Australian Trade and FDI Relations with Japan: Reflecting on the Past Seven Decades

The post-World War II reconstruction of global trade and foreign direct investment (FDI) has been a significant topic of discussion in the analyses of numerous bilateral economic relations, including those that are located in Asia Pacific. Since the reconstruction, Multinational Enterprises (MNEs) have increasingly internalised trade and FDI in markets where they are active. Markets and MNE activities have grown together while governments have become more responsive to this process. This paper discusses the above process along with an analysis of the rise and development of the economic relationship between Australia and Japan from the immediate post-World War II phase through Australia’s neo-liberal trade policy phase. The post-World War II relationship began in the 1950s, and grew during the Cold War years, the end of which has created competitive pressures on the Australian economy. Australia has tried to overcome this by progressively adapting a unilateral neo-liberal trade policy and encouraging its trade and investment partners to do the same, unsuccessfully in most cases where such partners have extensive state subsidy structures in place. The paper discusses the effects of major events such as the Plaza Accord and the end of Japan’s ‘bubble economy’ on the relationship. The discussion extends into the development of new challenges in the 2010s.