Canada and Japan are two of the world’s most advanced economies, bound by shared democratic values, a commitment to multilateralism, and a long-standing history of diplomatic and economic cooperation. As founding members of the G7 and active participants in the Indo-Pacific, both countries are increasingly aligning their economic strategies to promote supply chain resilience, energy security, and digital innovation.
In 2023, bilateral merchandise trade between Canada and Japan reached US$31.1 billion, with Canada exporting US$15.9 billion and importing US$15.2 billion, resulting in a modest trade surplus. This partnership is underpinned by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has significantly liberalized trade since its implementation in 2018.
This report explores the full scope of Canada–Japan trade relations, including tariff dynamics, trade volumes, institutional frameworks, sectoral trends, five-year industry performance, strategic cooperation, and a historical overview of their economic engagement.
Tariff and Non-Tariff Dynamics
The CPTPP has eliminated or reduced tariffs on 99% of tariff lines between Canada and Japan. This has particularly benefited Canadian exporters of agriculture, seafood, forestry, and industrial goods, while Japanese exporters have gained improved access to Canada’s automotive, electronics, and pharmaceutical markets.
However, non-tariff barriers persist:
- Canadian beef and pork exports to Japan are still subject to quota systems and sanitary regulations, although CPTPP has improved access.
- Seafood and wood products face strict Japanese quality, labeling, and traceability standards.
- Japanese pharmaceuticals and medical devices must undergo Health Canada’s regulatory approval, which can delay market entry.
- Digital services and data governance are emerging areas of divergence, as Japan strengthens its cybersecurity and privacy frameworks.
Despite these challenges, both countries have made progress through regulatory cooperation committees established under CPTPP.
Trade Performance and Investment Channels
In 2023, Canada exported US$15.9 billion in goods to Japan, down 12.7% from 2022—the largest drop since the 2008–2009 financial crisis. This decline was driven by lower global commodity prices and reduced energy exports. Imports from Japan, however, rose by 27%, reaching US$15.2 billion, reflecting strong demand for Japanese vehicles, electronics, and machinery.
Top Canadian Exports to Japan
- Canola and soybeans
- Coal and liquefied natural gas
- Pork and beef
- Wood pulp and lumber
- Copper, aluminum, and uranium
Top Japanese Exports to Canada
- Automobiles and automotive parts
- Industrial machinery and robotics
- Pharmaceuticals and medical devices
- Consumer electronics
- Optical and precision instruments
On the investment front:
- Canadian pension funds such as CPP Investments and CDPQ have increased exposure to Japan’s infrastructure, logistics, and real estate sectors.
- Japanese firms like Toyota, Honda, Mitsubishi, Hitachi, and Panasonic have expanded operations in Canada, particularly in automotive manufacturing, clean energy, and smart infrastructure.
Strategic Cooperation in the Indo-Pacific
Canada and Japan are key partners in shaping the Indo-Pacific economic architecture. In 2022, Canada launched its Indo-Pacific Strategy, identifying Japan as a “natural partner” in promoting a free, open, and rules-based regional order.
Shared priorities include:
- Energy security: Japan is investing in Canadian LNG and exploring hydrogen and ammonia imports from British Columbia.
- Climate action: Both countries are collaborating on carbon capture, battery storage, and green shipping corridors.
- Digital governance: Canada and Japan co-lead initiatives on AI ethics, cybersecurity, and cross-border data flows.
- WTO reform: As members of the Ottawa Group, they are working to modernize global trade rules and dispute resolution mechanisms.
These strategic alignments are reinforced through regular G7, G20, and APEC summits, as well as bilateral dialogues like the Canada–Japan Joint Economic Committee (JEC).
Sector Deep Dives
Agriculture and Agri-Food
Japan is Canada’s largest pork export market, with shipments exceeding US$1.2 billion in 2023. Canadian beef exports have also grown steadily under CPTPP. Canola, soybeans, and pulses are in high demand due to Japan’s limited arable land and aging farming population.
Energy and Natural Resources
Japan is a major importer of Canadian LNG, coal, and uranium. With Japan phasing out nuclear power post-Fukushima, demand for low-emission fuels like hydrogen and ammonia is rising. Canada is positioning itself as a reliable energy partner, especially from British Columbia and Alberta.
Automotive and Advanced Manufacturing
Japanese automakers like Toyota and Honda have deep manufacturing footprints in Ontario. Canada exports aluminum, steel, and EV battery components to Japan, supporting its transition to electric mobility. Joint R&D is growing in lightweight materials and autonomous driving systems.
Technology and Innovation
Japan’s strength in robotics, semiconductors, and precision engineering complements Canada’s leadership in AI, quantum computing, and clean tech. Bilateral R&D partnerships are expanding in smart cities, digital health, and climate modeling.
Education and Cultural Exchange
Over 15,000 Japanese students study in Canada annually. Academic partnerships between institutions like UBC, McGill, and the University of Tokyo support joint research in climate science, public health, and engineering. Canada will also host a national pavilion at Expo 2025 Osaka, showcasing innovation and cultural diplomacy.
Diaspora and Soft Power Influence
Canada is home to over 129,000 people of Japanese descent, many of whom are second- or third-generation Canadians. Cultural ties are reinforced through:
- 71 sister city relationships
- 25 friendship associations
- Joint sports diplomacy, including the Tokyo 2020 Olympics and Rugby World Cup 2019
Japanese manga, anime, cuisine, and design have a strong following in Canada, while Canadian artists and musicians enjoy popularity in Japan. These cultural exchanges deepen mutual understanding and support trade in creative industries and tourism.
Recommendations and Roadmap
- Expand CPTPP Utilization: Encourage SMEs to leverage tariff reductions, simplified rules of origin, and e-commerce provisions.
- Enhance Regulatory Cooperation: Align standards in food safety, pharmaceuticals, and digital trade to reduce friction.
- Strengthen Clean Energy Partnerships: Scale up joint ventures in hydrogen, carbon capture, and battery storage.
- Promote SME and Startup Collaboration: Create innovation corridors between Toronto–Osaka and Vancouver–Tokyo.
- Double Bilateral Trade to US$60 Billion by 2030: Set sector-specific targets in agriculture, energy, and advanced manufacturing.
Five-Year Industry Trade Trends (2019–2024)
- Agriculture and Agri-Food: Grew from US$3.2 billion in 2019 to US$4.1 billion in 2024, driven by CPTPP tariff cuts and rising demand for Canadian pork and canola.
- Energy and Minerals: Increased from US$2.8 billion in 2019 to US$3.6 billion in 2024, with LNG and uranium exports gaining traction.
- Forestry and Pulp: Rose from US$1.1 billion in 2019 to US$1.4 billion in 2024, as Japan’s housing sector rebounded post-pandemic.
- Automotive and Machinery (Japan to Canada): Climbed from US$4.9 billion in 2019 to US$6.2 billion in 2024, reflecting strong demand for Japanese vehicles and robotics.
- Pharmaceuticals and Medical Devices (Japan to Canada): Increased from US$1.2 billion in 2019 to US$1.6 billion in 2024, driven by aging populations and post-COVID health investments.
Historical Overview of Canada–Japan Trade Relations
The Canada–Japan trade relationship dates back to the late 19th century, when Japanese immigrants arrived in British Columbia and began exporting seafood and timber. Formal diplomatic relations were established in 1928, and trade expanded steadily through the post-war period.
In the 1970s, Japan became one of Canada’s top export markets, particularly for coal, lumber, and agricultural products. The 1976 Framework for Economic Cooperation institutionalized bilateral dialogue, followed by the 2005 Economic Framework, which laid the groundwork for deeper integration.
The 2018 implementation of CPTPP marked a turning point, eliminating most tariffs and opening new opportunities in government procurement, services, and investment. Today, Canada and Japan are key partners in shaping the Indo-Pacific economic order, with shared interests in supply chain resilience,