MARKET OUTLOOK - JAPAN 2018 - AN INTRODUCTION TO THE JAPANESE ECONOMY & SWEDISH INDUSTRY IN JAPAN JANUARY 2018 - BUSINESS SWEDEN IN TOKYO
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CONFIDENTIAL FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY MARKET OUTLOOK - JAPAN 2018 AN INTRODUCTION TO THE JAPANESE ECONOMY & SWEDISH INDUSTRY IN JAPAN JANUARY 2018 – BUSINESS SWEDEN IN TOKYO
JAPAN - THE WORLD’S 3RD LARGEST
ECONOMY & CONSUMER MARKET
JAPAN ECONOMIC DATA
REGIONAL GDP
(COUNTRY w. CLOSEST
EQUIVALENT GDP)
Indicator Japan (Sweden) BILLION USD (in 2011) HOKKAIDO
Population 127 million (10) (EGYPT)
229
1,000
GDP growth 2016 1,7% (3,3%) CHUBU
(HOLLAND)
GDP forecast 2017 1,6% (2,6%) 923
Unemployment rate 2,8% (6,9%) CHUGOKU Tokyo
(UAE)
Inflation (CPI) -0,1% (1,0%) Kyoto
Osaka
KANTO
352
Exchange rate 100 JPY = 7,25 SEK (Oct 2017)
Fukuoka
(BRAZIL)
KANSAI 2,510
KYUSHU (MEXICO)
(IRAN) SHIKOKU 973
598 (PERU)
174
SOURCE: IMF, OECD 2016 OR LATEST AVAILABLE YEAR.
GDP GROWTH CALCULATED ON QUARTERLY BASIS.
MOST INDUSTRY SEGMENTS IN
JAPAN INDICATE OPPPORTUNITIES
JAPAN’S GDP BY INDUSTRY SECTOR BUSINESS SWEDEN IN JAPAN IS ACTIVE IN ALL BELOW SEGMENTS:
Other industries
57%
ICT industry
11%
Wholesale
6%
Transport
machinery
6% HEALTH CARE & LIFE SCIENCES MATERIALS & MANUFACTURING RETAIL & CONSUMER PRODUCTS
Construction
5%
Transport
4%
Retail
4%
Electrical
machinery
4%
Steel
3% TRANSPORTATION & AUTOMOTIVE TELECOM & IT ENERGY & ENVIRONMENTAL TECH.
20% AS LONG AS A COMPANY HAS
WORLD-LEADING PRODUCT,
TECHNOLOGY OR SERVICE
…of GDP can be derived
to manufacturing
SECURITY & DEFENCE
SOURCE: JETRO WHITE PAPER ON ICT 2013
ECONOMIC DEVELOPMENT 3 MEGA TRENDS ARE AFFECTING
JAPANESE ECONOMY & INDUSTRY
6 TH
0,7 0,6
0,6 0,5 0,5
0,5 0,4
0,4 0,3
0,3 0,2 MEGA TRENDS IMPACTING JAPAN’S ECONOMY
0,2
0,1
…CONSECTIVE 1. Structural reforms to stimulate growth
0
QUARTERS - The JP government have introduced structural reforms aimed at
Q1 Q2 Q3 Q4 Q1 Q2 OF GDP GROWTH revitalizing the economy & stimulate investment; quantitative easing, inc.
2015 2016
government spending, tax/energy reforms, corporate governance etc.
EXPENDITURE ON R&D (% OF GDP) - The impact on the economy remain uncertain, but reforms are likely to
2 ND
improve business climate and could unlock untapped potential in the JP
4
manufacturing base. GDP has increased for 6 consecutive quarters.
3
2. Productivity & technological development:
2
- Japan is likely to remain a leader within the development of new materials
1 & manufacturing, offering a very advanced & automated production base.
…LARGEST SPENDING
0 ON R&D AMONG - The JP government has launched several initiatives, mainly the Industrial
2010 2011 2012 2013 2014
OECD COUNTRIES Value Chain Initiative (IVI) and the Robot Revolution Initiative (RRI), to
Japan OECD Total (NOMINAL TERMS) remain in the forefront of manufacturing and material development.
- Steady high expenditure on manufacturing R&D.
CROSS-BORDER M&A & INVESTMENT 3. M&A wave and changing business practices:
2ND
80 500
- Japanese corporations have experienced record profits in recent years,
Number of cross-border
partly due to favorable exchange rates.
400
60
- M&A’s & increased cross-border investment has followed
Billion USD
M&A deals
300
40 - Japanese companies are increasingly open-minded for international
200
cooperation, presenting opportunities to tap into production know-how &
20
100 …ONLY TO USA production networks, not only for access to domestic production capacity,
0 0 IN TERMS OF but also to gain benefits from production networks in Asia.
M&A value Number of deals
FDI OUTFLOWS - Increased exposure to international markets & competition will strengthen
SOURCE: IMF, OECD 2016 OR LATEST AVAILABLE YEAR.
the competitiveness of Japanese industry
GDP GROWTH CALCULATED ON QUARTERLY BASIS.
SWEDISH EXPORTS TO JAPAN JAPAN IS SWEDEN’S 2ND LARGEST
EXPORT MARKET IN APAC REGION
19bn
BY VALUE:
…SEK in 2016
60 54 1
50
Pharmaceutical products
40 5 585 million SEK, 29% of Swedish exports
30 48% increase from 2015 to 2016
19
20
14
10
10
0 2
India Korea Japan China
Vehicles
29%
BY CATEGORY: 2 488 million SEK, 13% of Swedish exports
Metal tools
Electrical 2%
74% increase from 2015 to 2016
machinery
3%
Paper & Other
11%
…pharmaceutical
pulp
3% Pharma- products
Chemical ceutical
products
products
4% 29% 3
Iron
& steel
5%
Medical
Machinery
equipment
7%
Wood &
Vehicles
13% 2 273 million SEK, 12% of Swedish exports
articles of
-11% decrease from 2015 to 2016
wood
11% Machinery
12%
SOURCE: INTRACEN 2017
OVERALL BUSINESS SATISFATION BUSINESS CLIMATE SURVEY
INDICATE OPTIMISITIC VIEW ON
3,82
(No. of companies)
JAPAN AMONG SW. COMPANIES
40
(On a scale 1-5, 5 34
35
very satisfactory
30 28
and 1 not at all
25 satisfactory)
20 …out of 5 Business Sweden carries out a bi-annual Business Climate Survey
13 14
15
10 10 among all Swedish subsidiaries, latest in April 2017.
10
4 4 The objective is to regularly monitor the Japanese business environment
5 2
0
1
and to gain a better understanding of Swedish companies’ opportunities
1 2 3 4 5 and challenges in Japan.
2015 2017
Response rate of 41% for roughly 150 Swedish subsidiaries
MARKET SHARE GROWTH HIGHLIGHTS – JAPAN BUSINESS CLIMATE SURVEY 2017
75%
Moderate perception of business climate, 3,39 out of 5 (3.16 in 2015)
Don't know
(5%)
Increase by more
than 50 %
Overall high business satisfaction, 3,82 out of 5 (3,61 in 2015)
Decrease by 10-
75% increased revenue and 53% increased operating margins in 2016
50% (9%)
(3%)
Decrease 1-10%
…of subsidiaries Half of the Swedish subsidiaries increased their market share and 63% of
(17%) increased their market companies have a market share of more than 6% in Japan
share in Japan 2016
Increase by 10-50%
“Product quality” & “design” are main competitive advantages in Japan
(34%)
Establishing new business/sales, obtaining right talent is challenging
Increase 1-10%
(32%)
77% indicate that Japanese companies are more open to collaboration
Business relations in Japan have led to benefits on other markets for 66%
Half believe the business climate will be more favorable in the coming two
years & 82% will increase operations in the coming two years
SOURCE: BUSINESS SWEDEN, BUSINESS CLIMATE SURVEY 2017
BY INDUSTRY SEGMENT OVERVIEW OF LOCAL SWEDISH
SUBSIDIARIES IN JAPAN
(Main industry of Swedish subsidiaries’ operations in Japan)
Defense & security
Food & drinks 3%
3%
Energy
7%
Sales and marketing is the main activity for almost all Swedish
Materials &
Transport
manufacturing
8%
33%
subsidiaries in Japan (92%), followed by production (6%).
ICT
12% Most companies are in materials & manufacturing (33%), Health care &
Life science (18%), Retail (16%), ICT (12%) industry segments.
Almost half of Swedish companies have less than 10 employees in
Retail Life Science
16% 18%
Japan (43%) and no expats in Japan. A few large companies account
for a majority of total number of employees as well as total revenue.
Japan is either one of the companies’ most important markets or a
BY COMPANY SIZE
(Size of Swedish companies in Japan by number of employees)
major market for 75% of the Swedish subsidiaries in Japan.
IMPORTANCE OF JAPAN IN A GLOBAL PERSPECTIVE
Large (250-)
18%
One of the company's largest markets 26%
Micro (-10) Medium (51-
43% 250)
10% Major market 46%
Niche market 23%
Small (11-50)
29%
Not siginificant globally 5%
0 5 10 15 20 25 30
SOURCE: BUSINESS SWEDEN, BUSINESS CLIMATE SURVEY 2017
TRADE
BUSINESS SWEDEN IN JAPAN
Cecilia Leiram Hideki Hayashi Petter Sund Haruki Tsuji
Trade office in Japan since 1965 – The trade council
officially established in 1972
Asumi Kojima Carl Norsten Yumiko Suzuki Carolina Santos
100+ clients in Japan annually
More than twice as many inquiries
Magnus Blondell Kumiko Ito Invest council in Japan since 1991
INVEST ”Invest in Sweden Agency” established in Japan 1995
6 segments for attracting high quality investments to Sweden
”Business Support Office” (BSO KK) established 1988
Michio Mori Yoko Söderberg Hideki Fujimoto Etsuko Yasuda
30-40 clients annually, mainly support with company
BUSINESS SUPPORT OFFICE establishment, bookkeeping, payroll, office space rental,
virtual office, administration etc.
5-6 new company establishments annually
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