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FY2018 JBIC Survey (the 30th) Report on Overseas Business Operations by Japanese Manufacturing Companies

  • Region: Others
  • Others
November 26, 2018
  1. The Japan Bank for International Cooperation (JBIC, Governor: Tadashi Maeda) published today the results of the FY2018 JBIC Survey on Overseas Business Operations by Japanese Manufacturing Companies (the "Survey"). The Survey was sent out by mail to 1,012 Japanese manufacturers in June 2018 and returned during the period from July to September by 605 companies with valid answers, which represents a 59.8% response rate. The objective of the Survey is to collect information and learn more about the current situation and challenges of overseas business operations of Japanese companies, as well as their business prospects. This year marks the 30th year of the Survey since it was first conducted in 1989. (Please click here for the full report)
     
  2. The Survey in FY2018 included the usual questions, such as (1) "performance evaluations of overseas business" including their satisfaction levels for sales and profits, and (2) "their overseas business prospects" and "promising countries or regions for overseas business over the medium term". In addition, it covered more specific topics surrounding the overseas operations of Japanese companies, such as (3) "impact of protectionism" and (4) "views on environmental regulations and deployment of environment-related business".
      
  3. The following are highlights of the results of this survey:

    (1) Overseas business performance of Japanese manufacturing companies for FY2017 was mostly robust and satisfactory throughout the regions. Their business attitude continues to be cautiously positive and aggressive not only in overseas but domestic
    For FY2017, on the back of a strong global economic growth, the overseas revenue ratio reached a record high of 37.3%, and high level of satisfaction was expressed. The response rate of "Good performance of sales" was high especially in China and the EU, while "Good performance of exports" stood out in ASEAN. Meanwhile, the level of revenue satisfaction dropped again in North America, with many companies expressing "Difficult to get customers" and "Difficult to cut costs" as dissatisfactory reasons. Reflecting this preferable business performance, the number of companies answering "Strengthen/expand" for their future business prospects increased, but signs of wariness are also seen in the lowered overseas revenue prospect for FY2018.
     
    (2) Companies seem to prioritize regions/countries to strengthen their business overseas since they also want to put more resource on domestic business, and thus votes for the Promising Countries survey polarize with China in the lead.
    As for the promising countries over the medium-term, the gap between the percentage shares of the top 6 countries and the rest widened. China and India attracted high expectations from all industries in terms of "market growth potential" and "market size." On the other hand, the gap between the US and Mexico widened, led by the automobile industry. This indicates that they seem to have begun to select countries in line with their priority, as they also need to distribute their scarce resource to strengthen domestic business.
     
    (3) Protectionism affects revenue and trade transactions, and could impact FDI in the future
     About 30% of the respondent companies answered that revenue and trade transactions will "Decrease" if protectionism prevails. As for Foreign Direct Investment (FDI) and domestic production, most of the respondents chose "No impact" and "Not sure," while 10% to 20% answered "Decrease". The latter numbers suggest that prolonged protectionism could potentially cause Japanese companies to pause or reduce FDI in the future. Meanwhile, as for the US-Mexico agreement for the USMCA, the "quantitative restrictions on auto imports" and the "minimum wage provision" are thought to be relatively important for Japanese manufacturers.         
     
    (4) Although environmental regulations are tightening especially in China and the EU, certain amount of Japanese companies regard this growing momentum for environmental sustainability as a business chance
    While 50% to 70% of companies doing business in China and the EU responded that local environmental regulations have been "Strengthened," 30% to 40% of them said the effects on business will be "positive". For now, Japanese companies are conducting environment-related business in various fields (e.g. air-pollution management and sewage/wastewater treatment), but for future prospects, business related to energy-saving (including fuel-efficient cars), especially in China, are attracting much attention.
     
    (5)Moving forward, careful assessment of negative impacts stemming from economic slowdown in the US and China and/or continuing uncertainty over trade affairs will be necessary
    This year's survey results are showing that Japanese manufacturing companies intend to strengthen their business both in Japan and overseas, leveraged by their favorable result in the past year. Hence, in the coming year(s), further development in overseas production and sales is expected, especially in the fields of advanced technology, labor-saving devices, e-commerce, and supply chain optimization. In the meantime, concerns over negative impact on business, such as growth slowdown in the major economies, trade conflicts, and Brexit issue, remain. It will become much more significant to closely monitor these factors and make flexible decisions in a timely manner, not only to maximize their business opportunity but also to keep the pace of "next-generation" technology advancement.
     
  4. Taking into account of the findings of this Survey, JBIC will continue to support the overseas business activities of Japanese companies operating under global competition, while holding dialogues with governments and relevant authorities in foreign countries and regions to improve their investment environment.

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