News & Updates
Mar. 28, 2013
Regarding business plans in the next three years including new investment and expanding existing operating bases, 69.2% of Japanese firms intend to expand their operations overseas, showing a decline from 73.2% in the FY2011 survey.
Among SMEs, 65.9% of respondents are planning to expand their business, showing a drop from 71.4% in FY2011.
The reasons cited most for expanding business overseas was "increasing overseas demand" with 75.6%, up from 72.4% in FY2011. The second was "reduction in domestic demand" with 56.8%, up from42.6 % in FY2011. On the other hand, the percentage of those citing "influence of the strong yen" came to 17.4%, dropping from 24.1% the previous year. Among SMEs, those citing "influence of the strong yen" came to 14.9%, significantly down from 23.4%.
Regarding reasons for downsizing or withdrawing from overseas operations, or for not planning overseas business in the future, that most commonly cited among SMEs was "lack of management resources such as funds, human resources and competitiveness" with 41.3%, following by "to put priority on domestic demand" with 38.9% and "the risks are significant" with 33.3%.
Future Plans on Foreign business operations over the next three years
The most common reply regarding the method of doing business overseas was "keeping proper business functions both in Japan and overseas" with 48.0%. The percentage of SMEs who intend to keep doing business in Japan and to export products to meet overseas demand was 28.0%, while 6.6% for major companies.
Regarding future target countries, China was placed the highest for overall exports with 49.1%. However, the target country varies depending on industry: the US ranked highest for food and beverages, Thailand for general machines, and Indonesia for transportation equipment including automobiles.
As for export plans in the next three years, the proportion of respondents who intend to expand dropped slightly with 75.2%, compared to 78.8% in the FY2011 survey. Among SMEs, those planning to work on exports in the future increased to 12.7% from 7.0% in FY2011. SMEs that have not yet begun exporting also showed strong intention to begin.
57.1% of respondents stated that their business performance has been adversely affected by the strength of the yen against the dollar over the past year. The figure showed a decline from 69.3% registered in FY2011, which included companies who had forecasted less corporate earnings with the continuing strong yen, reflecting the correction of the yen's appreciation made after the end of last year.
Although there are many business opportunities, rising labor cost poses a risk
Although many Japanese firms have a strong recognition of increasing overseas demand, regarding business risks in emerging countries, China stood out with response rates exceeding 20% in seven items such as "political risk," "intellectual property rights" and "labor cost." Myanmar also placed high with response rates exceeding 20% in five items including "infrastructure" and "the legal system."
In comparison with the FY2010 survey, "increased wages" rose drastically as a business risk. In Thailand the figure rose from 19.8% to 30.1%, and in Indonesia from 4.5% to 21.0%.
69.8% of Japanese firms consider that business risks in China have grown, showing an increase from 52.7% in FY2010.
Business plans in China (Time-series comparison limited to JETRO member companies engaged in the manufacturing, trade & wholesale and retail industries)
Regarding business plans in China in the next three years including trade, outsourcing, technical cooperation and direct investment, 61.2% of respondents are planning to expand existing operations or to consider new ones. The figure was less than the 77.9% registered in FY2010. Meanwhile, the number of those considering downsizing or withdrawing from existing operations increased to 7.5%, up from 2.4% in FY2010.
Regarding reasons for considering downsizing or withdrawing business from China, "country risk" was cited most with 55.0%, followed by "production cost" (38.5%) and "the legal system (31.2%)."
Among reasons for continuing business in China, the most common one was "market scale and growth potential" with 69.5%, while "advantage in production cost" was 23.4% among SMEs, 15.5% among major companies. This result indicates SMEs are putting more importance on production cost than major companies do.
Asked when they expected business to recover to its previous state, 38.8% of firms forecasted "the end of March 2013," 62.6% expected "within one year (or until the end of September 2013)," while 20.6% stated "nowhere in sight."
Regarding business results in China in FY2012, 55.1% of respondents stated their sales had dropped from their outlook, while 51.6% stated the same for operating profit.
The FTA utilization rate showed a continuation of the steady annual rise. (After FY2008: 36.2% → 36.8% → 40.1% → 42.7%).
Utilization of FTAs Japan has concluded
The use of FTAs between third countries is also rising compared to FY2011. Within AFTA utilization rose from 34.4% to 37.7%, between ASEAN and China it rose from 22.1% to 26.6%, between ASEAN and South Korea from 20.9% to 22.7% and between China and Taiwan from 14.1% to 18.2%.
The most common problem regarding FTAs when exporting from Japan was of "administrative workload to meet rules of origin" with 64.7%.
Contact person: International Economic Research Division Mr. Akira KAJITA or Mr. Atsushi SUZUKI
Tel: 81+03-3582-5177 E-mail:ORI@jetro.go.jp