Japan and Russia:Investment opportunities

“Japan and Russia” has the potential to emerge as an important theme.

With the top-down still contentious despite the inflection in the OECD LI, themeshave the advantage of clustering common earnings drivers bottom-up. Themestend to be multi-year in nature.

PM Abe of Japan and President Putin of Russia are expected to meet twicebefore the end of 2016: a) at the APEC (Asia-Pacific Economic Conference) inLima, Peru 19-20 November, b) in Japan, the week of 12 December for 4 days.

The Soviet Union did not sign the 1951 Treaty of Peace with Japan (aka the SanFrancisco Peace Treaty) along with the other 48 nations. Instead, Japan and theSoviet Union signed a Joint Declaration on 19 October 1956. This ended thestate of war between the two countries and re-established diplomatic relations.

However, it did not establish a permanent state of peace, and territorial disputeswere not resolved.

With over 60 years having passed since the Soviet-Japanese Joint Declaration,there is a renewed push to sign a Peace and Economic Cooperation treaty.

A Peace and Economic Cooperation treaty would, we believe, accelerate theeconomic linkages between the two countries, linkages which are alreadydeepening, detailed inside. There is a commercial strategic logic of Japanesetechnology and capital exports in exchange for energy security, diversifyingJapan’s energy supplies.

Of the total foreign investment stock in Russia (US$362.3bn, 2012), Japan’sshare was just 3%, with 86% of the latter being the Sakhalin projects.

The Russian RT news network reported 2 September 2016 that the secondEastern Economic Forum in Vladivostok had more than 3,000 participants from60 countries, with the Japanese delegation being the largest. One sessionincluded President Putin, PM Abe and President Park Geun-Hye of South Korea.