Japan and Indonesia Enhance Trade and Collaboration

Feb 2024

As revealed by Indonesia’s Foreign Minister, Japan and Indonesia have agreed to eliminate trade barriers and boost cooperation across multiple sectors. The agreement comes after a bilateral meeting between the leaders of both countries in Tokyo in December 2023.

The agreement is a modification to the Indonesia-Japan Economic Partnership Agreement (IJEPA), a bilateral trade and investment treaty initiated in 2007 to promote an economic alliance by enhancing trade and economic cooperation. The revised IJEPA is anticipated to be signed in the initial quarter of 2024 and entails Japan lifting tariffs on processed Indonesian fishery products, alongside both countries broadening access to each other’s banking industries. In addition to tackling trade barriers, bilateral talks resulted in Japan pledging support for several infrastructure initiatives in Indonesia through Official Development Assistance (ODA).

Almost 2,000 Japanese firms are active in Indonesia, employing around 7.2 million local workers and making substantial contributions to the country’s GDP and exports, representing roughly 8.5% of GDP and nearly a quarter of exports.

The revised IJEPA will entail reductions and eliminations of tariffs on a range of traded goods. Japan plans to cut tariffs on 114 new items and expand tariff quotas for bananas and lightweight pineapples. At the same time, products like yellowfin tuna, canned bonito, canned tuna, bonito flakes, and fruit juices will undergo tariff elimination. Conversely, Indonesia will reduce or eliminate tariffs on 19 Japanese products, including automobiles, steel, and rice flour.

The revised agreement will also incorporate a specific section on digital trade, encouraging digital commerce between the two countries while safeguarding cross-border information transfers and prohibiting restrictions on installing computer-related equipment.

Japan has committed investments to infrastructure endeavors in Indonesia, spanning transportation, energy, and environmental initiatives. Plans include the initiation of construction for the Jakarta East-West Mass Rapid Transit (MRT) line, scheduled for August 2024, and establishment of the Patimban Deep Sea Port in West Java. Discussions between leaders also centered on energy transition schemes, emphasizing renewable energy and environmental projects.

(Source: International Trade Council)

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