As a result of the ongoing Russo-Ukrainian war, Ukraine will face an extensive reconstruction process. In addition to addressing immediate humanitarian concerns, the country will have to revive its industries to spur long-term economic growth and self-sufficiency. Ukraine therefore needs the support of the international community to overcome the crisis it is facing at this critical juncture. Here, Japan in particular has arisen as a core supporter of Ukraine. 

Japan’s Engagement

Japan’s involvement in Ukraine has surprised numerous international observers because it represents a major Asia-Pacific power taking on a key role in a primarily Euro-Atlantic conflict and marks Japan shedding its previous reputation as a “political pygmy.”

Furthermore, Japanese involvement in Ukraine spotlights the role of the private sector in rebuilding the country, as business and economic actors can aid long-term Ukrainian economic recovery and strengthen bilateral ties through corporate cooperation. 

One high-level conference in Tokyo emphasized the promising opportunities associated with Ukraine's business environment and economic sectors, along with Japan's role in helping Ukrainian industries build momentum. In February 2024 the United Nations Development Programme (UNDP) and the Japanese External Trade Organization (JETRO) hosted the Inclusive Economic Growth and the Role of the Private Sector in Ukraine’ Reconstruction event. 

A key part of the program addressed the role that micro, small, and medium-size enterprises (MSMEs) play in the Ukrainian economy. MSMEs make up 99.98 percent of all Ukrainian business entities, provide 74 percent of all jobs, and create 64 percent of value added. 

Since the start of the conflict in February 2022, the Ukrainian economy has experienced heavy blows, as highlighted by the following statistics:

• Some 64 percent of MSMEs in Ukraine temporarily suspended or fully terminated operations.
• More than 90 percent of companies reported financial losses.
• In 2022, Ukraine’s GDP fell by about 35 percent.
• The United Nations warned that 90 percent of Ukrainians could become impoverished if the war continues. 

Despite these seemingly grim assessments, not all hope is lost. One term frequently applied to Ukrainian MSMEs—and to Ukraine as a whole during this time of national crisis—is “resilience.” As of October 2023, 90.4 percent of businesses had resumed operations, and only 9.6 percent of such companies are at risk of closing permanently.

Ukraine’s Affordances

Ukraine has long possessed underrecognized potential in terms of human capital and the vitality of its economic sectors, both of which could benefit Japan. As the event highlighted, two of the most prominent areas are digital and IT services and green innovation. 

Digital and IT Services. Before the war, Ukraine had a reputation as an “emerging tiger of Europe” in terms of its digital and IT capabilities. Digital and IT services are one of the few economic sectors—possibly the only one—that have grown and attracted investment since the start of the war in February 2022. 

In recognition of Ukrainian prowess in the field, Tokyo has sought to enhance its digital cooperation with Ukraine through such forums as memorandums to share best digital practices. Japan has offered to promote assistance in terms of IT development, e-government building, and enhanced cybersecurity. All three areas are vital not only for economic development but also for security and defense purposes. And as once innovative Japan has been criticized for its lack of digital competitiveness and stubborn adherence to outdated systems and practices, Ukrainian expertise and ingenuity could help Japan regain its status as a digital pioneer and global leader in the field. 

Green Innovation. Another notable sector is green innovation. Ukraine’s long-standing status as the breadbasket of Europe solidifies its reputation as an agricultural powerhouse. In March 2024, Japan granted $230 million to support Ukrainian farmers and agriculturalists. This investment was made in part to promote and expand the availability of Ukrainian agricultural products on the Japanese market, especially since Japan’s lack of arable land, high degree of urbanization, and shortage of agricultural workers limit its own agricultural potential.

Ukraine also has significant potential in terms of developing renewable energy sources such as wind, solar, and biofuels, though it requires green reconstruction efforts to build up such industries so they can achieve their full capacities. Japan supports many green transition initiatives as a means of supporting the 17 Sustainable Development Goals and as a way to reduce its dependence on imported fossil fuels.

Japan is an international leader in infrastructure development; the natural-disaster-prone country has a “build back better” policy with respect to resilient rebuilding. With the widespread need for reconstruction in Ukraine, Japan could utilize its expertise in this field to establish green infrastructure in Ukraine and promote environmentally friendly cooperation both bilaterally and globally.

Setting the Foundations

Japanese business organizations have recognized the advantages of investing in Ukraine and have taken steps to establish business-to-business links in Ukraine, especially by fortifying existing MSMEs and creating opportunities to establish new ones. JETRO has stated its intention to open a representative office in Kyiv, and it has created multiple platforms to facilitate Japanese-Ukrainian private sector cooperation. These initiatives include JETRO e-Venue Ukraine, a website matching international companies to preferred products and sectors, and J-Bridge, a channel that connects international businesses for partnership. JETRO has also cooperated with such intergovernmental and governmental agencies as the UNDP and the Japan International Cooperation Agency (JICA) to develop knowledge bases and networks. These examples highlight the joint role of the public and private sectors in facilitating Japanese-Ukrainian collaboration. 

Despite the difficult and unpredictable road ahead, Ukraine has the backing of Japan to aid it in its recovery process. While political interaction will undoubtedly be essential for ongoing cooperation between Tokyo and Kyiv, business ties will also be foundational for rebuilding Ukraine and creating mutually beneficial opportunities for both countries in the future.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.