JETRO Invest Japan Report 2024
Chapter2. Trends in Inward FDI to Japan Section6: Assessment of Business Environment in Japan by Global Companies

Business in Japan highly rated as "R&D" base and "Sales and Marketing" base

In this section, we look at the assessment of Japan's business environment from the perspective of global companies outside Japan, based on the survey results on the impact of structural changes in global value chains (GVCs) , which implemented to 62 companies, mentioned in Chapter 1, Section 3.

In terms of the attractiveness of setting bases in Japan by business function, global companies tend to rate "R&D" base and "sales and marketing" base particularly highly. As an R&D base, about 35% of the companies surveyed responded that Japan is "very attractive", and about 33% responded it is "attractive". Also, as a sales and marketing base, about 27% responded that Japan is "very attractive", and about 53% responded that it is "attractive".

Created based on the results of JETRO's Survey on the Impact of Structural Changes in Global Value Chains (GVCs) (62 target companies). Totals do not necessarily add up to 100% because figures are rounded to the second decimal place.Regarding the attractiveness of Japan for each business function as a research and development base: 35.1% very attractive, 33.3% attractive, 22.8% neutral, 8.8% not very attractive . As a sales/sales/marketing base: 27.1% very attractive, 52.5% attractive, 10.2% neutral, 10.2% not very attractive. As a regional headquarters: 9.1% very attractive, 34.5% attractive, 23.6% neutral, 32.7% not very attractive. As a base for business planning and management: Very attractive 5.7%, Attractive 30.2%, Neither 26.4%, Not very attractive 28.3%, Not attractive at all 9.4% . As a customer service center: 5.4% very attractive, 25.0% attractive, 35.7% neutral, 32.1% not very attractive. Not attractive at all 1.8%. As a manufacturing/processing base: 3.5% very attractive, 29.8% attractive, 31.6% neutral, 31.6% not very attractive. Not attractive at all 3.5%. As a data center: 3.8% very attractive, 15.1% attractive, 50.9% neutral, 26.4% not very attractive. Not attractive at all 3.8%. As a logistics base: 1.9% very attractive, 13.2% attractive, 52.8% neutral, 26.4% not very attractive. Not attractive at all 5.7%. — Chart 2-20: Japan's Attractiveness by Business Function

Note 1:

The sum does not necessarily equal 100% due to rounding to one decimal place.
Note 2:

"n" is the number of companies that assessed for each business function. "n" does not equal 62 because some companies left the field blank. Companies that selected at least one option were considered valid.
Source:

Results of JETRO's survey on the impact of structural changes in global value chains (GVCs)

Column: Japan as a highly regarded R&D center

In the 2020s, Japan is being re-evaluated as an investment destination due to increased awareness of geopolitical risks and economic security in the wake of the COVID-19 pandemic and Russia's invasion of Ukraine. In particular, with the focus on research and development (R&D) and the establishment of new facilities, foreign-affiliated companies are becoming more active in conducting joint research with nearby universities and research institutions.

The Japanese subsidiary of the Bosch Group, a German precision equipment manufacturer, announced in February 2022 that it will make a large-scale investment to build a new R&D facility in Yokohama and relocate its headquarters functions there. The new R&D facility will introduce cutting-edge testing equipment and other features to strengthen R&D capabilities in order to keep up with trends in automotive development. The new headquarters began operations in May 2024, and in September 2024, the company held an event to celebrate the completion of the Tsuzuki Ward Cultural Center (nicknamed "Bosch Hall") , the company's first public-private partnership project, and other facilities. The company aims to contribute to regional revitalization by integrating its sites with local facilities. Through this initiative, the company consolidated its eight sites across Japan and moved approximately 2,000 people there, and it will strengthen its cross-divisional development structure and promote the shaping of the future of mobility with the new R&D center as its core.

As for the semiconductor industry, which has been attracting attention in recent years, a major semiconductor manufacturer Samsung Electronics Co., Ltd. announced in December 2023 to establish a new cutting-edge R&D center for next-generation semiconductor packaging technology in Yokohama. The press release from Yokohama City quoted the CEO of Samsung Electronics praising the investment environment in Japan, saying "Yokohama is one of the best places to work with industry, universities and research institutes since it has a large number of packaging-related companies, as well as excellent universities and human resources."

In June 2022, TSMC, a major Taiwanese semiconductor contract manufacturer, opened the "TSMC Japan 3DIC R&D Center" in the "Tsukuba Center of the National Institute of Advanced Industrial Science and Technology (AIST)" in Tsukuba City, Ibaraki Prefecture. It is said to be TSMC's first overseas R&D center with clean room facilities.

Strengths of the Japanese business environment is "growth potential of the market including the company's business fields," "well-developed infrastructure," and "market size"

Regarding the strengths of Japan‘s business environment compared to other countries, the most frequently selected by surveyed companies were "growth potential of the market including the company's business fields," "well-developed infrastructure," and "market size." Looking at the breakdown, when asked to select up to three of the top choices, about 30% of the companies (21 out of 62 respondent companies) chose "market size" as their first choice.

Created from JETRO's Survey on the Impact of Structural Changes in Global Value Chains (GVCs). In the horizontal bar graph, the most frequently cited strengths of Japan's business environment are 1st place: Growth potential of the market including our own business field, 2nd place: developed infrastructure (transportation, logistics, energy , information and communications, etc.), and 3rd place was market size. — Chart 2-21: Strengths of Japan's Business Environment Compared to Other Countries

Note1:

:Companies that selected at least one option were considered valid.
Note2:

Because of the format of selecting up to three choices, the numbers of responses after the second choice may not be equal.
Source:

Results of JETRO's survey on the impact of structural changes in global value chains (GVCs)

Global companies place the greatest importance on the "prospects for acquiring new customers" when expanding their operations in Japan

According to the survey, the most important factor for global companies when expanding into Japan or strengthening existing bases was the "prospects for acquiring new customers" (selected by 40 of the 61 respondent companies). It was followed by "well-developed infrastructure" (23 companies) in terms of the total number in the selection, but when focusing on the first choice instead of the total number in the selection, it is clear that a certain number of companies place importance on the "R&D opportunities with universities and companies" and "attractive local government incentives."

Created from JETRO's Survey on the Impact of Structural Changes in Global Value Chains (GVCs). In the horizontal bar graph, the most important points cited as selection criteria when locating in Japan are: 1st place: Prospects for acquiring new customers; 2nd place: Well-developed infrastructure (transportation, logistics, energy, ICT, etc.), and 3rd place Prospects for securing excellent local human resources. — Chart 2-22 (1) Important Factors as Selection Criteria When Deciding to Locate in Japan

Note1:

Companies that selected at least one option were considered valid.
Note2:

Because of the format of selecting up to three choices, the number of responses after the second choice may not be equal.
Note3:

n=61 because one company did not respond.
Source:

Results of JETRO's survey on the impact of structural changes in global value chains (GVCs)

Chart 2-22 (2) Important Factors as Selection Criteria When Deciding to Locate in Japan (details)
Important Factors as Selection Criteria When Deciding to Locate	Free Comment
Prospects for acquiring new customers	Customer acquisition is a top priority. Check possibility to acquire new customers to meet the needs of the local market. It is important to be close to key customers and to do business with them directly and frequently.
Well-developed infrastructure (Transportation, logistics, ICT, energy)	It is important to have good public transportation and public infrastructure. Well-developed infrastructure is very important for operational efficiency. Japan's well-developed transportation infrastructure is one of its attractive features.
Prospects for securing excellent local human resources	It is important that local human resources can be secured, who can communicate adequately in both Japanese and English and are excellent in terms of technology. Because of the need to strengthen promotion in Japan, the company is placing emphasis on whether it can secure competent local human resources.
Attractive local government incentives	It is important that tax incentives are provided. Currently, there are concerns that incentives for clean energy are insufficient.
R&D opportunities with universities and companies	Having the opportunities to cooperate with universities for research and development is significant.
Existence of related industrial clusters	The existence of related industrial clusters is very important because it leads to interactive cooperation.
Low business costs (land, labor, etc.)	The government subsidies and preferential policies are expected. Low business costs at the time of starting a business are an important factor.
Others	When selecting a location, evaluation and scoring are carried out for logistics, local subsidies, local community, and access to customers and partners, and the best location is selected based on an overall evaluation. It is important that there are companies becoming appropriate partners for joint ventures and business alliances in Japan.

Source:

Results of JETRO's survey on the impact of structural changes in global value chains (GVCs)

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