Japanese Investment in Australia: A Growing Opportunity

Japanese investors are increasingly eyeing Australia as a destination for investment, driven by the country's strong economic growth, stability, and wealth. In recent years, inbound investments from Japan have surged, indicating a growing interest in Australia’s economic landscape. However, while Australia presents many advantages, it is not without challenges for Japanese companies.

Enter Shigeru Sekinada, Chair of Kearney Asia Pacific, who is on a mission to bridge the gap between Japanese corporate giants and Australian businesses. As a leading management consulting firm, Kearney has a strong track record of helping Japanese companies navigate the complexities of international markets, including Australia.

Kearney’s Unique Approach

Kearney is not your typical management consulting firm. A spin-off of McKinsey, it focuses on practical solutions rather than overcomplicating business strategies. Despite being a relatively small operation in Australia with 20 partners and 175 staff, Kearney’s impact is substantial, with revenues up 45% in the past year alone. Globally, Kearney employs more than 5,000 staff and has been serving Japanese companies since 1972.

Shigeru Sekinada leads 16 offices across the Asia Pacific, including Japan, where Kearney supports 20 of the largest corporations and 200 emerging companies. Recently appointed as the head of Kearney Asia Pacific, Sekinada has been touring Australia to better understand the market and explore opportunities for Japanese investors.

The Appeal of Australia for Japanese Investors

Australia’s economic stability, growing middle class, and affluent consumer base have made it an attractive destination for Japanese companies. Sekinada highlighted that many Japanese businesses are seeking to diversify their investments amid rising geopolitical risks, particularly in China. In 2015, for instance, Japanese beer giant Suntory sold half of its local brand to Chinese brewing giant Tsingtao, citing uncertainties in the Chinese market as a reason for halting further investments.

Australia’s population growth and robust middle class provide a fertile ground for Japanese companies, particularly those targeting the mid-market segment. Unlike China, where the middle class has not expanded as rapidly as the ultra-rich, Australia offers a more balanced consumer base that is aligned with many Japanese companies' products.

In 2024, Japanese inbound investments into Australia reached an impressive $133.8 billion. Sectors of interest range from mining and energy to property, financial services, food, and even health supplements and beauty products. Recent acquisitions include 7-Eleven’s Japanese division acquiring the Australian business for $1.71 billion and Kirin’s $1.9 billion buyout of Australian vitamins giant Blackmores.

Challenges in the Australian Market

Despite the opportunities, Japanese companies face challenges when investing in Australia, particularly around leadership and communication. Sekinada pointed out that Japan’s high-context culture, where communication is often indirect, can sometimes clash with the more direct communication style preferred in Australia and the US.

Kearney ANZ Managing Partner Adam Dixon echoed these concerns, noting that many Japanese companies struggle to manage assets in Australia due to governance and communication challenges. Japan Post’s $6.5 billion investment in Australian logistics firm Toll, which was later sold for just $7.8 million after years of poor performance, serves as a cautionary tale.

Dixon also observed that while Japanese companies often provide local leadership teams with significant autonomy, this approach doesn’t always align with Australian expectations. Despite these challenges, Australia offers a prime environment for innovation and experimentation, with global brands increasingly using the country as a testing ground for new products and ideas.

A Path Forward for Japanese Investment

Australia’s favourable economic conditions, coupled with Kearney’s expertise, make it a promising destination for Japanese investors. While there are challenges to overcome, such as cultural differences in leadership and communication, Kearney’s insights and support can help bridge these gaps and create successful partnerships between Japanese and Australian businesses.

For Japanese companies, Australia represents a lower-cost innovation environment with opportunities to experiment and grow. With the right guidance, Japanese investors can continue to thrive in Australia’s dynamic market, contributing to the strong and growing relationship between the two nations.