Not the type of 1980s revival which can probably be observed nightly at some or other Karaoke bar in the Japanese capital frequented by the often over-worked and hard-playing “salary-man”, but rather another significant upturn in Japanese corporate investment in Scotland.
And these high hopes of inward investment and trade promotion agency SDI do not seem to have been plucked out of thin air, although they are based partly on a view that Scotland can really capitalise on its massive wind energy resource.
SDI, a joint venture between the Scottish Government and publicly funded economic development agency Scottish Enterprise, believes that this natural resource could prove a magnet for Japanese companies which wish to enter the European renewable energy market. SDI points out that many Japanese companies, unlike some of their international competitors, have cash piles which have survived the global economic downturn.
Stephen Baker, a Japan veteran who retains a Geordie accent and became country head for SDI in Japan about three years ago, sees potential for large-scale job creation in Scotland through the establishment of manufacturing operations by Japanese companies with no production presence in the renewable energy sector in Europe at the moment.
This is not the only area in which he sees potential. Baker, who moved to Japan nearly 25 years ago and spent more than two decades working for electronics giant Sony, also highlights Scotland’s life sciences sector, and notably its expertise in the likes of stem cell technology.
Highlighting his hopes of a renewed rise in investment by Japanese companies in Scotland, Baker says: “Certainly, from that 1980s period, there was substantial investment (from Japan) and the UK got a disproportionate amount of that investment. Scotland shared in that.
“You tend to get investment cycles. Japan had one investment cycle (from the 1980s). It has gone into a sort of consolidation. I think we are going to see another good cycle, especially (given) some of the things we see now on the energy side and things we see in life sciences.”
Underlining the scale of the wind energy potential in Scotland, in a European context, Baker says: “If you take each country and just redraw it, in terms of wind resource, Scotland appears as one-quarter of the whole of Europe.
“The good thing about Japanese companies is, on the energy side, they don’t really have manufacturing for the renewable or wind-related energy market in Europe.”
He adds: “It is a great rationale for them to come back and put something in Europe. There is this massive potential for wind energy we would like to unleash in Scotland.
“It is a very exciting time. Of course, these projects involve massive investment and that is one of our key focuses, to get as many companies involved in that value chain as possible.”
Of course, it is Baker’s job to sell Scotland. However, his assertion that Scotland can enjoy a manufacturing boost from the renewable energy revolution appears to stack up.
He highlights the various parts of the wind energy “value chain” in which Japanese companies, pioneers in recent times in the drive to reduce carbon dioxide emissions through everything from efficient solar power to electric cars, could become involved.
Baker also notes that the yen’s current strength, relative to sterling, makes this an attractive time for Japanese companies to take the plunge in Scotland.
He points out that wind energy involves the production not just of wind turbines but of the blades, the support structures, cabling, and, in the case of offshore renewable energy, undersea sub-stations.
Baker declares he doesn’t want people “to be just shipping parts to Scotland”, but rather wants them to create jobs on the ground.
“For us, renewable energy is right at the top of the list and all hands on deck,” he declares.
Although the focus on renewable energy in Japan has been on solar, something in terms of which Scotland would not figure big on a map of Europe, much of the technology developed could be transferable to wind. And, as Baker points out, Japan also has wind farms, even though these might not grab the headlines in the Asian country, which are devoted to solar.
Looking at what has happened so far, Japanese investment in the Scottish wind energy sector has kicked off in a low-key way. But it has started.
In terms of Japanese companies which are already active, Baker points out that Eurus Energy has established an office in Scotland with a view to creating wind farms. And he notes that Japan Wind Development Co is planning a 32MW co-development wind farm on Orkney.
Baker also points out that much of the action, in terms of the boom in wind farms in the UK, will be in the coming few years so there is much to play for over this timeframe.
The “consolidation” in overseas investment by Japanese companies to which Baker refers has involved sometimes painful exits, such as the closure by electronics giant NEC of its plant at Livingston and JVC’s manufacturing withdrawal.
However, there are still 65 Japanese companies operating in Scotland. Baker is not in any doubt, nor should he be, that Japan remains among the most important sources of inward investment for Scotland on the international stage.
And recent years have not been without their successes.
Baker is particularly pleased that Mitsubishi Electric announced last year that it would start making energy-efficient, air-source heat pumps in its plant at Livingston.
He notes that Mitsubishi Electric’s Scottish operations in the past manufactured video decks. The company then diversified into air-conditioning equipment, which it still manufactures at Livingston, and has now moved into this new area of heat pumps.
There have also been several sizeable investments in the North Sea oil sector in recent times by Japanese companies Sumitomo, Nippon Oil Exploration and Petro Summit.
Japanese medical products company Terumo has meanwhile expanded significantly in recent years its Vascutek operation at Inchinnan in Renfrew-shire. Vascutek makes prosthetic vascular grafts.
And Baker highlights the scale of the inward investment “pipeline” being pursued by SDI’s Japan office across all sectors.
He says: “This year, we have grown our pipeline of projects quite significantly. We are up to a set of 20-plus projects we are working on which are actually projects with a company (where) they have decided to do something. Now we have got to make sure they get through the full process and make a final decision on Scotland.”
He acknowledges some of these ideas will “fall by the wayside” but emphasises SDI is talking in concrete terms with companies about these 20-plus projects.
Baker adds that SDI has “almost the same number of potential projects” that are at an earlier stage.
He also highlights the potential for Scottish financial companies in Japan. He is confident that the crises at Royal Bank of Scotland and Edinburgh-headquartered sector stablemate HBOS have not impacted upon the Japanese view of the Scottish financial sector.
Baker highlights in particular the potential for Scottish fund managers to attract more assets to manage on behalf of Japanese players. He notes success in forging Japanese alliances already by players including Scottish Widows Investment Partnership, Baillie Gifford, and Aberdeen Asset Management.
On the burning question of whether the troubles of the Scottish banks have come on the radar in Japan and are affecting people’s perception of the wider financial sector in Scotland, Baker replies: “I would say not really, to that extent.”
He acknowledges that Royal Bank of Scotland was at the forefront of the minds of those with a connection to Scotland but adds: “In Japan, that is further away. They tend to see the global picture. RBS is just one company that is involved in that. That is a good point there (from Scotland’s perspective).”
Drawing a distinction between RBS and HBOS and Scotland’s fund management sector, he adds: “I think there has been a recognition in Japan that the asset management side (in Scotland) actually performed quite well during the crisis.”
Baker highlights how Scotland’s fund management companies concentrated on their core strengths and avoided getting “into these ‘no idea what’s in them’ bonds”.
