100 Days of Labour and New Horizons for the UK–Japan Relationship

Sir Keir Starmer’s Labour government assumed office in July 2024 with an ambitious reform agenda, covering areas including energy, finance, health and immigration. After 100 days in office, what do we understand about the government’s emerging priorities and the impact of government policies on businesses operating within the UK–Japan ecosystem?

That was the question addressed at a recent event hosted by the British Chamber of Commerce in Japan. Panellists comprised His Majesty’s Ambassador to Japan, Julia Longbottom CMG; Director for Trade & Investment Japan and Deputy HM Trade Commissioner for North-East Asia, Christopher Hunt; Dominic Sharman, partner at Baker McKenzie; and Stephen Norris, partner at Control Risks; with moderation by Dominic Henderson, managing director of Sodali & Co.

Ambassador Longbottom said the UK–Japan relationship has gone from strength to strength, citing the Hiroshima Accord, an enhanced bilateral global strategic partnership signed during the G7 summit in 2023. The landmark agreement is expansive, encompassing areas such as defence and economic growth, as well as how to tackle global challenges such as climate change.

“I would confidently say the UK–Japan relationship is its strongest ever, and now with the new UK government we have the opportunity to build on it and take it further,” she said.

The Ambassador pointed to the new government’s five key “missions” comprising economic growth; becoming a clean energy superpower; tackling crime; ensuring equal opportunity; and addressing challenges in the national healthcare system.

“In terms of the UK–Japan relationship, we have many opportunities—economic security, technology, supply chains,” she said.

“So whether it’s digital regulation, making sure that AI [artificial intelligence] is both safe and fully available to business and researchers; whether it’s how we think about trade barriers, working out how best to allow trade to flow. … On security, we have come a long way on defence, including the [multinational] Global Combat Air Programme, and also increased joint exercising. And on clean energy, there’s an enormous agenda.”

Business environment: chances and risks

Baker McKenzie’s Sharman said Japan has become an “even more friendly place for foreign companies,” with growing interest from UK businesses.

“Looking at the regions, Osaka and Fukuoka are offering incentives for foreign businesses wanting to operate there. Government incentives, such as the Doubling Asset-based Income Plan, potentially mean a lot for asset management companies wanting to come here. And lastly, there has been an increased focus on corporate governance, to better serve shareholders and modernise in that area,” he said.

Sharman also noted the benefits of the UK–Japan Comprehensive Economic Partnership Agreement (CEPA), with trade barriers to be further lowered in December when the UK formally accedes to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“The pace at which the Labour government has started after 14 years of waiting has been breakneck—that doesn’t show any sign of abating,” he said.

However, he noted some potential “curve balls” for Japanese companies in the UK, including the English Devolution Bill, together with the Employment Rights Bill, which will increase employees’ rights, albeit still likely providing comfort for Japanese companies given they are still not “as employee-friendly as Japanese employment law.”

UK Trade Director Hunt said there would be further opportunities for businesses post-Brexit as a result of the UK–Japan CEPA, the CPTPP and additional partnerships with “likeminded countries like Japan” on areas such as AI regulation, with opportunities across clean energy, healthcare and technology.

Control Risks’ Norris said the new government had been “quick on getting regulation out the door … The risk is if the government loses momentum, will they be able to maintain their confidence and continue to go at the pace they’re going?”

He pointed to potential opportunities for Japanese companies in the UK, including in areas such as charging infrastructure and grid management as part of the growth of the electric vehicle sector, together with clean energy industries such as offshore wind power.

Renewable energy opportunities

“Japan can be considered to be at an earlier stage compared to the UK on some areas of renewable energy deployment such as offshore wind but there’s been a lot of partnership between the UK and Japanese governments and businesses to grow the market in both countries for renewable energy,” the Ambassador said, citing Japanese investment in the UK’s offshore wind sector.

She also noted how the UK has increased its share of renewables in its electricity mix to more than 50% in the first quarter of this year, having reduced its reliance on coal for power from 40% in 2012 to “pretty much zero” now (and closed its last coal power plant on 30th September), largely through the development of offshore wind.

“We have shared with the Japanese government the UK’s regulatory framework on how we incentivised offshore wind development, and the Japanese have looked at lessons learned to adopt into Japanese policy for its future offshore wind auctions,” she said.

The Ambassador also noted the opportunity in “third countries” for the UK–Japan partnership, such as working with the Japan Bank for International Cooperation to promote “green” energy grids in Southeast Asia.

Looking ahead, she pointed to opportunities in defence, decarbonisation, digital and technology: “We will be hearing soon what the [UK Government] industrial strategy determines are the key sectors in the UK, but I’m confident they will map really well with business interests in Japan: advanced manufacturing, AI and tech, life sciences, defence, renewables, financial services.

“Japan’s Ministry for Economy, Trade and Industry seems really interested in working with us on policy development and trade. I think there will be enormous opportunities, both UK businesses coming here and Japanese businesses coming to the UK,” she concluded.