Japan Finds Big Receptive Growth Market in Indonesia

Indonesia offers Japanese corporations a huge, fast-growing market full of consumers without entirely negative historical associations with imperial Japan’s Greater East Asian Co-Prosperity Sphere.

Indonesia’s population of 245 million is less than a fifth of China’s 1.3 billion and its nominal per-capita GDP of $3,500 is far lower than China’s $6,100. But Indonesia’s population is youthful, with 40% under the age of 24. By 2050 it’s expected to number 306 million, about the size of the current population of the US. China’s, on the other hand, is rapidly graying, and will have one retiree for every 2.5 working-age people by 2030 at which point the population will begin shrinking.

Until recent months Indonesia’s economy has been growing at a better than 6% average rate over the past three years. That’s less than China’s average growth of over 8% during that period but Indonesia’s is driven mostly by consumer spending while China’s has been powered more by government investment in infrastructure and industrial capacity.

Perhaps most importantly, unlike Chinese whose historical animosities have been rekindled recently by the dispute over the Senkakus (Diaoyudao), most Indonesians have no negative historical sentiments toward Japan. Instead, many see Imperial Japan as having helped pave the way for national independence by dismantling Dutch colonial rule while supporting and training young activists to pursue an independence movement that had been suppressed by the Dutch. When Japan invaded Indonesia, the vast majority of the population greeted the Imperial Army Asian big brothers throwing off the yoke of European colonialism.

Since the tensions began with China last summer, Japanese corporations have begun accelerating investments in Indonesia, the world’s 4th most populous nation and 16th largest economy. Japan’s direct investment in Indonesia, which had been only $712.6 million in 2010, surged to $2.5 billion in 2012, according to the Indonesian Investment Coordinating Board.

Japan’s economic relationship with Indonesia turns as much on buying natural resources as on selling machinery and consumer goods. Japan is Indonesia’s top foreign market, taking 17.28% of its exports, mostly oil and gas, electrical appliances, plywood, rubber and textiles. Japan accounts for 8.92% of the goods imported by Indonesia, putting it in third place behind Singapore at 24.96% and China at 12.52%.

“Two years ago, when I first came to Indonesia, we had around 1,000 Japanese businesspeople coming to us for Indonesian market advice,” said Kenichi Tomiyoshi, chief of the Japan External Trade Organization’s (JETRO) Indonesian operations.

“But in the past 12 months, we’ve already advised 4,000.”

Japan wants to make Indonesians more than mere business partners; it wants them to become fans of Japanese culture. This week the government is working with corporate sponsors like Toyota to put on cultural events like an anime festival and a sumo showcase involving a number of top wrestlers to mark the 55th anniversary of diplomatic ties between the two nations.

Even without such special promotions, Indonesians have begun embracing Japanese culture. Japanese restaurants have become a fixture of Indonesian cities. Japanese language classes have also surged in popularity. Last year over 870,000 were taking lessons, a 24% jump over the 700,000 in 2009.

Even companies not linked to Japan are seeking to capitalize on the popularity of things Japanese, according to Japan Times. One is a Wakai Raifusutairu, a new clothing line that seeks to evoke the styles affected by young Japanese. The company even hired a Japanese to design its product line.

In Indonesia Japan Inc appears to be achieving a secure overseas footing in a major East Asian market that can provide not only big growth potential but a counterweight to the animosities that linger elsewhere in the region resulting from its stubborn reluctance to make a clean break with its imperial era.