Arab News Japan

The relations between Saudi Arabia and Japan have entered a new phase of economic cooperation, with the volume of trade reaching approximately $41 billion and the partnership gradually shifting from a model, based primarily on oil and technology, to a more diversified one encompassing clean energy, investment, industry, space, and advanced technologies.

With Japanese direct investment in Saudi Arabia reaching SAR 49 billion, the two-day visit to Riyadh by Japanese Foreign Minister MOTEGI Toshimitsu is expected to see an expansion of economic ties across various sectors, most notably artificial intelligence, alongside the continued pivotal role of energy in bilateral trade.

Trade figures reflect the extent of interdependence between the two economies and the significance of the current phase, in which oil is no longer the ultimate goal of the partnership but rather one of its components.

Saudi Arabia supplies Japan with a strategic energy resource, while Japan provides the technology, industrial expertise, financing, and partnerships that Saudi Arabia seeks to leverage in its drive toward economic diversification.

Energy remains the backbone of trade relations; oil and mineral products accounted for approximately 97.1% of Japan’s imports from Saudi Arabia in 2025, while automobiles and transport equipment constituted the largest share of Japanese exports to the Kingdom, at about 73.6%.

The Japanese minister is arriving at the head of a high-level delegation to hold two days of bilateral talks with Saudi officials.

Oil remains a factor… but the partnership is changing

Despite its economic transformation, Saudi Arabia remains a key partner for Japan in energy security, with continued cooperation to ensure crude oil supplies and global market stability.

However, the scope of cooperation is no longer limited to oil. The two countries have moved to develop partnerships in hydrogen, ammonia, low-carbon fuels, carbon capture technologies, and renewable energy, as part of the “Lighthouse” clean energy cooperation initiative launched by both nations in 2023.

This approach reflects an effort to build an economic relationship that leverages Saudi Arabia’s capabilities in energy, resources, and strategic location, alongside Japan’s expertise in technology, manufacturing, and advanced solutions.

Japanese investment expands in the Saudi market

Investment represents a key pillar in the transformation of bilateral relations. Data from the Japan External Trade Organization (JETRO) indicates that, as of October 2024, there were 118 sites and facilities belonging to Japanese companies in Saudi Arabia; meanwhile, the number of Japanese companies investing in the Kingdom rose from approximately 65 at the launch of the “Saudi-Japan Vision 2030” framework to around 100 subsequently.

Japanese companies are also showing increasing interest in the opportunities presented by Saudi economic diversification projects, particularly in industry, digital technologies, energy, space, and infrastructure.

In January 2026, the Saudi-Japanese Investment Forum saw the signing of 12 new memoranda of cooperation between companies across sectors including finance, space, and agritech, among others — underscoring the expanding scope of cooperation beyond traditional sectors.

Free Trade and Supply Chains

Negotiations for a free trade agreement between the Gulf Cooperation Council (GCC) and Japan are among the economic dossiers that could reshape the future trade relationship.

The agreement is viewed as a tool to reduce barriers to trade and investment and foster supply chain integration, thereby offering Japanese companies greater opportunities in Gulf markets and granting Gulf companies broader access to the Japanese market.

As Saudi investments expand into new sectors, the agreement could become a significant factor in transforming the relationship from trade heavily reliant on oil into a partnership encompassing industrial products, services, technologies, and investments.

Clean Energy: The fastest-growing sector

The energy sector transition represents one of the most important shared economic agendas.

The “Lighthouse” initiative aims to foster cooperation in the fields of hydrogen, ammonia, synthetic fuels, and carbon capture, utilization, and storage, alongside clean energy infrastructure.

This partnership holds particular significance for Japan, which seeks stable supplies of new energy sources, and for Saudi Arabia, which aims to leverage its natural resources, geographic location, and renewable energy capabilities to secure a leading position in the low-carbon economy.

Technology, Space, and the Digital Economy

Diversification is not limited to energy; it extends to the technology, space, digital economy, and entertainment sectors.

In this context, the two countries agreed to expand cooperation in the space sector. Recent years have also seen agreements between Japanese and Saudi companies spanning gaming, esports, artificial intelligence, and autonomous driving. Notably, memoranda of cooperation were signed between Sega and the Saudi Esports Federation, as well as between Tier IV and the Saudi company Elm regarding autonomous driving technologies.

These files reflect a significant shift in the nature of the relationship—from a partnership focused on commodities and energy to cooperation targeting technology, knowledge, and value-added services.

Financing: A New Gateway to Investment

Financing plays an increasingly important role in supporting the expansion of Japanese companies within Saudi Arabia. Financing agreements and credit guarantees for Saudi projects have also emerged within the framework of “Saudi-Japan Vision 2030,” including a $1.5 billion financing agreement covered by Nippon Export and Investment Insurance (NEXI) for the Saudi Ministry of Finance.

This means that the economic relationship operates not only through direct trade but also through a broader system encompassing banking, finance, export guarantees, and institutional investment.