The kaizen spirit is shared by both Japan and the Czech Republic

He first came to Prague as a tourist in 2017. Now he’s living in this beautiful city, astonished that you can literally live in the history here, admiring the many layers of architecture and the fact that Prague is very green. He was also amazed to see how Czech people welcome and appreciate Japanese culture. We talked to Kansuke Nagaoka, Ambassador of Japan to the Czech Republic, at his residence in Prague.

You took up the position of in spring 2024. What has surprised you the most about the Czech business culture so far?

It has been a short time so far, so I haven’t been to any 100% Czech-owned companies yet, but I did visit some Japanese companies here. In many of them, the top management now includes Czech people – so while they are Japanese companies by name, they are getting more and more Czech over the years. I have realized there are many strong similarities between the Japanese and Czech corporate cultures. I think that Czechs are very serious to pursue the highest possible quality of products and services, and they always try to innovate their production processes. It’s the same spirit we respect in Japan. We call it kaizen, which is a logic of a continuously improving process. I find that the kaizen spirit is well established in the Czech industry and economy, and I believe it’s also one of the reasons why so many Japanese companies have decided to invest in your country.

EPA brings many benefits also to smaller companies

Japan and the EU signed the EPA in 2019. What are the main advantages of this agreement? How can both parties benefit from it?

The EPA connects two of the biggest economies in the world, whose combined GDP makes up over 20% of the global GDP. Besides facilitating more trade and investment between Japan and the EU markets, the agreement has also contributed a lot to creating new job opportunities and also made our companies more competitive in the global market. It is definitely a milestone in the Japan-EU history. Back in the 1980s and 1990s, Japan and the EU had a lot of trade disputes, but these are now a thing of the past, and now we are heading to new horizons.

When it comes to bilateral trade, we see that the EPA has had a significant impact. Both imports and exports between Japan and Czechia have increased by more than 70% since 2019. One great example: Czech wine export to Japan has increased 6.7 times in that time. Quality-wise and price-wise, Czech wine producers are very competitive against countries such as Argentina, Australia, South Africa or Spain. And these are mostly SMEs or even smaller producers, which shows that the agreement has been beneficial not just for big companies.

The EU and Japan are among the largest digital economies in the world, and this year, they signed a protocol to include cross-border data flows in this trade agreement. Does this show that Japan sees the importance of the new digital economy and that it keeps opening itself up to the world?

The creation of this amendment was already agreed upon when Japan and the EU signed the EPA. In July 2024 this amendment protocol finally came into force. It stipulates that the two parties shall not adopt measures which prohibit or restrict the cross-border transfer of information. It also outlines more specific measures that are prohibited.

Japan as well as our major international partners including the EU have always promoted free flow of cross-border data and have made serious efforts to maintain dynamic and open trade environment. This protocol makes it clear that Japan gives great importance to cooperation with the EU on digital economy. It also shows our commitment to promoting the data free flow with trust (DFFT) initiative, which first came up at G20 meeting in 2019 in Ósaka.

Engineering and automotive are the main industries

Both Japan and Czechia have a strong focus on automotive. Can you outline our cooperation in this industry?

A lot of Japanese companies investing in your market are active in the automotive industry. Consequently, most of Japanese export to Czechia consists of different types of machinery including car parts. Typically, ready cars or advanced automotive parts are then exported across the EU. This means that Japanese exports contribute to Czech exports to EU member countries, which is a win-win situation for both parties.

One example – Denso produces air conditioning systems for cars in Liberec. They sell their products also to Japanese car makers like Toyota, but their biggest clients are German automotive companies like Mercedes or BMW.

From your point of view, what are the most promising sectors for our economic cooperation?

More and more Japanese companies are interested in making eco-friendly products, such as heat pumps or recyclable packaging and wrapping materials. Companies like Daikin or Panasonic produce heat pumps, and when it comes to recyclable packaging materials, Toppan has invested in a big plant near Most and are looking to start production in 2025.

The EU has set very strict environmental regulations, and these products meet all of them. They argue that if they succeed in this demanding market, they will also be successful in the rest of the world. The international market is also getting greener, it’s a clear trend. With its geographical location and industrial base, Czechia is the best place in the EU for investment.

Japan as a major foreign investor

There are around 280 Japanese companies in the Czech market. What do they bring to the regions where they operate?

Looking at the accumulated investment volume, Japan is the second biggest investor in the Czech market  after Germany. As for jobs, Japanese companies create over 50,000 jobs in Czechia, according to a survey by JETRO. Apart from job creation, these companies have become very good local partners in the respective regions. They provide a lot of support for sports and cultural activities. Some of them have become partners or sponsors of cultural events like classical music concerts .

To encourage FDI in Japan and to support Czech companies entering the Japanese market, a special contact and information point was established at your Embassy. Czech businesses can also use the services of JETRO. Which Czech companies have succeeded in Japan, also thanks to this support? 

Compared to the Japanese investment in Czechia, the Czech investment in Japan remains very small. But many Czech companies have unique and advanced technologies, which would be highly appreciated in Japan. Avast and ERA, who make security software and surveillance systems, respectively, have already been  successful in the Japanese market.

The Japanese government is constantly trying to bring more foreign investment in the country, and under the Invest Japan programme, we provide various support necessary to establish  foreign companies’ presence in Japan. It’s a package that includes facilitation of incorporation procedures and finding office space and workforce. We also provide continuous support to those companies who already operate in Japan and want to expand their activities. Then there is another programme called J-Bridge, a platform where foreign startups can match with the corresponding Japanese companies. 

In which industries do you see the most opportunities for Czech businesses in Japan?

If we look at the foreign direct investment in Japan in 2022, software sector makes up 36% and business services 15% - together more than a half. I know that Czech companies are very strong in these areas so if they want to do business in Japan, these two sectors offer great opportunities. Overall, Japan is a very populous country with a huge internal market, plus it opens doors to other markets in the region. Japanese customers are very critical, but Czech businesses can take this as a test: if they pass such high standards in Japan, it will only get easier elsewhere.

Building bridges in research and education

What about Czech-Japanese cooperation in research and education?

We have seen many exchanges between universities or research institutions. For instance, VSB – Technical University of Ostrava and Yokohama National University have been working very closely together for more than 20 years in the field of materials research. They regularly organise seminars in Ostrava, the latest one this year in October. Another great example is the Palacký University of Olomouc and Tokyo University, who have been working in the field of quantum studies, and this May, they organised a workshop in Tokyo.

On governmental level, the Japan Society for the Promotion of Science (JSPS) and the Czech Academy of Sciences are promoting exchange of researchers based on the memorandum of understanding. We also provide a scholarship programme for Czechs on BA, MA and PhD levels, in social studies as well as in sciences. These people can then work as a bridge between the two countries, and that’s also why we organize an alumni event every year. For example, the current Minister of Health Vlastimil Válek is one of them.

Our countries also have a number of partnerships in the cultural field. There are events in Czechia focused on Japanese culture as well as partnerships between cities such as Prague-Kyoto. Can you give some more examples?

I have to say that I am really amazed to see how Japanese culture is truly welcomed and appreciated by a lot of Czech people. It is exciting to see how many people devote their time and energy to master Japanese martial arts and other traditions. Of the many events, I should definitely mention the Animefest in Brno, held for around 20 years.

When it comes to sister city agreements, Kyoto and Prague have been working very closely, and in 2026 they will celebrate a thirty-year anniversary. Another sister agreement is between Karlovy Vary and Kusatsu spa towns and between Pilsen and Takasaki, which was set up in 1990 on the basis of beer production. Other strong partnerships include the one between the Zlín Film Festival and KINEKO International Film Festival, both devoted to children’s film. In sports, Osaka Marathon has recently become a partner with Prague International Marathon. We also have a strong cooperation in baseball, which is a hugely popular sport in Japan.

In your view, what will be the biggest benefit of Expo 2025 in Osaka for both our countries?

The Expo 2025 will be the first international expo after covid-19 pandemic. With a century-and-half long history, the world expo has always been a place where new technologies and products enrich our lives. In order to design future society for our lives, Expo 2025 will gather wisdom to achieve Sustainable Development Goals (SDGs), a common challenge for all humankind. We expect almost 3 million visitors from all over the world. So far, over 160 countries have decided to participate in the Expo, so for both of our countries, it will be a real international arena. Companies as well as governments, NGOs, universities and other entities can introduce what they have – technologies, cultures, gastronomies, traditions – to guests from across the globe. There will also be a lot of matching opportunities for all sides. I’m sure it will be an unforgettable event.

Ambassador Nagaoka was interviewed by Daniel Libertin

Photo credits: Embassy of Japan in the Czech Republic