Since October 2022, the European Union and Japan have engaged in negotiations aimed at incorporating regulations for cross-border data transfers into their Economic Partnership Agreement (EPA). This week, it was officially announced that an agreement has been reached between Japan and the EU.
The agreement was achieved during the G7 Trade Ministerial meeting in Osaka, where the EU and Japan jointly committed to simplifying, cost-effectiveness, and enhancing the efficiency of online business operations. This pivotal agreement was solidified during the EU-Japan High-Level Economic Dialogue (HLED), which was co-chaired by Valdis Dombrovskis, Executive Vice-President of the European Commission, Nishimura Yasutoshi, Japan's Minister of Economy, Trade and Industry, and Yōko Kamikawa, Japan's Minister of Foreign Affairs.
Both the EU and Japan are prominent players in the world's digital economies, underscoring the significance of this agreement in their shared pursuit of advancing digital transformation in their respective societies and economies. Cross-border data flows are essential drivers of this transformation, especially considering the growing importance of the data economy for both the EU and Japan. The EU's data economy has experienced substantial growth, estimated at €325 billion in 2019 (with projections indicating a tripling by 2025), equivalent to 2.6% of the region's gross domestic product (GDP). In 2019, Japan's data economy accounted for 1.2% of its GDP.
The agreement reached today holds the promise of substantial benefits for companies across various sectors, including financial services, transportation, machinery, and e-commerce. It empowers these businesses to efficiently manage data without burdensome administrative or storage requirements, providing them with a stable legal environment in which to thrive. A pivotal aspect of this agreement is the removal of costly data localization requirements, which had needlessly encumbered European and Japanese businesses. This change not only reduces costs and complexities, such as the necessity to establish and maintain data storage facilities in multiple locations and duplicate data usage, but also fortifies data security.
Upon ratification, the agreed-upon provisions will be integrated into the EU-Japan Economic Partnership Agreement (EPA), paving the way for a unified approach to digital trade. This underscores a strong stance against digital protectionism and arbitrary restrictions, aligns with the EU's digital agenda and privacy regulations, and is consistent with the digital trade goals of the EU's Indo-Pacific Strategy. It's also worth noting that similar negotiations with Korea and Singapore are also in progress
