A summary of the survey results is as follows.
(1) Japanese manufacturers’ overseas business operations seem to have started to recover from the COVID-19 pandemic
The overseas business operations of Japanese manufacturers seem to have started to recover from the pandemic-induced slowdown and stagnation that was observed until the previous fiscal year. Both their overseas sales ratios and overseas production ratios are on the rise compared to the previous year. In FY2022, their overseas sales ratios are projected to be at pre-pandemic levels, and according to their medium-term plans, their overseas production ratios are expected to recover to almost pre-pandemic levels in 2025. Overseas earnings also increased in many regions, which is encouraging Japanese manufacturers, particularly the larger ones, to expand their operations again domestically and internationally.
(2) India has returned as the top promising country after three years, pushing China down into second place
Seen by a wide range of industries to be the most promising country for the next three years, India is back to the top place after three years, while China has lost a large number of votes. China’s decline is most likely attributable to its radical zero-COVID policy, which has brought its economy to a standstill. However amid an ongoing US-China conflict, there are also various other growing concerns that could be the cause of this descent. The United States maintains its third place, backed by its solid expectations for further economic growth in the general machinery industry. Among the ASEAN members, those that ranked relatively high last year have stayed in the same places, partially regaining the votes they had lost due to the pandemic.
(3) Nearly 90% of the respondents suffered a negative impact from the invasion in Ukraine
Almost 90% of the respondents said their business had been negatively affected by the Russian invasion of Ukraine. The most common impacts were indirect impacts such as “fuel price rise,” “logistics disruption,” and an “increase in spending due to currency fluctuations.” Direct influences, such as the “scaling back or discontinuing of operations” and “working around economic sanctions,” were identified by a relatively small number of the respondents. In addition, there were many more respondents that anticipate they will accelerate their decarbonization efforts due to the invasion than the opposite. The high price of fossil fuels induced by the invasion seems to have heightened expectations for a widespread introduction of clean energy.
(4) Japanese manufacturers view geopolitical risk as increasingly critical for their business strategy and are enhancing their information gathering and capacity for analysis
Approximately 90% of the respondents view geopolitical risk as “very significant” or “significant” for their business strategy. Many respondents said they were diversifying their suppliers and enhancing their information gathering capacity or risk analysis/evaluation capability in order to mitigate geopolitical risk, and few said they were changing their location strategy or investment plan, or discontinuing or selling their business. Concerning US-China decoupling, fewer respondents than in the previous year’s survey said that they would enhance their operations in China, for the same reasons as China’s decline in the ranking of promising countries, and more said they would enhance their operations in the United States.
(5) Approximately 80% of the respondents are considering sustainability, and 75% of these respondents are already working on decarbonization
Approximately 80% of the respondents are considering sustainability in their overseas business operations. Those respondents who aspired highly toward operations overseas or viewed geopolitical risk seriously tended to consider sustainability. Also, respondents are particularly concerned about climate change and decarbonization. 75% of them are already taking action, and more than 50% of respondents are making efforts that align with or exceed the Government of Japan’s goal of achieving carbon neutrality by 2050. Furthermore, we found that those that have the aim of actively improving their brand image are more actively addressing decarbonization. Regarding human rights protections, the respondents are showing significant progress compared to the previous year.
