Latest UpdatesJapanese companies recovering from the damage caused by COVID-19 V-shaped recovery in their intentions to newly establish or expand business locations in Japan, and aggressive stance toward the introduction of digital technology
Mar 4, 2022
Affected by COVID-19, the Japanese economy experienced a large decline through to the second quarter of 2020, and then it began to recover. In 2021, business confidence among companies was recovering, albeit at a sluggish pace due to intermittent restrictions on economic activities (*1). According to a questionnaire survey (*2) conducted by the Japan Industrial Location Center on domestic manufacturing and logistics industries to grasp the location of business bases and intentions for capital investment, there was a V-shaped recovery in their intentions to newly establish or expand business locations in Japan from the significant decline in the previous year, and a positive trend was also seen in capital investment.
In particular, regarding the outlook for capital investment in Japan, 36.2% of companies (up 21.3 points from the previous fiscal year) expect to "increase investment" in overall capital investment, and 34.5% of them expect to "increase investment" in digital transformation. This is the same level as for capital investment overall, indicating a positive stance toward the introduction of digital technology. The proportion of companies that said they would "increase investment" shows a strong correlation with the company size, that is, while the ratio of companies to expect “investment increase” was only 27.0% of companies with less than 30 employees, it reached 61.6% of companies with 300 or more employees.
The top digital technologies being considered for introduction are; "Telework/web meeting-related" (24.4%), "Electronic document management system" (22.1%), "Cloud service" (21.6%), "Robotics" (10.5%), "IoT" (10.1%), and "AI (artificial intelligence)" (7.2%). As for the purpose or results of capital investment for digital transformation, efficiency and acceleration of business processes (71.6%) and reduction of business costs (64.0%) are emphasized.
On the other hand, 37.9% of companies are not considering to introduce digital technology in the future, indicating that there are a certain number of companies that do not see the benefits of introducing digital technology or that are not able to take the plunge due to financial or human resource constraints. For companies that are reluctant to introduce digital technology, it will be important to appeal them in an easy-to-understand manner on the benefits of its introduction including how to reduce the burden of financial or human costs through digital transformation.
According to the Survey on the International Operations of Japanese Firms (*3) published by JETRO in January 2022, of the companies that promote digital transformation, a higher percentage of companies that collaborate with overseas companies recognize the results of introducing digital transformation. In the methods for seeking cooperation with overseas companies, participation in exhibitions and events, introductions from overseas subsidiaries and partners, and participation in the projects of public organizations such as JETRO ranked high.
※1 Macroeconomics and FDI in Japan(1.6MB), Invest Japan Report
JETRO has prepared a collection of materials on the investment environment in Japan, which is summarized as "Resources". Please use them as a reference for your investment consideration.
※2 Outline of the Survey Results on New Business Location Planning in Fiscal 2021(1.8MB) (Japan Industrial Location Center)
Japan Industrial Location Center provides consultation on the selection of industrial and business sites, as well as research and consulting services related to industrial location and regional development. Every year, the Center publishes the Industrial Site Guide(11.5MB), which summarizes information on industrial sites throughout the country. (*All links are in Japanese only)
※3 FY2021 Survey on the International Operations of Japanese Firms(2.6MB) This annual survey is conducted by JETRO targeting Japanese companies (their headquarters) that are highly interested in doing business overseas. The survey summarizes the willingness of Japanese companies to do business overseas and their responses to business issues related to the global situation. (*Link is in Japanese only)
Please contact JETRO if you are interested in the investment and business environment in Japan or in selecting a business location in Japan.