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JETRO Invest Japan Report 2017 (Summary) 4. Perception of the Business Environment in Japan among Foreign-affiliated Companies

Foreign-affiliated companies are generally performing well and positive about economic prospects

  • A questionnaire was sent to about 1,600 companies with a focus on foreign affiliates supported by JETRO in their entry into the Japanese market. 260 companies responded.
  • Foreign-affiliated companies are generally performing well and positive about economic prospects.

Outlook of the business conditions in Japan (over the next one or two years)

It shows the percentage of the companies who gave the following answers: “Good (upturning),” “Unchanged,” or “Bad (worsening).” There were 256 answers in total. 56.6% of the companies answered “Good (upturning),” 33.2% answered “Unchanged,” and 10.2% answered “Bad (worsening).”

The business environment is getting better in Japan

  • The business environment in Japan is evaluated as improving as a whole.

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

Seven questions were asked about improvement: Living conditions for foreigners; Tendency of Japanese companies and society to be closed toward foreign-affiliated companies; Ease of communicating in non-Japanese languages (in business); Particularities of Japanese business climate; Ease of finding business partners; Ease of recruiting good employees; and Business costs. It shows the percentage of the companies who gave the following answers for the seven questions: “It has been improved,” “It has been slightly improved,” “It has got worse slightly,” and “It has got worse.” While the share of respondents answering “It has been improved” or “It has been slightly improved” is generally large, a relatively large number of respondents answered “It has got worse” or “It has got worse slightly” to the questions “Ease of recruiting good employees” and “Business costs.

[Note] Ratio of companies answering ”It has been improved” or “It has been slightly improved” is shown as positive, while that of answering “It has got worse” or “It has got worse slightly” is shown as negative. Ratio of answers “It remains unchanged” is not shown in the chart.

70% of foreign-affiliated companies plan to expand their business and employment

  • 70% of foreign-affiliated companies plan to increase investment within the next five years (expand their business/employment)
  • As locations for the secondary investment, Tokyo, Osaka, Kanagawa and Aichi and other large cities with a large market are ranked high.
  • In respect to business functions, Kanagawa and Hyogo were chosen for “R&D,” Aichi and Okinawa for “Manufacturing” and Fukuoka for “Logistics,” which reveals regional strengths.

Investment plans within the next five years

There were 258 answers in total. 72.1% of the companies answered that they will “expand business,” 23.6% answered they will “maintain the status quo,” 3.5% answered they will “scale down business,” and no company answered that they would “move from Japan to another country.” 0.8% answered they will “exit Japan.”

Projected number of employees in Japan (within the next five years)

There were 256 answers in total. 69.5% of the companies answered they “will increase” the number of employees. 27.0% answered that they “will maintain the same” number, while 3.5% answered that they “will decrease” the number.

Locations of secondary investment (top two prefectures)

There were 270 answers in total. The results were: 34% for Tokyo, 16% for Osaka, 14% for Kanagawa, 9% for Aichi, 5% for Fukuoka, 3% for Hyogo, 3% for Hokkaido, 1% for Tochigi, 1% for Okinawa, and 13% for all other prefectures.
Locations of secondary investment (top two prefectures) and types of business to expand(-: no data is available)
Rank Prefecture No. of projects Most selected Second most selected Third most selected
1 Tokyo 93 Sales Customer Service Manufacturing, R&D
2 Osaka 43 Sales Customer Service Manufacturing, R&D
3 Kanagawa 37 Sales Customer Service R&D
4 Aichi 25 Sales Customer Service Manufacturing
5 Fukuoka 14 Sales Customer Service Logistics
6 Hyogo 8 Sales R&D Manufacturing
7 Hokkaido 7 Sales Customer Service Other
8 Tochigi 4 Manufacturing, R&D - -
8 Okinawa 4 Manufacturing Sales, Customer Service -
NA Other 35

Foreign-affiliated companies’ efforts to enhance productivity

  • More than 40% of foreign-affiliated companies answered that their productivity has improved compared with one or two years ago.
  • A considerable number of the companies have enhanced productivity by efforts related to so-called “work-style reform.”

Company productivity compared with one or two years ago

 43.5% of the companies answered “It has improved,” 51.4% answered “It remained unchanged,” and 5.1% answered “It has worsened.”

Measures implemented in order to enhance productivity (multiple answers)

109 companies answered, and multiple answers were allowed.50.5% of the companies answered “Training or human resource development,” 37.6% of the companies answered “Employing appropriate personnel based on each task,” 34.9% of the companies answered “Reviewing work procedures (improvement of operational processes or shortening the time for meetings,” 29.4% answered “Introducing more variety of ways of working (telecommuting, flex time, shorter working hours),” 26.6% of the companies answered “Finding new markets,” 25.7% of the companies answered “Enhancing sales activities for existing products as well as services,” 22.9% of the companies answered “Promoting diversity in workforce or advancement of women,” 18.3% of the companies answered “Streamlining of back-office divisions,” 14.7% of the companies answered “Establishing new business fields and new business areas,” 13.8% of the companies answered “Utilization of ICT (including IoT, big data, AI),” 12.8% of the companies answered “Shortening of working hours (“no overtime” days, morning shifts, prohibition of late-night overtime,” 11.0% of the companies answered “Streamlining supply activities,” 8.3% of the companies answered “Streamlining logistics,” and 5.5% of the companies answered “Other.”

The first-ranking appeal is the “Japanese market” followed by “Stability of nation and society”

  • Attractiveness of doing business in Japan is “The Japanese market” and “Stability of nation and society.”

Attractiveness of doing business in Japan (top three options)

There were 258 answers in total. 65.9% of the companies answered ”The Japanese market,” 40.3% answered ”Stability of nation and society,” 28.7% answered ”Existence of good partners, companies or universities with outstanding technology or products,” 28.3% answered ”Existence of world famous global companies,” 24.4% answered ”Well-developed infrastructure (traffic, logistics, ICT, energy, etc.),” 22.5% answered ”High quality of R&D,” 12.4% answered ”Expected increase in demand and sales leading up to the 2020 Tokyo Olympics,” 11.6% answered ”Japan’s location (e.g. Position as a gateway to Asia, advantages as a base for regional HQ, etc.),” 11.2% answered ”Possibility of finding highly talented human resources,” 6.2% answered ”Well-structured/effective legislation such as a sophisticated IP system,” 5.4% answered ”Everyday living conditions for foreigners,” 4.3% answered ”Support by Government/Municipal Government,” 1.9% answered ”Ease of raising funds,” 1.2% answered ”Deregulation,” and 4.7% answered ”Other.”

Request for improvement by the Japanese government or industries

  • The most frequent request for improvement by the Japanese government or industries is “Fostering globally competitive human resources (Japanese).”

    The items for which you would like to see improvement by the Japanese government or industries (multiple answers)

    There were 255 answers in total. 35.7% of the companies answered ”Fostering globally competitive human resources (Japanese),” 32.2% answered ”Improvement of communication in foreign languages,” 32.2% answered ”Simplification of administrative procedures (Reduction of number of procedures, enabling one-stop services),” 31.4% answered ”Addressing internationally unharmonized and incompatible business permit/licenses,” 23.5% answered ”Provide administrative procedures in multiple languages,” 23.1% answered ”Deregulation (Reduction/abolition of regulation, relaxing standard for business permit/licenses),” 22.0% answered ”Tax System,” 20.0% answered ”Attracting highly-skilled foreign professionals (Relaxation of requirements for visas),” 19.2% answered ”Setting up more online systems for administrative procedures,” 18.4% answered ”Simplification of import/export procedures,” 9.4% answered ”Promoting employment of international students,” 7.1% answered ”Living conditions for foreigners,” and 2.7% answered ”Other.”
  • Foreign-affiliated companies’ issues for securing human resources include “Lack of human resources who can communicate in foreign languages,” and “Difficulty in finding specialists.”
  • By category of job, “Engineering” is most difficult to fill.

    Issues particularly troublesome for securing human resources (top two options)

    There were 255 answers in total. 66.7% of the companies answered ”Lack of human resources who can communicate in foreign languages,” 25.1% answered ”Difficulty in finding specialists,” 25.5% answered ”High hiring cost,” 35.7% answered ”Low mobility in labor market,” 24.7% answered ”Inclination of workers (e.g. they are reluctant to work for foreign-affiliated companies.),” 5.5% answered ”Low employee retention rate,” and 6.7% answered ”Other.”

    Category of jobs most difficult to fill (multiple answers)

    There were 253 answers. 49.4% of the companies answered ”Engineering (Staff),” 33.2% answered ”Engineering (Manager),” 27.7% answered ”Sales (Manager),” 27.7% answered ”Sales (Staff),” 21.7% answered ”Corporate planning (Manager),” 13.0% answered ”Corporate planning (Staff),” 8.3% answered ”Customer service (Staff),” 7.1% answered ”Customer service (Manager),” 5.1% answered ”General affairs/administration (Manager),” 3.2% answered ”General affairs/administration (Staff),” and 9.1% answered ”Other.”
  • Regarding administrative procedures and regulations, the most frequent answers were “Tax matters,” “Labor matters,” “Status of residence (visa).”
  • For specific issues needing improvement, the largest percentage answered “Complicated administrative procedures (Too many procedures and points of contact)” followed by “Internationally unharmonized and incompatible business permits/licenses.”

    Administrative procedures and regulations that need improvement (top two options)

    There were 240 answers in total. 37.5% of the companies answered ”Tax matters,” 25.4% answered ”Labor matters,” 22.9% answered ”Status of residence (visa),” 22.9% answered ”Safety standards/regulations of products,” 19.6% answered ”Social insurance,” 10.4% answered ”Company registration,” 6.7% answered ”Trade,” 6.3% answered ”Procedures for construction permit,” 5.0% answered ”Intellectual property,” 4.2% answered ”Environmental regulations (environmental impact assessment, etc.),” and 10.4% answered ”Other.”

    Specific issues needing improvement regarding administrative procedures/regulations (top two options)

    There were 240 answers in total. 36.3% of the companies answered ”Complicated administrative procedures (Too many procedures and points of contact),” 32.9% answered ”Internationally unharmonized and incompatible business permits/licenses,” 27.9% answered ”Excessive legal restrictions, rigid business permits/licenses,” 20.4% answered ”Excessive amount of required documents,” 15.4% answered ”Inconvenience caused by the lack of online procedures,” 12.1% answered ”Translation of required documents,” 11.7% answered ”Excessive amount of time required for procedures and permits/licenses,” 10.0% answered ”Insufficient information or support,” 8.8% answered ”Unclear handling at points of contact for administrative applications/permits,” 4.2% answered ”High cost of application and procedures,” and 3.8% answered ”Other.”