JETRO Invest Japan Report 2019 (Summary)3. Perception of the Business Environment in Japan among Foreign-affiliated Companies

Positive about open innovation with universities, research institutions and Japanese companies

  • JETRO conducted a survey research targeting about 2,100 companies, mainly consisting of foreign-affiliated companies supported by JETRO in their entry into and/or expansion in the Japanese market and member companies of foreign chambers commerce in Japan, 213 from which valid responses were taken (Survey period: June to July, 2019).
  • More than 70% of the companies answered they have implemented or are interested in open innovation with Japanese companies/universities.
  • About 60% of the companies are interested in universities/research institutes as well as small and medium-sized Japanese enterprises.

Your efforts regarding open innovation with Japanese companies/universities, etc.

This bar graph illustrates companies’ efforts regarding open innovation with Japanese companies/universities, etc. The proportion of each choice is following. “Have already implemented and will continue/expand” is 20.6%, “Have not yet implemented, but we are interested” is 52.0%, and “Have not implemented, nor will we do so” is 27.5%. The number of answers to this question is 204.

The kinds of partners you are interested in （multiple answers）

This bar graph shows kinds of partners companies are interested in working with. “Universities/research institutes” is 63.4%, “Small and medium-sized Japanese enterprises” is 59.9%, “Large Japanese enterprises” is 44.4%, “Japanese startups” is 33.8%, “Foreign-affiliated companies in Japan (other than startups)” is 14.1%, “Foreign-affiliated startups” is 10.6%, and “Other” is 1.4%. Companies could choose multiple answers, and the number of answers to this question is 142.

Over 70% of target locations for their secondary investment/expansion are areas outside of Tokyo

  • As a destination for secondary investment/expansion, although Tokyo(26.5%) is the most popular choice, a number of companies also choose others such as Osaka (15.9%) and Kanagawa (10.9%), and prefectures other than Tokyo recorded more than 70%.
  • Regarding the reasons for selecting their secondary investment locations in the top-ranking ones, “Proximity to customers,” “Market size,” and “Existence of relevant industrial clusters” are generally among the most-cited reasons.

Where to make secondary investment/expansion（multiple options）

This is a pie chart that shows in which prefectures foreign-affiliated companies are considering secondary investment/expansion. The proportion of companies that chose “Tokyo” is 26.5%, “Osaka” is 15.9%, “Kanagawa” is 10.9%, “Aichi” is 8.3%, “Kyoto” is 4.3%, “Fukuoka” is 4.0%, “Hokkaido” is 3.6%, “Saitama” is 3.0%, “Hyogo” is 3.0%, “Hiroshima” is 2.6%, and “Other” is 17.9%. Companies could choose multiple answers, and the number of answers to this question is 302.

Where to make secondary investment/expansion, the type of business, and the reasons (multiple options)(-: no data is available)

Rank Prefecture No. of projects Tyoe of business (top 3) Reason (top 3)
1 Tokyo 80 Sales/customer service Proximity to customers
Research & development Market size
Back office operations Existence of relevant industrial clusters
2 Osaka 48 Sales/customer service Market size
Research & development Proximity to customers
Back office operations Relative positioning compared to other bases in Japan
3 Kanagawa 33 Sales/customer service Proximity to customers
Research & development Market size
Manufacturing Existence of relevant industrial clusters
4 Aichi 25 Sales/customer service Proximity to customers
Manufacturing Market size
Research & development, Regional head office function Existence of relevant industrial clusters
5 Kyoto 13 Sales/customer service Proximity to customers
Research & development Market size
Back office operations, Liaison services/PR/collecting information, Other Existence of relevant industrial clusters, Preferential measures or incentives provided by local government
6 Fukuoka 12 Sales/customer service Proximity to customers
Back office operations Market size
Liaison services/PR/collecting information Existence of relevant industrial clusters
7 Hokkaido 11 Sales/customer service Market size
Back office operations Proximity to customers
Procurement Existence of relevant industrial clusters, Preferential measures or incentives provided by local government, Low cost (land, personnel expenses)
Other 80 - -

Greatest appeal lies in the Japanese market, with the spotlight on its huge and stable market

  • The top answer for the perceived attractiveness of doing business in Japan is “Japanese market,” as observed in 2018.
  • In particular, the size of the Japanese market attracts attentions.

Attractiveness of doing business in Japan (select each from 1st to 3rd positions)(n=213)

Answer Votes Points
1st 2nd 3rd
Japanese market 133 12 8 431
Existence of suitable partners (companies, universities) with outstanding technology or products 24 37 23 169
Stability of country and society 13 42 44 167
Existence of renown global companies 17 33 15 132
High quality of R&D 15 25 15 110
Infrastructure (traffic, logistics, ICT, energy) 4 25 36 98
Potential for securing talented human resources 2 12 11 41
Japan’s location (e.g. position as a gateway to Asia, advantage as a base for regional headquarters) 0 14 13 41
Well-maintained living environment 3 4 23 40
Expected increase in demand and sales toward the 2020 Tokyo Olympic and Paralympic Games 2 5 8 24
Well-structured legislation regarding intellectual property 0 4 7 15
Other 0 0 10 10

[Note] In regard to the 1st, 2nd and 3rd place answer selected by respondents, each is awarded points as follows:
1st=3 points, 2nd=2 points, 3rd=1 point, and are listed in order of answer with the highest points total.

Challenging issue of doing business is "difficulty in finding human resources"

  • A lot of companies raised “Difficulty in finding human resources” as obstacles to doing business in Japan.
  • In particular, companies are finding “Lack of human resources with foreign language ability” and “Difficulty in finding experts” as challenges.

Obstacles to doing business in Japan (select each from 1st to 3rd positions)(n=213)

Answer Votes Points
1st 2nd 3rd
Difficulty in finding human resources 70 33 26 302
Difficulty in communicating in non-Japanese languages 49 47 31 272
High business costs 20 44 43 191
Complicated administrative procedures 23 25 29 148
Rigid regulations 19 33 19 142
Difficulty in finding business partners 21 11 16 101
Difficulty in financing 5 7 14 43
Immigration control system 5 5 16 41
Difficulty in living conditions for foreigners 0 6 3 15
Other 1 2 16 23

[Note] In regard to the 1st, 2nd and 3rd place answer selected by respondents, each is awarded points as follows: 1st=3 points, 2nd=2 points, 3rd=1 point, and are listed in order of answer with the highest points total.

Japan’s business environment heading for improvement

  • Companies felt improvement for the past one or two years in 5 out of 7 items of business environment.
  • A number of companies see improvement in “Acceptance of Japanese companies and society toward foreign investment” and “Comfort of living conditions for foreigners.”

Business environment in Japan –changes in comparison with past one or two years

This bar graph depicts the answers to the question of business environment in Japan over the past one to two years. The number of answers to this question is 213. The proportions of answers to each question are following. Acceptance of Japanese companies and society toward foreign investment: “Improved overall” 46.5%, “Worsened overall” 2.8%. Comfort of living conditions： “Improved overall” 46.0% , “Worsened overall”1.4% Ease of communicating in non-Japanese languages (in business)： “Improved overall” 33.8%, “Worsened overall” 2.3%. Ease of finding business partners： “Improved overall” 30.0%, “Worsened overall” 5.2%. Severity and complication of administrative procedures and regulations： “Improved overall” 26.3%, “Worsened overall” 11.3%. Business costs： “Improved overall” 12.2%, “Worsened overall” 28.6%. Ease of recruiting suitable employees： “Improved overall” 12.2%, “Worsened overall” 44.6%.

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