The year 2007 was in many ways a landmark year in the history of Australia’s commercial relationship with Japan. It was the 50th anniversary of the signing of the bilateral Agreement on Commerce that helped reinvigorate trade in the post-World War II period, and it saw the beginning in earnest of negotiations on a new trade agreement designed to integrate the two economies still further. The end of Australia’s 2006–07 financial year marked the 40th anniversary of Japan overtaking Britain as Australia’s largest export market, a position it still occupies by significant margin.
If 2007 was a year of landmarks then the ‘morning after’—2008—has been more a year of questions. Figures released in early May 2008 confirmed that China had become the biggest trading partner of Australia (a position Japan had held for almost all of the previous three and a half decades). Japanese data released early in the year also showed that China had overtaken the United States as Japan’s largest two-way merchandise trading partner. In both Australia and Japan there has been a heavy media spotlight on China and the other emerging giant, India, with much speculation about their potential to affect global economic dynamics and the Australian and Japanese economies. Still further questions and uncertainties have been posed by the acceleration, late in the year, of the global financial crisis and its growing impact on the real economy.