Results of JETRO’s FY2018 Survey on the International Operations of Japanese Firms

Mar 07, 2019

From November 2018 through January 2019, the Japan External Trade Organization (JETRO) conducted a survey of Japanese firms that have used JETRO’s services to gauge their interest in business overseas. The survey received valid replies from 3,385 firms out of 10,004 (a 33.8% response rate), of which 2,770 were small and medium-sized enterprises (SMEs). It covers a range of topics, including trade and overseas investment activities, the impact of trade protectionism, utilization of free trade agreements (FTAs) and the utilization of foreign personnel and e-commerce.

Regarding export policies over the next three years or so, 81.2% of firms answered that they would expand exports. (This figure combines firms “planning to further expand exports” [70.5%] as well as those “intending to begin exports” [10.6%]). The proportion of firms that are willing to expand exports continued to decline from the peak of FY2015 (84.9%), dropping below 80% in FY2017 (79.4%), but leveling off in FY2018.

With regard to the most important export destination, 28.1% of firms planning to expand exports in the future selected China as the target. This is followed by the United States (14.7%) and Vietnam (8.0%). Compared with the previous survey in FY2016, the proportion for China has greatly increased from 19.8%. Looking at the reasons why China was selected as the most important export destination, 92.2% answered that it was due to increased demand, far exceeding other reasons.

Regarding overseas business (direct investment) expansion policies over the next three years or so, the ratio of firms “planning to expand overseas business” came to 57.1%, remaining the same as the previous year. (This figure combines firms “planning to further expand overseas business” [32.9%] and those “intending to begin overseas business” [24.2%]). Regarding factors for motivation to expand remaining the same, many respondents pointed out a shortage of human resources. At the same time, a notable portion of firms answered that they are relying on exports to meet overseas demand.

Regarding the countries and regions where firms aim to expand business overseas, China’s ratio rose to 55.4%, compared with 49.4% the previous year. This is the first rise in China as an answer since data began being collected in FY2011. Regarding the US, for which there was a reduced desire to expand business the previous year, motivation to expand increased, particularly in the manufacturing industry, rising from the previous year (29.0%) to 32.3%. In terms of functions to be expanded, the ratio of firms citing sales increased from the previous year for both China and the US.

At the time of the survey, 43.1% of firms indicated there was “no impact” on their business regarding trade protectionism since 2017. This was followed by those which did not know (28.0%) and those expecting an overall negative impact (15.2%). Regarding the outlook for the future (about two to three years), while "no impact" has decreased to 15.9%, "unknown" has increased to 42.0% and "overall negative impact" increased to 24.4%. In terms of what effects are anticipated in the future, 47.9% of firms that expect to be negatively impacted (including those for which positive and negative impacts are expected to be equal) are concerned about an economic downturn at their sales destination. The proportion of firms that anticipate a negative impact on their own products or those of their suppliers or buyers is about 30 to 34% for each.

Among all respondents, 24.0% have already implemented some form of countermeasures against trade protectionism while 38.7% are considering them in the future. For firms expecting a negative impact as a whole, 56.7% have already implemented countermeasures in some form while 70.1% are considering them in the future. Looking at countermeasures being considered in the future, high ratios answered “strengthening information gathering” (30.1%) and "improving productivity or efficiency" (26.5%).

Among firms exporting to FTA-partner countries of Japan, the ratio of firms using FTAs in one or more countries was 48.2%, up by 3.3 points from the previous year. The utilization rate for SMEs was 43.8%, also up by 4.6 points from the previous year. When asked about what they are aware of regarding the self-declaration system (also called the self-certification system) adopted as the origin certification system for the Japan-EU EPA and TPP-11, the most frequent answer, given by 39.0% of firms using or considering using FTAs, was that it could reduce time and labor required for origin procedures. On the other hand, 37.0% answered that "information on the self-certification system is insufficient."

The percentage of firms employing foreign personnel at domestic bases remained at 45.1%, the same level as the previous year (45.4%). Firms that responded they would like to consider employing them in the future increased from the previous year (from 15.7% to 17.8%). In the case of SMEs, about 60% (58.6%) responded that they are either employing foreign personnel or considering doing so in the future. Among firms with high employment ratios of foreign personnel, the ratio of those making efforts toward "clarification of job content and authority,” “improvement of treatment such as salary and fringe benefits” and “improvement of in-house consultation” was notably high.

Among firms that have used e-commerce for sales, 52.8% have used it for overseas sales, exceeding the previous survey in FY2016 (47.2%). Looking at the breakdown of overseas sales, the number of firms that have used it to sell overseas from Japan (cross-border e-commerce) increased to 40.3%, 9.4 points higher than the previous survey, while the proportion of those engaged in e-commerce for sales at overseas bases remained nearly the same at 22.8%.

Of firms that have used e-commerce for overseas sales, 59.7% claimed they find some sort of benefit in e-commerce operations. Among them, 28.7% responded that e-commerce sales are producing profits at present. This ratio was 40.2% for large firms and 26.1% for SMEs, demonstrating a difference depending on firm size. By industry, more than 70% of respondents in medical products/cosmetics answered they have benefited. The largest number of firms cited China as their sales destination both for the present as well as for the future.