UK and Japan agree to free trade deal that excludes data localisation requirements

Template for post-Brexit bilateral deals excludes algorithmic disclosures too

The UK and Japan have agreed to a new trade deal that will see the two nations to share a “free flow of data” across their borders.

Toshimitsu Motegi, the Japanese foreign minister, and the UK’s trade secretary, Liz Truss, confirmed that they had agreed to a deal in principle on Friday morning. The deal is expected to be finalised in October and come into force in 2021.

The deal replicates most of the existing free trade agreement between Japan and the EU, which took effect last year, but adds new elements around data sharing.

Under the new deal, the UK and Japan have agreed to the “free flow of data” by not enforcing localisation requirements. This will allow Japanese conglomerates like Sony, and British fintech firms, such as Revolut and Transferwise, to operate from offshore servers.

The two countries also said that they would not mandate disclosure of source code of their software or algorithms, or share encryption information. This is more liberal than Japan's trade deal with the European Union, under which Japan agreed to not demand source codes or encryption keys but did not do the same for algorithms.

The deal is the first negotiated by the UK alone after Brexit and is being hailed as a template for the many such deals to come once the nation completely and utterly departs the EU and is no longer bound by the bloc's existing deals.

The British government has said that the deal will bring in £15bn in trade between the UK and Japan, but hasn't said when the cash will flow.

A new trade deal was necessary or the two countries would have reverted to WTO rules, which would have seen increased tariffs and other regulations.

The UK's trade secretary, Liz Truss, said: "This is a historic moment for the UK and Japan as our first major post-Brexit trade deal. The agreement we have negotiated – in record time and in challenging circumstances – goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries."

Shigeki Ishizuka, Chairman of the Japan Electronics and Information Technology Industries Association said that the deal would "greatly benefit" both countries, and in particular praised the prohibition of localisation, source code, and encryption requirements.

"We are confident that this mutual relationship will be further strengthened as an ambitious agreement that will contribute to the promotion of cooperation in research and development, the promotion of innovation, and the further expansion of inter-company collaboration," he said in a statement.

Julian David, chief exec of TechUK, welcomed the new deal. "Today's agreement improves an already flourishing relationship between the UK and Japan tech sectors and creates significant opportunities for trade and investment for both our countries," he said. ®