum in Osaka

In 2015, bilateral trade reached $ 2.5 Billion ($1.6 of imports vs. $900 million of exports) a paltry fraction of Israel’s $45 billion bi-lateral trade with the United States or $15 billion with China. Prime Minister Shinzo Abe, keen to reassert Japan as a leading global player, and fearful of an ascendant China, is encouraging stronger ties with Israel. In 2014, then Minister of Economy, Trade and Industry (METI), Toshimitsu Motegi, concluded a joint industrial R&D agreement with Israel. Soon after, Japanese eCommerce giant Rakuten purchased Israeli VoIP startup Viber for $900 million. This was followed by pharma giant Takeda joining J&J and Orbimed in the FutuRX bio incubator. Perhaps the most significant catalyst occurred in January, 2015, when Prime Minister Abe became the first Japanese Prime Minister to visit Israel in a decade. A series of high profile business delegations to Israel ensued in 2016.

Prime Minister Shinzo Abe visiting Israel last year

The complexities of Japan's distribution and regulatory environment are important considerations. To reduce risk, many foreign technology firms maintain R&D abroad, with local distributors overseeing localization, sales and marketing. Also, patent review is slower than Europe, as noted by Maier Fenster of IP firm Ehlich & Fenster in his presentation IP in Japan. According to Fenser, "one tactic used by Israeli companies is to file for IP in Japan, take a slow path to patent grant and license or sell these patents to Japanese companies. There are several technology fields being developed in Israel which are a natural fit for the Japanese market. These should be protected in Japan."
Japanese distributors are happy with this model. For example, the healthcare business of industrial conglomerate Teijin has licensing agreements with two Israeli startups- Motorika and 2Breathe. Both filed patents in Japan and are pursuing approval from the Pharmaceutical and Medical Devices Authority. “The quality of Israeli technology is impressive”, says Hidetada Onishi, Senior Manager of IT Healthcare at Teijin. “We can help with issues like regulation and distribution to reach Japanese consumers”. At the IoT forum, Israeli startups seeking similar Partnerships included the following: Allbe1, Cartasense, IQP, Perytons, Power Tags, Proacts, Sensibo, Sensoleak, Vayyar, Power Plug, HeraMED). Other Israeli technology startups interested in joint R&D or commercial projects can join the government catalog administered by NEDO and MATIMOP. Next month, there is also the Japan-Israel 3rd Call for Proposals to fund R&D projects with Japanese companies. Deadline is August 25th.
Avi Hasson, addressing a Tokyo audience of more than 300 executives, noted “for a long time, I have believed that Japan and Israel complement one another in reaching global technology markets". His comments were reciprocated by Nobuyuki Ide, former Chairman and CEO of Sony, who spoke to the IoT delegation. "Our history is similar. Israel began in 1948 and Japan started over in 1945. We have taken different paths but can strengthen one another". After decades of modest trade levels, this may be the start of a new era.