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JETRO Invest Japan Report 2018 (Summary)4. Perception of the Business Environment in Japan among Foreign-affiliated Companies

Greatest appeal lies in the Japanese market, with high profitability also seen as a major selling point

  • A questionnaire was sent out to approximately 1,700 companies, with a focus on foreign-affiliated companies supported by JETRO in their entry into the Japanese market. 266 companies responded. (Survey period : from May to June, 2018)
    Attractiveness of doing business in Japan
    Rank Answer Votes 1st Votes 2nd Votes 3rd Points
    1 Japanese market 158 20 20 534
    2 Existence of suitable partners, (companies, universities, etc.) with outstanding technology or products 25 50 29 204
    3 Stability of country and society 16 43 60 194
    4 High quality of R&D 19 38 15 148
    4 Existence of renown global companies 24 26 24 148
    6 Infrastructure (traffic, logistics, ICT, energy, etc.) 4 39 30 120
    7 Potential for securing talented human resources 4 14 19 59
    8 Well-maintained living environment 4 7 23 49
    9 Japan’s location (e.g. position as a gateway to Asia, advantage as a base for regional headquarters, etc.) 3 12 14 47
    9 Expected increase in demand and sales toward the 2020 Tokyo Olympics 3 9 20 47
    11 Well-structured legislation regarding intellectual property 2 6 5 23
    NA Other 4 2 7 23

    [Notes]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.
    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • Even though Japan’s market scale is predicted to shrink in the future, a considerable number of foreign-affiliated companies see “Mid-and long-term growth potential of the business field” and ”Opportunities for innovation due to Japan’s status as a frontrunner in addressing global challenges” as particularly appealing about the Japanese market.

    What is particularly appealing to you about the Japanese market? (top 2 options)

    There were 198 answers in total. 80.3% of the companies answered “Market size (high income level, large volume of customers),” 40.9% answered “Mid-and long-term growth potential of your business field,” 25.8% answered “Presence of sophisticated consumers,” 19.2% answered “Opportunities for innovation due to Japan’s status as a frontrunner in addressing global challenges,” 13.6% answered “Convenience for developing business toward other markets (e.g., Asia),” and 1.5% answered “Other.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • Over 70% of the companies perceive Japan as a highly profitable market.

    How do you evaluate the Japanese market in terms of profitability?

    There were 260 answers in total. 19.2% of the companies answered “Profitability is high,” 51.5% answered “Profitability is somewhat high,” 25.4% answered “Profitability is somewhat low,” and 3.8% answered “Profitability is low.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

High level of business confidence among foreign-affiliated companies and a positive outlook on the future

  • Foreign-affiliated companies are positive about economic prospects.

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

    There are 264 answers in total. 65.5% of the companies answered “Improving,” 29.9% answered “Staying even,” and 4.5% answered “Declining.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

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

Investment plans within the next 5 years

There were 266 answers in total. 69.9% of the companies answered that they will “expand business,” 27.8% answered they will “maintain the status quo,” 0.8% answered they will “scale down business,” 0.8% answered they will “relocate to other areas in Japan,” and 0.8% answered they will “withdraw from Japan.”

[Source] JETRO “Survey on Japan’s Investment Climate 2018”

Projected number of employees in Japan
(within the next 5 years)

There were 264 answers in total. 70.5% of the companies answered “The number of employees will increase,” 28.4% answered “The number of employees will maintain the same,” and 1.1% answered “The number of employees will decrease.”

[Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • Over 50% of foreign affiliated companies who plan to expand their business in Japan within the next five years expressed an interest in M&A deals with Japanese companies.

    Are you interested in secondary investment through M&A with a Japanese company?

    T”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

Focus on Japan’s SMEs as partners for open innovation

  • Around 70% of the foreign-affiliated companies showed interest in open innovation with Japanese companies and universities.

    Please tell us about your efforts regarding open innovation with Japanese companies/universities, etc.

    There were 261 answers in total. 21.1% of the companies answered “Efforts have already been implemented, and will continue or expand in the future,” 46.4% answered “Efforts have not yet been implemented, but we are interested,” 30.7% answered “We have no interest at the moment,” and 1.9% answered “Other.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • They are more interested in Japan’s SMEs and universities/research institutes as partners.

    Please select the kinds of partners you are interested in (multiple answers)

    The question was asked to foreign-affiliated companies that have already engaged in, or are interested in, open innovation with Japanese companies, universities, etc. There were 172 answers in total. 51.2% of the companies answered “Small and medium-sized Japanese enterprises,” 51.2% answered “Universities or research institutes,” 44.2% answered “Large Japanese companies,” 26.2% answered “Japanese startups,” 12.2% answered “Foreign-affiliated startups,” 11.6% answered “Foreign-affiliated companies in Japan (other than startups),” and 1.7% answered “Other.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • Over 60% of the companies expressed an interest in using the “Regulatory Sandbox” system.

    Please tell us about your interest in the "Regulatory Sandbox" system

    There were 260 answers in total. 11.2% of the companies answered “We want to take advantage of the system to overcome challenges brought by specific regulations,” 50.8% answered “We would like to take advantage of it in the future if the need arises,” and 38.1% answered “No particular interest.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

The biggest obstacle to doing business in Japan is difficulty in finding human resources

Obstacles to doing business in Japan (select each from 1st to 3rd position)
Rank Answer Votes 1st Votes 2nd Votes 3rd Points
1 Difficulty in finding human resources 87 35 37 368
2 Difficulty in communicating in non-Japanese languages 54 69 31 331
3 High business costs 41 45 63 276
4 Complicated administrative procedures 36 40 39 227
5 Rigid regulations 24 32 31 167
6 Difficulty in finding business partners 11 25 15 98
7 Immigration control system 7 6 9 42
8 Difficulty in financing 0 7 12 26
9 Difficulty in living conditions for foreigners 0 2 11 15
NA other 6 5 18 46

[Notes]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.
[Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • Particularly troublesome issues are “Lack of human resources with foreign language ability” and “Difficulty in finding experts.”

    Regarding securing human resources, what difficulties in particular have you encountered? (top 2 options)

    There were 263 answers in total. 54.4% of the companies answered “Lack of human resources with foreign language ability,” 41.8% answered “Difficulty in finding experts,” 34.2% answered “Recruitment, hiring, and employment cost,” 29.7% answered “Awareness of workers (e.g. preference for large companies, reluctance to work for foreign-affiliates),” 19.8% answered “Low mobility in labor market,” and 3.8% answered “Other.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • By category of job, “Engineering” is most difficult to fill.

    Regarding securing human resources, which categories of jobs are most difficult to fill? (multiple answers)

    There were 259 answers in total. 58.7% of the companies answered “Engineering,” 47.1% answered “Sales and customer service,” 21.2% answered “Corporate planning,” 5.4% answered “General affairs,” and 9.7% answered “Other.”

    [Source] JETRO “Survey on Japan’s Investment Climate 2018”

  • In regard to “Complicated administrative procedures,” many companies pointed to the “Excessive amount of required documents,” “Lack of English translation” and “Excessive amount of time required to complete procedures,” especially with “Tax matters,” “Labor matters” and “Matters related to status of residence (visas)”.
    Administrative procedures felt to be in need of most improvement and specific issues currently experienced by companies
    Administrative procedures that need improvement the most Issues necessary to be improved the most
    Excessive points of contact(lack of consolidation) Excessive amount of required documents Inconvenience caused by the lack of online procedures Lack of English translation Excessive amount of time required to complete procedures High cost of applications and procedures Other Unselected Total
    Company registration 3 5 0 8 5 1 1 2 25
    Tax matters 6 15 6 19 6 5 0 0 57
    Social insurance 1 5 6 6 5 2 1 0 26
    Labor matters 6 14 3 7 14 1 7 0 52
    Matters related to status of residence (visas) 0 6 8 6 23 1 2 0 46
    Intellectual property 0 1 2 3 0 0 0 0 6
    Trade 1 4 0 2 4 2 0 1 14
    Other 1 2 2 5 4 0 14 1 29
    Unselected 0 0 0 2 1 0 0 8 11
    Total 18 52 27 58 62 12 25 12 266