Even though their relative significance to each other in terms of total trade has tended to decline over past years, the EU and Japan remain important bilateral trade partners. In 2017, Japan was the sixth largest destination market for EU exports of goods and fifth largest market for EU agri-food exports. In the same year, the EU was Japan’s third largest trading partner in goods. Total trade in goods between the EU and Japan accounted for €129.3 billion in 2017, with a trade deficit on the EU side of €8.3 billion. Although Japan benefited in the past from significant surpluses in the trade of goods with the EU, trade figures have recently become considerably more balanced, owing to EU export performance and decreasing EU imports.
In 2016, the EU exported €31 billion of services to Japan, and recorded a surplus of €13 billion in services trade, an upward trend from €4.9 billion in 2010. As regards investments, the EU’s outward FDI stocks represented 1.1 % (€82.8 billion) of the EU total in 2016, although the EU was the largest foreign investor in Japan (39.6 % of foreign investment stocks). Conversely, Europe accounted for 22.5 % of Japan’s outward FDI stocks in 2016, representing Japan’s second largest destination by share.
The changing EU-Japan trade patterns can be explained by various factors, such as changes in the traditional global trade flows, due to the economic rise of emerging market economies, the increasing importance of regional trade integration and the proliferation of intra-Asian FTAs. The decline in Japanese exports of industrial goods to the EU may also be due to investments by the Japanese automotive and electronic sector in Europe as a way to circumvent EU tariffs. For instance, more than two-thirds of all Japanese-brand cars sold in the EU are EU-made.