What the Japan Free Trade Agreement means for investors

Yesterday was an historic day, with Australia signing a Free Trade Agreement (FTA) with our second-largest trade partner, Japan.

What that means is almost all (97%) Australian exports to Japan will receive some sort of concessions from tariffs and duties that are currently in place. Australian beef and dairy products are the big winners, with the current 38.5% tariff on frozen beef falling to 19.5% over 15 years, including an 8% drop in the first year.

The fresh or chilled beef tariff will drop to 23.5% over 15 years from 38.5%, including 6% in year one.

Dairy products exported to Japan will be duty-free up to 47,000 tonnes a year, up from 27,000. Beer, wine, lamb, wool and cotton will also attract zero tariffs and Australia has also secured ‘most favoured nation’ status. That means if the US, which is currently negotiating its own FTA with Japan, secures a better deal, it will automatically apply to Australia.

The cuts to the beef tariffs are estimated to let our industry grow by $2.8 billion over the next twenty years.

It also means Australian consumers will benefit with Japanese imported cars losing their 5% tariff. Retail purchase prices are estimated to drop between $1,000 and $1,500 on an average $30,000 car.

Imported Japanese electronics and household goods will also have zero tariffs going forward.

The big winners will be Australia’s agricultural exporters, including listed companies such as Australian Agricultural Company Ltd (ASX: AC), Bega Cheese Ltd (ASX: BGA) and Warrnambool Cheese & Butter Factory Co. (ASX: WCB). Australia’s largest fruit and vegetable processor SPC Ardmona, a subsidiary of Coca-Cola Amatil Ltd (ASX: CCL) could also be a big winner, potentially able to begin exporting its products to Japan, rather than selling its entire product locally.

Local electronics retailers JB Hi-FI Limited (ASX: JBH) and Harvey Norman Holdings (ASX: HVN) could also see higher sales, thanks to more competitively-priced products.

Foolish takeaway

The FTA is a big deal for Australia and a huge win for our agricultural exporters. The government is also working on FTAs with China and Korea, although they are unlikely to be completed before the end of the year.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.