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Israel and Japan advance toward free trade agreement

Move is expected to lower tariffs and bring down prices of Japanese-made cars, toys

Sharon Wrobel is a tech reporter for The Times of Israel.

Jerusalem's Chords Bridge lights up with the Japanese and Israeli flags as a sign of solidarity with the Japanese people following the assassination of former Japanese prime minister Shinzo Abe, July 10, 2022. (Screenshot/Twitter)
Jerusalem's Chords Bridge lights up with the Japanese and Israeli flags as a sign of solidarity with the Japanese people following the assassination of former Japanese prime minister Shinzo Abe, July 10, 2022. (Screenshot/Twitter)

Israel and Japan are advancing initial steps for the signing of a free trade agreement in a move that is expected to bring down tariffs and lower the prices of Japanese-made cars, toys and other imported goods.

“This morning in Tokyo, we agreed to take a first step toward the signing of a free trade agreement between Israel and Japan, which means discounts for products and goods from Japan for the benefit of the Israeli market and increasing Israeli exports to Japan, the third-largest economy in the world,” said outgoing Prime Minister Yair Lapid. “This year, we are also celebrating 70 years of relations between our countries and this is further proof of their growing strength – diplomatically and economically.”

With Israel and Japan having forged diplomatic ties back in 1952, economic activity has been expanding and defense relations have been warming in recent years. Japanese companies have invested a total of $13 billion in the Israeli tech industry since 2000, and over 85 Japanese companies are currently operating in Israel, according to Israel’s Foreign Ministry. Japan accounts for 15.8% of all foreign investments in Israeli tech industry, compared to just 1.8% in 2016, and 12% of total investment (foreign and Israeli), according to estimates by consulting firm Harel-Hertz Investment House.

At the end of August, Israel and Japan signed an agreement for closer cooperation on defense technology and military equipment.

Lapid hailed the advancement of a free trade agreement as “an important achievement for Israel’s economy and Israel’s standing in the world.”

Last year, the volume of trade in goods and services between the two countries amounted to $3.574 billion, according to Foreign Ministry figures. Exports increased 8% to $1.241 billion year-on-year mainly driven by business services, optical and medical equipment, base metals, and machinery products. Imports rose 10% to $2.333 billion in 2021 from the previous year.

On Tuesday, the Foreign and Economy ministries agreed with their Japanese counterparts to establish a joint feasibility study on a path that could lead to a free trade agreement between the two countries. As part of the process, representatives of the Israeli ministries will arrange a meeting with their Japanese counterparts to discuss the possibility of implementing a Japan-Israel Economic Partnership Agreement.

“After a decade of negotiations, we are happy to begin the process of talks towards a trade agreement with Japan,” said Israel’s Ambassador to Japan Gilad Cohen. “This is a significant step that could lead to lowering tariffs, lowering the price of Japanese cars and goods imported to Israel, and helping to increase Israeli exports to Japan.”

The start of talks comes as a free trade agreement between Israel and South Korea is expected to go into effect on December 1, the country’s first with an Asian country. Israel has free trade agreements with the United Arab Emirates and is hoping to ink a similar trade agreement with Bahrain by the end of this year.

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