The EU Council has signed a new protocol aimed at facilitating cross-border data flows with Japan, a deal that was concluded in principle on the margins of the G7 Trade Ministerial in Osaka at the EU-Japan High-Level Economic Dialogue (HLED). This protocol, which is a key component of the broader EU-Japan Economic Partnership Agreement (EPA), marks a crucial development in the global digital economy, emphasizing the importance of streamlined digital trade and data management.

Approved by the EU Council, the protocol focuses on providing legal certainty for businesses by eliminating data localization requirements that often complicate digital operations. By allowing companies to handle data more efficiently without the need to establish multiple local data storage sites, the agreement aims to reduce costs and complexities, thereby boosting competitiveness and operational efficiency for businesses across sectors, including financial services, transport, machinery, and e-commerce.

A fundamental benefit of the protocol is the alignment with both regions' existing digital privacy laws and regulatory frameworks. This guarantees that unwarranted limitations won't obstruct data flows between the EU and Japan, promoting a safe and predictable legal environment for cross-border data processing. This alignment is particularly significant given the strict data protection standards upheld by both regions, which are integral to their digital trade strategies.

This agreement is seen as a strategic move against "digital protectionism and arbitrary restrictions" and aligns with the EU's digital agenda, privacy rules, and digital trade agenda within its Indo-Pacific Strategy.  It constitutes a broader commitment by the EU and Japan to the rules-based international trading system. 

Once Japan ratifies the agreement and both parties inform each other of the completion of their internal procedures, it can come into effect.