Gaining momentum in the Israeli-Japanese relations: The economic and defence dimensions

Despite certain political differences, Israel and Japan are intending to boost their ties, especially in trade, defence, and tech

Looking at the current trajectory of Israeli foreign policy, it is discernible that its politico-diplomatic and economic footprints are on a significant rise in the wider Asian region. All Israeli governments, regardless of their political ideologies, for several decades, have been making concerted efforts towards strengthening partnerships with most Asian countries. Such undeterred foreign policy overtures towards Asia has intensified, especially following the establishment of its full diplomatic relations with then-emerging countries, such as India and China (in 1992). Likewise, its ties with Japan and South Korea are also witnessing exponential growth in recent years. The increasing emphasis being given by these Asian countries, mostly for trade and business (both energy and non-oil), and technological cooperation with the wider Middle Eastern region, has also coincided with Israel’s diplomatic moves to expand its engagements with the former. Within this ambit, the Israeli-Japanese governments are continuously working to scale their bilateral ties to newer heights and create a win-win scenario.

With both countries commemorating the 70^th year of diplomatic relations in 2022, they have made systematic moves to enhance their cooperation in almost all the traditional sectors—economic, science and technology, defence-security, people-to-people, culture, and so on. The rising frequency of high-level reciprocal bilateral visits of leaders during the last two decades has clearly demonstrated the appetite to enhance cooperation. As a result of the political goodwill of Israeli and Japanese leadership to boost relations, particularly from the mid-2010s onwards, there has been a simultaneous expansion not only in the financial-commercial sectors but also in defence cooperation. Economic ties between Israel and Japan are progressing, with bilateral trade volume touching US$3.5 billion in 2021-22. In late 2022, the two countries initiated the process to sign a Free Trade Agreement (FTA) to enhance bilateral ties. It is noteworthy that the first meeting of a possible Japan-Israel Economic Partnership Agreement (EPA), albeit virtually, was held in March 2023. Such mechanisms will prove to be beneficial to the firms operating in both countries, creating favourable conditions for both to enter each other’s markets.

Tech collaboration

Presently, many Japanese tech firms are present in  Israel; in 2021, their investments were estimated at US$2.9 billion, although this is small when compared to the domestic (Israeli) and the United States (US) investors; however, the recent entry of newer Japanese telecommunications companies, such as Nippon Telegraph and Telephone (NTT), along with a few other multinationals, have created more economic opportunities for both. Today, there are about 85 Japanese companies present in Israel, with investments worth US$13 billion since 2000, accounting for 15.8 percent of all foreign investments in the Israeli tech industry. This explains the salience of technical cooperation, and economic and investment ties between the two technologically advanced countries.

The visits of the Israeli Prime Minister to Japan in May 2014 and that of his then-Japanese counterpart, Shinzo Abe, to Israel in January 2015, had played an instrumental role in making the investment climate conducive. This resulted  in a considerable surge in investment. Now, the introduction of direct El Al (Israeli national carrier) flights between Israel and Tokyo and the signing of the ‘holiday-work visa’ in March and April this year, respectively, will likely lead to further growth in the socio-cultural-economic ties. Professionals from the high-tech sectors are expected to benefit from this formal arrangement.

Collaboration in the defence sector

Defence is another important domain that Israel and Japan are interested in scaling up. This is crucial for Israel as it is in a continuous quest for defence partners—for exports of its armaments, security partnerships, and for joint collaborations in defence technology. Moreover, with a limited capacity to absorb its locally manufactured weapons systems and to spur its research and development (R&D) programmes, Israel needs clients for generating export revenues from various markets. In recent years, Israel’s defence industries have had to contend with challenges stemming from the global arms landscape, which has become increasingly competitive. Such developments have also put additional pressure on Israeli defence firms to compete in existing and new overseas markets—Japan could potentially be a candidate. As security relations remain an integral part of Israel’s political ties with different countries, a similar pattern can also be expected with Japan sooner rather than later. In 2021, Israel’s total global arms export saw a record high at US$11.3 billion, which was at US$8.3 billion in 2020. For a few years, the Asia-Pacific accounted for a major portion of such Israeli exports; in 2021, it was 34 percent. Favourable groundwork to boost defence ties was laid during the visit of then-Israeli Defence Minister, Benny Gantz, to Japan in September 2022 (the first since February 2012), resulting in the signing of the Memorandum of Defence Cooperation, to “widen defence, strategic and military exchanges”, and importantly, to collaborate in the joint development of military technology. A similar agreement was also inked in September 2019. In the presence of such official documents, the furtherance of defence ties looks promising.

Notwithstanding the politico-economic incentives, Israel could accrue from transferring arms to Japan; the latter also searches for defence partners as it is embarking on a major military modernisation drive, triggered by the increasing threat perceptions from a militarily emboldened China, and also North Korea. Due to such looming security threats and challenges, Japanese decision-makers unveiled (in December 2022) a US$52 billion defence budget for 2023 for the Japanese Self-Defence Forces (JSDF). A bulk of this amount would be utilised in the procurement of armaments, defence R&D programmes, and to support its “domestic manufacturing and maintenance capacity”. This, therefore, provides an opportunity for Israeli firms to get closer to the Japanese defence establishments to clinch arms deals. With its advancement in the field of missiles, anti-missile systems, Unmanned Aerial Vehicles (UAVs), naval defence items, electronic warfare systems, airborne early warning systems, arms and ammunitions, communication and targeting systems, etc., Israeli defence firms (state and private) should endeavour towards securing arms deals with Japan. Establishing defence ties appear to be timely for Israel, too, as it looks for new arms markets while Japan is gradually expanding its military-security cooperation beyond its traditional partners, including the US and the United Kingdom (UK). Indeed, a fusion of Israeli and Japanese defence technologies could result in significant innovations and co-production of equipment suitable to both the countries, which, then, can be exported to potential buyers in the region and beyond. The participation of 14 Israeli defence industries’ delegations at the Defence and Security Equipment International (DSEI) exhibition, held in Tokyo in March 2023, is construable as a prelude to more interactions in this prospective sphere. As a beginner, unmanned aerial systems (UAS) is one category in which Israel and Japan can jointly collaborate, and this will make sense, considering Japan’s ambitions to use hundreds of attack drones in the next couple of years.

Cooperation in the cyber domain

Beyond the traditional security areas, both countries are cognisant of various cybersecurity threats. Nearly a decade ago, they foresaw a significant potential for cooperation in the cyber domain, given their strengths in this area. Due to this, the then-Israeli government (in 2015) approved an investment plan aimed at strengthening ties with Japan in sectors including space- and cyber-related research and development. To give more impetus, another accord—primarily to increase cooperation in R&D, information exchange, and training programmes—was signed in late 2018. As Israel is considered the global cybersecurity ‘powerhouse’, Japan should establish relations with relevant Israeli firms and work together towards protecting the country’s critical infrastructures from cyberattacks, which were recorded to be the second highest, next to the US, between September and November 2022. The increment in Japan’s defence budget should also be beneficial for the Israeli cyber firms, too, as it  can look forward to winning new contracts from the Japanese government. Israeli firms could provide suitable solutions according to the needs of the Japanese authorities. In the long run, the cooperation can well extend to digital health, artificial intelligence, and robotics, with the possibility of exporting, at a later stage, jointly-developed technologies to other clients worldwide. The recent developments clearly suggest that Israel and Japan have strong mutual strategic interests to take ties to the next level. This has enabled them to consciously overlook certain political differences, mostly related to the Palestinian issue, which, in reality, has become a diminishing issue. Japan balances its ties between Israel and the Palestinians tactfully and with the utmost craftsmanship. While Tokyo continues to support a two-state solution (vis-à-vis Israeli-Palestinian conflict), this factor will unlikely cause a major dent in its present endeavours to build stronger strategic ties with Israel.

The realisation on both ends that they (Israel & Japan) have more to gain out of robust cooperation with each other, due to convergences of interests—economic, defence, strategic, technological, and political—is what is now propelling the relations. The existing direction of the overall cooperation signals both countries’ investment in relations, and they would do whatever it takes to preserve the growing momentum, not letting any third party stymie the steady progress.

Alvite Ningthoujam is an Assistant Professor at the Symbiosis School of International Studies (SSIS), Symbiosis International (Deemed University), Pune