Japan will follow America’s lead in revoking Russia’s Most Favored Nation (MFN) status, which will drive up prices for Japanese consumers for most imports from the country.
MFN status allows a country to benefit from the best trading conditions offered by its trading partner, such as the lowest tariffs or the highest import quota, ensuring that all countries with the status are treated equally. . By revoking the status, Japan will subject imports from Russia to higher tariffs.
The Group of Seven (G7) countries, comprising Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, have jointly announced their intention to revoke the status March 12.
Japanese Prime Minister Fumio Kishida told a press conference on March 16 that Japan would also ban imports of a long list of items being drawn up by the Japanese government. However, Russia’s most important export to Japan, liquefied natural gas, will not be banned in order to guarantee a stable energy supply. Japan will also ban luxury goods exports to Russia.
Withdrawing MFN status from Russia will increase Japanese tariffs on crab from 4% to 6% and duties on salmon and trout from 3.5% to 5%. That’s probably not enough of a change to significantly alter the amount of these products sold in Japan. Instead, it will likely reduce profits for Japanese processors.
A product unlikely to be affected is pollock roe. A large volume of pollock roe is processed in Japan to make mentaiko and tarakoand trade may not be affected by revocation of MFN status because a “temporary duty rate” is currently in effect.
According to Japan Customs, a temporary rate – which is usually set due to current industry needs – still replaces both the WTO (MFN) rate and the general rate, which Russian imports would otherwise be subject to. MFN status. The general rate is 10%, the WTO rate is 6% and the temporary rate is 4.2%. Thus, unless pollack eggs are banned outright, Russia should maintain its competitiveness against pollock eggs from the United States.
Despite the competitive tariff rate, it can be difficult for Japanese companies to pay for Russian products. As part of the March 16 update, Japan plans to “prevent financing of Russia from major multilateral financial institutions,” including the World Bank and IMF. The country had already pledged to restrict transactions with the Russian central bank and to isolate the country from the international financial system.
Several Russian banks have been banned from using the Society for Worldwide Interbank Financial Telecommunications (SWIFT). Vietnam’s Association of Seafood Exporters and Producers said in early March that Russia’s ban on SWIFT was already complicating financial transactions.
Photo courtesy of the Government of Japan