PH, Japan upbeat on growing two-way trade, sort out issues including bananas

TOKYO – Japan has shown keen interest in more Philippine products, including the popular barako coffee with its uniquely strong aroma, and expand investments in a range of key sectors like infrastructure, agriculture, geo-mapping, and manufacturing in an attractively expanding market in Southeast Asia, Japanese and Philippine trade officials said.

Bracing for heavier two-way trade, the Asian neighbors, which have boosted their security ties, are also discussing and sorting out obstacles to trade, including tariffs. 

The Philippines has proposed a review of its 2006 free-trade agreement with Japan, called the Japan-Philippines Economic Partnership Agreement, to regain a bigger Japanese market share for its bananas, a staple fruit among many Japanese, Dita Angara-Mathay, the Philippine Embassy’s Commercial Counsellor in Tokyo, told GMA News Online in an interview.

Other countries have pointed out longstanding investment drawbacks in the Philippines, including its inadequate infrastructure, but Japan has gone beyond by investing and appropriating Official Development Assistance (ODA) to help solve such issues.

“I’m very optimistic on the relationship between our two countries. It is a very promising relationship,” an official from Japan’s Ministry of Economic, Trade and Industry (METI) in Tokyo said in a background briefing on overall relations with the Philippines.

“We hope that infrastructure, roads and airports will be developed utilizing Japanese ODA and maybe in the next five or 10 years, the construction will be done and developed and that situation will be more attractive for investment side. Infrastructure is very important,” the METI official said.

Japanese ODA in the Philippines worth billions of dollars have focused on a wide range of cooperative projects including good governance, infrastructure, agricultural modernization, investment promotion, health care, disaster-risk reduction, environment, energy and peace initiatives in the southern part of the country, according to the Japan International Cooperation Agency.

Japan’s initiative to expand growth in new areas has dovetailed with the expanding markets in the Philippines, making many of its industries attractive, the METI official said.

Aside from infrastructure, manufacturing, and other major investment areas, Angara-Mathay said there’s keen interest in Japan to invest in the Philippines on other crucial fronts like “geo-mapping.” 

An earthquake-prone country like the Philippines, Japan has developed a high-tech expertise to locate and map fault lines even under the ocean floor, she said. “We have the same topography so that is where the interest is.”

Japan has been rapidly expanding its investments in the food, agribusiness, retail and services industries in the Philippines, Angara-Mathay said citing a strong preference among Filipinos for Japanese-made products.

Japanese brands continue to thrive with Japanese companies capitalizing on the strong Filipino preference for Japanese products and services among the current generation of Filipinos, who adore Japanese culture and entertainment like anime, she said.

“They expressed interest in our barako, which they call `phantom coffee’ because of its very limited global supply," she said.

There is a need for more plantations in the Philippines to be dedicated to such coffee varieties to meet growing demands. Arabica, another variety that the Philippines produces from its highlands, including in the Sagada mountain municipality and Benguet province in the north and Mount Apo in the south, has been in demand, she said.

Japanese demand for Philippine handicrafts, jewelry, clothing, footwear, bags, and light snacks like “cornick” has increased, including among the Filipino expatriate community in Japan, she said.

Philippine banana exports decreased in the past due to pest problems, prompting Japan, with its very stringent quality standards, to diversify its sources of the popular fruit, which is a staple to the Japanese diet, Angara-Mathay said.

The Philippines used to supply about 90% of Japan’s banana market in 2012, but that dropped to 79% in 2023 and 75% in 2024, raising concerns from Filipino producers and officials.

“We sent a strong letter to the Ministry of Foreign Affairs already that in the interest of good faith, let’s resume the discussions,” Angara-Mathay said.

Japan plans to enforce zero tariffs on bananas from Vietnam and other exporting countries by 2028 and the Philippines will seek the same preferential treatment, she said. 

“So many Filipino families in the agriculture sector depend on the banana trade,” she said.

There has been no commitment so far from Japan on the proposal to review JPEPA, she said. 

Japanese officials, she added, have proposed to discuss the issue under the ambit of the Regional Comprehensive Economic Partnership (RCEP), a regional free trade bloc that groups 15 countries, including the 10-nation Association of Southeast Asian Nations, which includes the Philippines, along with China, Australia, New Zealand, South Korea, and Japan.

The Philippines prefers a bilateral discussion because in RCEP, “if you give concession to one, you have to give concession to all. Countries do not have the same needs,” she said.

Japan’s business community, has welcomed Philippine laws intended to further liberalize trade and improve ease of doing business, the Japanese METI official said, citing the “CREATE MORE” law that aims to address taxation concerns and provide greater support to MSMEs.

“We are happy the law was approved. We hope the implementation and rules will be released soon and such related issues will be resolved,” the official said, adding that efforts to address taxation and infrastructure issues and the effective and consistent enforcement of policy and regulations would boost investments to the Philippines.

The CREATE MORE Act, signed by President Ferdinand Marcos Jr. last year, aims to improve Philippine tax incentives and make the country more investment-friendly, with more predictability and accountability.

Japan has long been a leading trading partner of the Philippines. It’s the largest investor of the Philippine Economic Zone Authority, contributing a 28% share in total investments, which generated P798 billion ($16.3 billion) in exports and created 342,845 direct jobs in nearly 900 PEZA-registered business enterprises, according to 2024 figures.

United States, under former President Joe Biden, Japan, and the Philippines forged a trilateral bloc to boost security, economic and investment engagements. Such alliances would help Japan and the Philippines, which both face similar territorial disputes with China, diversify their trading engagements as a buffer in case the disputes spill into the economic front.—AOL, GMA Integrated News