UK-Japan Economic 2+2 and Industrial Strategy Partnership Paving the Way for Co-creation
4 August 2025
At OBM, we have been deeply involved in UK-Japan relations for the past 15 years, and we are convinced that the intergovernmental agreements of the last six months will be a significant benefit to for businesses.
The landmark agreements concluded consecutively in March and July 2025 demonstrate a qualitative transformation in the economic partnership between both nations. This article analyses the strategic complementarity between the two countries' industrial strategies, driven by strengthening UK-Japan relations, and examines future business opportunities
The Trajectory of UK-Japan Relations Development
Since the Brexit referendum in 2016, UK-Japan relations have steadily strengthened. Following the completion of the UK's departure from the EU in December 2020, both countries have deepened their strategic partnership. Particularly noteworthy was the Japan-UK Hiroshima Accord, announced at the G7 in May 2022, which clearly articulated the "Enhanced Global Strategic Partnership" between the two nations.
This development is underpinned by shared fundamental values. Economically, the balance of Foreign Direct Investment from the UK into Japan has increased more than four times in the last decade, ranking the second largest. At the same time, security cooperation in the Indo-Pacific region has been strengthened, and scientific and technological collaboration for innovation advancement has also deepened.
2025: Historic Agreements Leading UK-Japan Relations to a New Stage
Two groundbreaking agreements have been concluded so far in 2025, which have established good foundation for collaborative businesses between the two countries.
1. Japan-UK Economic 2+2 Ministers' Meeting (7 March 2025)
The inaugural Japan-UK Economic 2+2 Ministers' Meeting held in Tokyo on 7 March 2025 holds historic significance. This meeting brought together foreign ministers and economic ministers from both countries, confirming agreements in the following critical areas:
• Economic Security: Supply chain resilience and fair market development
• Free and Open International Trade: Strengthening the multilateral trading system centred on the WTO
• Energy Security: Cooperation in renewable energy and offshore wind
• Industrial Strategy Partnership (MOU): Collaborative framework for industrial policy development
Of particular note was the signing of memoranda between UK-Japan industrial partners for next-generation quantum computing development, symbolising concrete cooperation leveraging both countries' technological advantages.
2. Memorandum of Cooperation on Promoting Direct Investment from the UK into Japan (9 July 2025)
On 9 July 2025, the Memorandum of Cooperation between the Cabinet Office of Japan and the Department for Business and Trade of the UK was signed, aimed at further expanding UK investment into Japan.
Particularly significant is that the balance of foreign investment from the UK into Japan has quadrupled over the past decade, ranking second by country (end of 2014: approximately £16 billion → end of 2024: approximately £72 billion). This memorandum is expected to drive further investment expansion.
UK-Japan Industrial Policies: Strategic Complementarity
Comparing both countries' industrial policies reveals where collaboration opportunities exist.
Eight Priority Sectors of the UK's Industrial Strategy
The UK Government's Modern Industrial Strategy announced on 23 June 2025 identified eight priority sectors to drive future growth:
1. Advanced Manufacturing
2. Clean Energy Industries
3. Creative Industries
4. Defence
5. Digital and Technologies
6. Financial Services
7. Life Sciences
8. Professional and Business Services
Viewing these priority sectors, a high degree of commonality is evident with Japan's strengths (such as advanced manufacturing and clean energy). At the same time, a complementary relationship with the UK's unique strengths (such as digital and financial services) can also be seen. This is expected to create diverse business opportunities for companies in both countries.
Where are collaboration opportunities?
By looking at these intergovernmental agreements as well as both countries’ industrial strategies, we have identified areas of high compatibility.
Green transformation and Clean Energy: Japan's GX (green transformation) policy (£1.2 trillion investment) and the UK's Clean Energy Industries policy can leverage each other's strengths. Specific cooperation on offshore wind and the shared 2050 net-zero target will accelerate collaboration.
Digital Transformation and Digital Technologies: Japan's semiconductor strategy and the UK's Digital and Technologies focus are mutually complementary. Industrial partnerships in quantum computing create potential for cooperation in AI and data science.
Life Sciences and Health tech: Japan's health industry policy (targeting a £620 billion market) and the UK's Life Sciences priorities enable technological complementarity in biomanufacturing.
Innovation: ” New Directions in Japan's Economic and Industrial Policy (by METI)” highlighted the importance of innovation and entrepreneurial mindset to enhance Japanese economy which aligns with where the UK's strengths lie, as we highlighted in our previous insight article.
Conclusion
The series of 2025 agreements clearly demonstrate that UK-Japan relations have been developed to a new stage. The UK's Modern Industrial Strategy and the March-July government agreements will serve as catalysts for further promoting co-creation between the two nations.
For companies considering open innovation and collaboration between the UK and Japan, we recommend leveraging this policy tailwind to engage in early relationship building. OBM, with our extensive experience, are happy to support your UK-Japan business strategy realisation. Please do not hesitate to contact us.