26 Apr Japanese Companies’ Overseas Business: Outlook
China remains the number one country for Japanese businesses to expand their operations. However,Vietnam has continued its stellar run of three years to come in second. According to the recently released JETRO report of Japanese firms, which surveyed the headquarters of Japanese companies with overseas operations, well over one third of nearly 1000 respondents cited Vietnam as the country where they want to expand business. It is interesting that Vietnam ranked highly for expanding operations, not only in sales and production activities, but also in research and development business functions.
Unsurprisingly 49.4% of the respondents said they are motivated to expand into China. However, with other countries like Vietnam, Myanmar and the Philippines featuring more prominently, it is significant that the overall number of companies wanting to expand in China has been steadily falling from in 2011 when it recorded 67%. The 56 page survey (only Japanese) is available here
Australia remains profitable for Japanese businesses but wage concerns remain.
In a separate JETRO survey of Japanese subsidiaries in various countries, Australia has been shown to be one of the most profitable countries in the Asia and Oceania regions. The 2017 JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania (available in English here) shows Australia remains a profitable place to do business in the region, with nearly 80% of businesses forecasting an operating profit for the 2017 financial year. This is an increase from 2016, where just over 70% of respondents expected to make a profit. The increase in companies expecting a profit in Australia was both above the regional average and increased more than the regional trend. (Up 8.1 points for Australia, compared to an increase of 4.6 points for the whole of the Asia and Oceania regions). This would appear to be further evidence of the current trend of Japanese M&A in Australia outlined elsewhere in this AJBCC Japan Business Alert – namely “acquisitions which are targeting revenue and profit growth opportunities in overseas markets”.
Australian wage growth has been sluggish for a number of years, but on the contrary other countries in Asia have been experiencing huge wage growth. Australia had the lowest forecast wage increase of all surveyed countries at 2.2%, compared to growth of 10.1% in Pakistan, 9.8% in India and 8.8% in Myanmar. Nevertheless, Japanese companies still felt that wage growth was the main operational concern in Australia. It was interesting to note though that in this annual JETRO survey, the level of concern has been decreasing for a number of years now.