JETRO Invest Japan Report 2016 (Summary) 4. Perception of Business Environment in Japan among Foreign-affiliated Companies

More than 40% of companies feel improvement in business climate

A questionnaire was sent to about 1,300 companies with a focus on foreign affiliates supported by JETRO in their entry into the Japanese market. 197 companies responded.
Over 40% of the companies answered that the business climate was “becoming significantly better” or “becoming somewhat better.” The ratio increased nearly 8% from the 2015 survey.
As especially effective measures for improving the business climate, “corporate tax reduction (38.9%),” “regulatory reform (37.2%),” ”reform of immigration rules (33.6%),” “reform of administrative procedures (20.4%)” and “corporate governance reform (8.8%)” were chosen.

Do you feel that the Japanese business climate has become better?

This is a chart showing the evaluation of the business environment in Japan. The chart shows the percentage of the companies who gave the following four answers: “Yes, it is becoming significantly better,” “Yes, it is becoming somewhat better,” “No, it hasn’t changed much,” and “No, it is becoming worse. It also compares the percentages in 2015 and 2016. 40.6% of the companies answered that the business climate was “becoming significantly better” or “becoming somewhat better.” The ratio increased nearly 8% from the 32.9% of the 2015 survey. While 61.7% of the companies answered that “it hasn’t changed much” in 2015, 59% answered so in 2016. Companies that answered with “becoming worse” account for 5.4% in 2015 and 0.5% in 2016.

Nearly 80% of foreign-affiliated companies willing to expand investment

To the question about business plans within the next 5 years, nearly 80% of foreign-affiliated companies answered that they “will expand business.”
Similarly, more than 70% of the companies answered that they “will increase the number of employees.” The results reflect prosperous business by foreign-affiliated companies and prospects for active investment in the future.
The major purposes of investment expansion are divided into three categories: (1) consolidation/expansion of business locations, (2) acquisition of markets outside the Tokyo Metropolitan Area and (3) function enhancement.

Business plans in Japan (within the next 5 years)

Projected number of employees in Japan

Expanding business sites for production, R&D, regional head office, taking advantage of regional characteristics

When deciding on the location of additional investment, “proximity to customers” is considered as the most important factor. Tokyo, Osaka, Aichi, Fukuoka and Hokkaido were chosen as locations for the expansion of trade.
Meanwhile, Kanagawa, Kyoto and Aichi were chosen for “R&D,” Fukuoka and Hiroshima for “Asian regional headquarters,” Hokkaido and Okinawa for “back offices” and Kanagawa and Aichi for “logistic bases,” revealing the particular advantages of each region.

Where to make secondary investment (prefecture) and the type of business

This is a pie chart showing the prefectures where secondary investment is planned. The results were: 35.4% for Tokyo, 16.7% for Osaka, 11.7% for Aichi, 11.3% for Kanagawa, 4.6% for Fukuoka, 2.9% for Hokkaido, 2.5% for Kyoto, 2.1% for Hiroshima, and 12.9% for all other prefectures.。

Rank	City	No. of Projects	Type of business, Rank 1	Rank 2	Rank 3
1	Tokyo	85	Sales	Regional head office (Japan head office)	Manufacturing, Research & Development
2	Osaka	40	Sales	Customer service	Liaison services/PR/Collecting information
3	Aichi	28	Sales	Manufacturing, Research & Development, Customer service, Logistics
4	Kanagawa	27	Sales	Research & Development	Manufacturing
5	Fukuoka	11	Sales	Manufacturing, Regional head office (Asian head office)
6	Hokkaido	7	Sales	Back office, Customer service, Regional head office (Japan head office)
7	Kyoto	6	Research & Development	Sales, Manufacturing
8	Hiroshima	5	Manufacturing, Research & Development, Customer service, Regional head office (Asian head office)
9	Other	31

Attractiveness of doing business in Japan – Greatest appeal is “Japanese market”

The attractiveness of doing business in Japan (those who chose the top two options among the available four options*) ( ( ) indicates % in 2015 survey)

This is a chart showing the attractiveness of doing business in Japan, and it indicates the percentage of the companies who chose the top two options among the available four options. 86.4% of the companies answered “Japanese market,” followed by “well developed infrastructure (transportation, logistics, ICT, energy, etc.)” at 79.6%, “high-quality of R&D” at 69.8%, “existence of good partners, companies or universities with outstanding technologies or products” at 69.6%, “everyday living conditions“ at 64.4%, “existence of world famous global companies“ at 58.6%, “well-structured or effective legislation such as a sophisticated IP system“ at 55.4%, “possibility of finding highly talented human resources“ at 50.3%, “deregulation“ at 41.6%, “expected increase in demand and sales leading up to the 2020 Tokyo Olympics“ at 39.8%, “attractive business systems and structures (business support systems, financial incentives, etc.)” at 38.9%, “Japan’s location (e.g. position as a gateway to Asia, advantages as a base for regional headquarters, etc.)“ at 37.1%, “ease of raising funds“ at 29.1%, and “other“ at 45.5%.

* The four options available were: "It’s largely attractive," "It’s attractive," "It’s a little attractive," and "It’s not attractive."

Obstacles to doing business in Japan - Finding human resources is a challenge

As obstacles for foreign-affiliated companies doing business in Japan, “Difficulty in finding human resources,” “Difficulty in communicating in non-Japanese language (in business)”, “High business cost”, and “Complicated administrative procedures” are ranked high.
“Complicated administrative procedures and regulations” (1st in 2015) decreased nearly nine percentage points in 2016. It can be viewed that the Japanese government’s initiatives toward “the greatest ease of doing business in the world” is producing effects little by little.

Top five obstacles – Comparison of the 2013, 2015 and 2016 Surveys

This is a table showing the top five obstacles to doing business in Japan, and it also compares the results of the survey in 2013, 2015, and 2016. The percentage in the 2015 and 2016 surveys indicates those who chose the top two options among the available four options. The percentage of the 2013 survey is not included above because the research method was different from that of the 2015 and 2016 surveys. The top five obstacles in the 2013 survey were: “high business cost” at the top, followed by “particularities of Japanese market,” “difficulty in communicating in non-Japanese languages,” “complicated administrative procedures,” and “difficulty in finding human resources.” In the 2015 survey, the top five obstacles include “complicated administrative procedures” at 46.3％, “difficulty in finding human resources” at 44.9％, “difficulty in communicating in non-Japanese languages” at 44.2, “particularities of the Japanese market” at 35.4% and “high business cost” at 34.2%. In the 2016 survey, the top five obstacles include “difficulty in finding human resources” at 48.2％, “difficulty in communicating in non-Japanese languages” at 42.3％, “high business cost” at 38.2%, “complicated administrative procedures” at 37.5％, and “particularities of Japanese market” at 37.0%.

*The percentage of the 2013 survey is not included above because the research method was different from that of the 2015 and 2016 surveys.
The percentage in the 2015 and 2016 surveys indicates those who chose the top two options among the available four options.
*The four options available were: "It’s a very large obstacle," "It’s an obstacle," "It’s a small obstacle," and "It’s not an obstacle."

There is persistent demand for improvement of “complicated administrative procedures,” ”too many legal restrictions, rigid business permit/licenses,” “internationally unharmonized and incompatible business permit/licenses” and “inconvenience caused by the lack of online procedures.”
As specific procedures and regulations needing reform, “procedures for acquiring visas,” “procedures for tax matters” and “procedures about safety standards/regulations of products” ranked high.

Obstacles and the related Procedure/regulations

Procedure / regulations related to obstacles	Complicated administrative procedures	Too many legal restrictions, rigid business permits, licenses	Internationally unharmonized and incompatible business permits/licenses	Unclear points of contact for administrative applications/permits	Insufficient information on incentives and support	Inconvenience caused by the lack of online procedures	Others	Blank	Total
Procedures for company registration (article of incorporation etc.)	13	5	0	1	1	4	0	1	25
Procedures for tax matters (corporate tax, inhabitant tax etc.)	19	7	7	3	8	7	1	0	52
Procedures for social insurance (employment insurance, pension etc.)	12	6	3	9	1	7	0	0	38
Procedures for labor matters (agreement on overtime, work rules etc.)	13	10	7	3	2	0	1	1	37
Procedures for acquiring visas	15	15	8	4	3	8	1	0	54
Procedures about IP (application for patent, review process etc.)	6	3	1	2	2	3	1	0	18
Procedures for international trade (customs, export/import declaration etc.)	6	9	10	2	4	5	0	1	37
Procedures for construction permit	3	6	2	2	1	3	0	0	17
Procedures for environmental regulations (environmental impact assessment etc.)	1	3	4	1	1	0	0	0	10
Procedures about safety standards/regulations of products	5	19	16	3	1	4	2	0	50
Other	7	8	6	3	5	4	5	0	38
Blank	5	4	0	3	2	3	0	198	215
Total	105	95	64	36	31	48	11	201	591