Japan's value to a post-Brexit Britain explained

In 2015, according to data published by the Office for National Statistics, it was the 11th largest buyer of UK exports, buying £10.5bn worth of British goods and services, putting it ahead of the likes of the United Arab Emirates, India, Australia, Canada and Russia.

The strength of British exports to Japan is all the more impressive given the "gravity model of trade", developed by economists over many years, which holds that the two biggest factors influencing trade ties between two countries are the size of the two economies and the distance between them.

In short, the closer a country is to another, the more likely it is to trade goods and services with it. It is quite remarkable that Britain exports more to Japan, which is more than 9,000 miles away, than it does to Sweden, which is on our doorstep.

Japan is a crucial investor in Britain. In 2015, its companies were the fourth-largest overseas investors in the UK, while in 2016 alone, Japanese investors ploughed £27bn into buying 37 UK businesses, most notably the chip designer ARM Holdings.

In total, there are around 1,100 Japanese-owned businesses in the UK, accounting for some 140,000 jobs.

The best-known example of Japanese investment into Britain is in car-making. Nissan made 478,000 cars in Britain last year, of which around 80% were exported to the EU, while Toyota made 196,000 in the UK, nine in 10 of which went to the EU.

Katsunori Kitakura, lead strategist at Sumitomo Mitsui Trust, one of Japan's largest asset management firms, said: "An increase in costs following Brexit could lead to a decline in Japanese investment in the UK and the relocation of production bases to other EU countries."

"As such, the ongoing negotiations between the UK and the EU will be crucial for the future investment relationship between the UK and Japan."

"Japanese companies want to continue their investments in the UK after Brexit. However, the UK government will need to respond to their requests and take measures to maintain the same business environment that is currently in place as far as possible."

"If the EU single passport expires, it will be necessary to review office locations and staffing arrangements, In fact, Japanese financial companies have already begun steps to establish core bases in continental Europe in preparation for Brexit."

The facts speak for themselves. Japan, with its history of patient investment for the long term and promoting technical excellence, is a crucial, vital trading partner for the UK and one whose views our politicians must take seriously.

Story by Sky News (Source here)