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em>Outgoing Japanese Ambassador to Indonesia Yoshinori Katori has seen encouraging developments in Japanese investment and other aspects of Indonesia-Japan relations in the past several years. As his term ends this month, Katori says he will return to Japan with '€œwarm and exciting'€ memories. Katori, who presented his credentials in June 2011, talked to The Jakarta Post'€™s Yohanna Ririhena on the issue. Below are excerpts of the interview.

Question: Could you elaborate on the progress in Indonesia-Japan relations that has been achieved during your term in Indonesia?

Answer: I was very lucky to serve here when bilateral relations were very dynamic. There have been many developments since I came here three years ago.

On economic relations, Japanese direct investment in Indonesia has grown rapidly. From US$700 million in 2010 it increased to $1.52 billion in 2011, $2.46 billion in 2012 and $4.71 billion in 2013. It is very dynamic and a big increase, almost seven times more from 2010 to 2013.

There are very symbolic figures. It grew very fast in the past years. The auto industry and its related sectors and household electronics are still important pillars of Japanese direct investment.

However, with the increase in Indonesia'€™s economic growth and its middle class, the scope of investment has also broadened. Now, we see more service-related industry, such as the banking sector, insurance, logistics, food and beverages, retail and convenience stores.

What are the aspects that attract more Japanese businesspeople to Indonesia?

Quite interesting was the report of the Japanese Bank for International Cooperation [JBIC] in 2013, which placed Indonesia as the number one destination for Japanese companies.

Indonesia for the first time sits at first place, replacing China, as the top destination for Japanese investment worldwide. The six top destinations in the JBIC 2013 survey are Indonesia, India, Thailand, China, Vietnam and Brazil [compared to the JBIC 2012 survey: China, India, Indonesia, Thailand, Vietnam, Brazil].

I think there are many reasons to explain this situation. You have stable economic development, a growing middle class, a young and dynamic population with an average age of 28, natural resources and political stability. All these combined elements make Indonesia the country with the best prospects for future investment.

Are you satisfied with the figures and what do you expect in the near future?

Yes, we'€™ve see an almost seven times increase in the past several years, but we expect that investment from Japan will continue in the future. Investment is always a win-win situation.

Indonesia is a dynamic country with a young population while Japan has an aging population. One in four Japanese is over 65 years old. The market in Japan will not grow. It makes sense that many Japanese companies invest here because of the dynamic growth of the market.

Do you think that the growing tension between China and Japan contributes to the increase in Japanese investment here?

I think that political confrontation and anti-Japanese sentiments, of course, can be a factor for
some companies, which are directly affected, to relocate their investment. But actually, the overall aspect of Japan'€™s increased investment in Indonesia and Southeast Asia is due more to business-related considerations.

They are pointing to labor costs in China and here. Many think labor costs in China are rising rapidly. That is why they are thinking of investing more in this region.

It is true that Japan has a political dispute with China, but you can see that economic relations between the two countries are quite big. Our interdependence is quite strong. So, China will surely remain Japan'€™s business partner. Economic activity will continue.

Indonesians consider the Japanese labor market very difficult to access as there are many complicated requirements to be fulfilled. What do you think about this?

Actually there is a lot of debate and consideration in Japan on how to deal with foreign labor forces. As I have mentioned, Japan has big aging population and decreasing population. Many Japanese scholars point out that it could be very important for Japan to open the door to more foreign labor forces. Of course, this is politically difficult and a delicate issue; we have to go forward very carefully and study the issue. We need more time to decide on this issue.

Nikkei reported Japan had around 2 million foreigners, which is 1.6 percent of the total population. It is very low compare to other developed countries.

How can Japan resolve this obstacle for Indonesians?

There are now 1,235 Indonesian caregivers and nurses across Japan. Many Japanese are very thankful and impressed by charming young Indonesians working in hospitals, homes for the elderly, etc. But in order to become full-fledged caregivers they have to undergo the Japanese national examination. Unfortunately, only 254 Indonesians have passed the examination.

The main barrier is language because everything is written in Japanese characters. The embassy gives Japanese language training and we are also improving our examination so that more Indonesian can pass it.