The economic ties between the Philippines and Japan have grown stronger over the past three years, fueled by increased investments, sectoral expansion, and deeper collaboration in infrastructure development.
Fresh investments signal confidence
In March 2025, four Japanese companies committed a total of ₱23.5 billion in new investments, targeting key sectors such as renewable energy, railways, IT, and manufacturing.
The Philippines’ recently enacted CREATE MORE law—offering enhanced tax incentives and streamlined business processes—has played a key role in attracting these investors. Among them is Nidec Corporation, which is exploring the production of humanoid robotics in the country, drawn by the Philippines’ skilled and tech-ready workforce.
SMEs see opportunity, but face barriers
Filipino small and medium enterprises (SMEs) are beginning to carve out space in the Japanese market, especially in niche segments where Filipino craftsmanship shines. Exports of wooden furniture, for example, have gained traction as Japanese consumers seek out sustainable materials and unique design.
But challenges remain. Japan’s stringent product standards and certification requirements—particularly in food exports—pose significant barriers. For many SMEs, the high costs of testing and compliance are out of reach.
Logistical limitations, such as poor transport infrastructure and patchy internet in rural areas, further complicate export operations. Financing remains a bottleneck, with many SMEs struggling to scale production despite clear demand from Japanese buyers.
Programs like Negosyo Centers have helped, but progress varies widely depending on location and industry.
Sectors on the rise
Trade data from December 2024 show continued growth in both directions. Japanese vehicle exports to the Philippines rose by 4.91%, while Philippine exports to Japan—including bananas and precious metal scrap—increased by 5.74%.
Agriculture remains a high-performing sector. The Philippines supplies over half of Japan’s banana imports and continues to gain ground in pineapples, avocados, and papayas—supporting job creation in rural communities.
Meanwhile, electronics and electrical machinery remain key drivers of Philippine industrial exports, with steady demand for specialized components from Japanese manufacturers.
Infrastructure collaborations
In March 2025, the 15th Philippines-Japan High-Level Joint Committee on Infrastructure Development and Economic Cooperation reaffirmed both countries’ commitment to collaborative infrastructure projects.
Japanese expertise in disaster-resilient design is now being applied to transportation projects in vulnerable areas. Ongoing initiatives include flood monitoring systems, maritime safety enhancements, and regional development programs aimed at spreading economic gains beyond Metro Manila.
Japan has also maintained its development support for the Bangsamoro region as part of its contribution to the Mindanao peace process. These efforts are helping establish local supply chains and open up international market access for previously underserved communities.
SME support and digital strategies
New strategies are emerging to help SMEs navigate the Japanese market. Digital platforms now allow smaller exporters to reach Japanese consumers directly, bypassing traditional retail channels.
In partnership with the Department of Trade and Industry, the Japan External Trade Organization (JETRO) launched a mentorship program pairing veteran exporters with SMEs new to Japan. The initiative offers guidance on regulatory compliance and cultural nuances of doing business in Japan.
On the financial side, the Japan Bank for International Cooperation, along with select local banks, is offering customized financing solutions tailored to export business cycles.
Strategic, resilient at the core
Japan’s strategy to diversify its supply chains across Southeast Asia aligns well with the Philippines’ push for investment under CREATE MORE. More Japanese mid-sized firms are now looking at Philippine operations as part of their long-term regional strategy.
This shift is helping Filipino suppliers integrate into global value chains, while ongoing diplomatic engagement ensures both countries remain aligned on emerging issues such as digital trade and supply chain resilience.
What’s Next
The partnership is entering a more dynamic phase, with both countries expanding into high-growth sectors like artificial intelligence, renewable energy, and health technology. Japanese firms are also increasingly looking to the Philippines for tech talent and creative innovation.
In fact, investments from Japan into Philippine tech startups jumped by 45% last year—pointing to a shift from traditional trade ties to deeper collaboration in innovation and entrepreneurship.
As investment flows, technology transfer, and infrastructure cooperation continue to scale, the Philippines-Japan relationship is evolving into a long-term engine for shared growth—benefiting businesses and communities on both sides.
