Exploring Investment, Trade, and Future Growth Potential
Introduction: Bridging Two Economies Across the Pacific
Japan and Canada share a long history of strong trade and investment ties. Though separated by the Pacific Ocean, the commercial hubs of Tokyo and Vancouver act as natural gateways linking the two economies. According to the World Bank, both nations consistently rank among the top three G7 countries for Government Effectiveness, Political Stability, and Rule of Law. Canada’s direct border with the United States—backed by a comprehensive free trade agreement—further enhances its role as an entry point to the world’s largest economy. With these advantages, opportunities for deepening economic exchange between Japan and Canada remain significant.
This article explores the current landscape of investment and trade activities between the two countries, forming the first part of a two-part series that will later turn to the field of startup innovation.
Overview: Current Investment and Trade Flow
According to the Government of Canada, Japan’s FDI stock in Canada stood at US$48.2 billion (≈¥7.0 trillion) in 2024, making Japan the second-largest Indo-Pacific source and the fourth overall among Canada’s FDI partners. Japanese subsidiaries and affiliates in Canada employ thousands of Canadians and contribute significantly to local communities. Investment is concentrated in manufacturing, transportation & trade logistics, and energy & mining, reflecting Canada’s strengths in resources and advanced industries.
The same source reports that the stock of Canadian direct investment in Japan was valued at US$3.8 billion (≈¥550 billion) in 2024, with activity spanning automotive, information and communications technologies, financial services and forestry. These sectors highlight Canadian investors’ interest in Japan’s established industries and growing innovation ecosystem.
In addition, the data show that Canada’s exports of merchandise to Japan totaled US$15.0 billion (≈¥2.2 trillion) in 2024, while imports from Japan reached US$21.4 billion (≈¥3.1 trillion). The structure of trade remains complementary: Canada exports mainly energy, minerals and agri-food, while importing vehicles, machinery and precision equipment. This reflects Canada’s comparative advantage in natural resources and Japan’s strength in advanced manufacturing.
Trade Agreements: Opening Markets, Expanding Partnerships
Canada and Japan are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), now encompassing 11 countries plus the United Kingdom, which formally acceded in 2023. Other prominent members include Australia, Malaysia, Singapore and Vietnam. The CPTPP removes or reduces tariffs on up to 98% of exports among its members. For Canada, the agreement remains particularly beneficial for agriculture, fish & seafood, forestry and industrial goods, while the UK’s accession further broadens opportunities in trans-Pacific and trans-Atlantic markets.
Canada is also a member of the Canada–United States–Mexico Agreement (CUSMA), the largest free trade region in the world. For digital services, CUSMA members benefit from the Digital Sales Tax (DST) exemption, applicable to corporate revenues not exceeding $20 million (≈¥3.0 billion). This provision provides Canada with a competitive edge in IT and digital services across North America, though the framework continues to evolve amid ongoing discussions on digital trade.
Conclusion: Untapped Potential in Technology
An analysis of the trade and investment statistics reveals that Japanese investors and businesses express a high degree of confidence in the Canadian market. However, transactions remain largely concentrated in traditional industries such as manufacturing, natural resources, energy and transportation. Opportunities in the exchange of capital and knowledge in the technology sector are underutilized, despite the dynamic startup environments in both countries.
Bridging this gap requires targeted support. This is where EXPACT can provide value—offering market entry guidance, partnership facilitation, and fundraising advisory to help businesses capitalize on emerging opportunities. Potential opportunities in this regard shall be covered in the next article.
About EXPACT
EXPACT provides a variety of operational support to domestic and international startups.
EXPACT offers market entry strategy advisory for international businesses looking to establish a presence in Japan. Our services are as follows:
– Advice for visas and programs: Providing guidance on suitable visas and government programs for foreign entrepreneurs (e.g., Startup visa).
– Market research assistance: Evaluating the potential market size and demand for the product or service.
– Geographical evaluation based on the company’s target: Carrying out a location analysis to determine the most suitable region, prefecture, and city according to the startup’s specific needs.
– Support for applying for financial aid programs: Sourcing and supporting the application process for applicable government grants and subsidies.
– Assistance for forming partnerships: Serving as a liaison to help the startup establish connections with local partners, investors, and government institutions.
– Advice for a business plan: Offering a business plan review with insights from a Japanese perspective.
– Translation services: Providing translation services for in-person meetings, virtual discussions, and document preparation.
Additionally, the company also offers One-Stop support from Startup advisory to Finance, PR, Recruitment and EXIT.
- Finance and Fundraising: Advisory on the financial health of startups and proposing an optimal fundraising plan by applying for government grants and facilitating investor introductions. Activities include drafting a pitch deck, and forming a business plan and/or cap table.
- Promotion: Publishing press releases, building media relations, branding.
- Startup Advisory: Business ideation, researching, conducting interviews, MVP analysis, investment access.
- Human Resources: Personnel strategy, hiring support, institution building.
- EXIT: IPO support, M&A support, exit system design.
For assistance or additional information, please contact us at info@expact.jp for inquiries.
Inquiries on market entry strategies can be directed to pramod@expact.jp
Note: Information regarding investment statistics and trade agreements are accurate at the time of publication, taking reasonable efforts into account. The information is subject to change at a later date due to ongoing geopolitical developments.
Written by Pramod Sharma & Hana Miyagi
References:
https://www.international.gc.ca/country-pays/japan-japon/relations.aspx?lang=eng
https://international.canada.ca/en/global-affairs/corporate/reports/chief-economist/state-trade/2024
https://www.jetro.go.jp/world/n_america/ca/gtir/
https://www.conferenceboard.ca/insights/trade-partner-profile-japan/