Business Climate Survey: German Business in Japan 2025

95% of German companies value Japan's stability in times of geopolitical upheaval

In the year of Expo 2025 in Osaka, Japan impresses with its fundamentals: 82% of German companies generated profits in Japan in 2024; 23% achieved pre-tax profit margins of more than 10%

•  Success story of the last decade: 64% of companies increased their turnover in the last ten years, 26% tripled it or achieved even more growth
• Differentiated view of new U.S. Administration: 22% of respondents expect President Donald Trump's re-election to have a positive impact on their business in Japan (+10 percentage points compared to his first election in 2017); 39% expect negative consequences
• Japan as a global partner for Germany: 61% (+14 percentage points compared to the previous year) want to participate in Japan's business networks, 63% cooperate with Japanese partners in third countries (+10 percentage points compared to the previous year), 61% see a growing willingness of Japanese companies to cooperate with foreign companies
• Biggest challenges: Recruitment of qualified personnel (82%) and exchange rate risks (77%)

April 2, 2025 | Tokyo/Berlin. Especially in geopolitically uncertain times, Japan is a stable and profitable market for German companies. This is shown by the new business climate survey “German Business in Japan 2025” by the German Chamber of Industry and Commerce in Japan (AHK Japan) and KPMG Germany

According to the survey, German companies give Japan an excellent rating as a business location: 95% value the country's economic stability, 93% praise the stable and reliable business relationships, 87% the social stability and security in the country and 80% the political stability and democratic pillars.

In addition, 90% of respondents rated the high level of qualification of skilled workers as particularly positive. The highly developed infrastructure (87%) and openness to technology and innovation (76%) also contribute to its attractiveness.

German companies in Japan with solid profits and growth ambitions

Despite global economic turbulence, German companies in Japan remain on course for success. In 2024, 82% generated a profit, 23% achieved pre-tax margins of over 10%. For almost half of the companies surveyed (47%), Japan is one of the five largest sources of revenue and earnings for the entire group.

“Japan is and remains an attractive market for German companies. ‘Making money in Japan’ is thus once again underlined by the respondents. The fact that so many companies achieve pre-tax profits, and as many as 23% of them more than 10%, underlines that business is adequate and puts Japan in the top global league of particularly attractive markets. This is also confirmed by the surveys of the last ten years,” says Marcus Schürmann, Managing Director of AHK Japan.

The outlook for the future is also optimistic: 73% expect sales to increase in 2025, 80% expect this to be the case in 2026. Profitability remains high: 61% of companies expect a higher margin in the current year, 70% forecast this for the following year.

Just under one in three companies (31%) are planning higher investments in 2025; a good one in two (52%) want to hire additional employees. For 2026, these figures rise to 46% and 59% respectively.

Does engagement in Japan promote resilience?

German companies also have a differentiated view on the new U.S. administration. 22% expect President Donald Trump’s re-election to have positive effects for their business in Japan, while 39% remain neutral. At 39%, there are also skeptical assessments, but significantly fewer than in Germany. Compared to the survey results for President Trump's first election as US president in 2017, the hope of German companies in Japan has also increased (+10 percentage points).

“The US has a similarly high trade deficit with Japan as it does with Germany - around 70 billion US dollars. Nevertheless, German companies in Japan are noticeably more relaxed about the new U.S. administration’s economic policy agenda and expect fewer repercussions. One key factor here is the strategic partnership between the US and Japan in Asia. This is another reason why companies in Germany should consider establishing and expanding their presence in Japan”, explains Andreas Glunz, Managing Partner International Business at KPMG in Germany.

Japan as Germany's partner in global competition between the major powers

For 86% of the companies surveyed, Japan’s high sales potential is the most important reason for their involvement in Japan (+5 percentage points compared to the previous year). This is followed by participation in the global business networks of Japanese corporations as the second most important reason (61%, +14 percentage points compared to the previous year).

In this context, German companies in Japan are increasingly using their contacts with Japanese partners to cooperate outside Japan: 63% work together in third markets (+10 percentage points compared to the previous year). Cooperation is not limited to a specific region, but encompasses the ASEAN countries (68%), Europe (55%), China (44%), North America (40%) and India (33%). Cooperation is increasing particularly strongly in the European domestic market, namely by +12 percentage points.

“As the third and fourth largest economies, German and Japanese companies are in direct competition globally - especially in key sectors such as automotive engineering, mechanical engineering and high technology. At the same time, cooperation is growing, for example in hydrogen technology and Industry 4.0. The increasing cooperation between German and Japanese companies is strengthening their position in the geopolitical competition with the USA and China,” emphasizes Andreas Glunz, Managing Partner International Business at KPMG in Germany (KPMG). “German and Japanese companies are cooperating particularly in their respective home markets in Asia and Europe.”

The openness of Japanese companies to cooperation with foreign partners has grown significantly over the past ten years. 61% of respondents confirm this.

“The Global South is playing an increasingly important role in the context of business potential in third markets. While Japan's and Germany's trade volumes with G77 countries in the Global South are on a comparable level, Japan's investments in these countries are a higher than Germany's at around USD 638 billion (2023). It is very worthwhile to understand how Japan invests in these regions to derive business potential”, explains Marcus Schürmann, Managing Director of AHK Japan.

Learning from Japan

61% cite the recognition of new trends in technology and innovation as the reason for their involvement in Japan. Observing Japanese competitors is relevant for 57% of companies, as German companies are in competition with them worldwide.

“Japan is not a hundred-meter sprint, but a marathon. If you want to be successful here, you have to invest in building business relationships over many years. But those who are prepared to master the long haul will find a stable and trusting basis - both in the Japanese market and for joint success in third markets,” reports Andreas Glunz, Divisional Director International Business at KPMG in Germany from his own experience.

Nearshoring and regional integration as investment drivers

Geopolitical uncertainties and the need for robust supply chains are reinforcing the trend towards nearshoring: 29% of companies see this as the key to resilience - an increase of 6 percentage points compared to 2024.

“Production in Japan for Japan as well as for Asia and worldwide is a growing trend,” observes Marcus Schürmann, Managing Director of AHK Japan. “Asia's oldest industrialized nation offers attractive framework conditions and competitive cost structures not only for newcomers, but also for companies planning secondary investments. The Japanese government and prefectures offer comprehensive support in this regard.”

New hires and currency risks as the biggest challenges

A shortage of skilled workers remains the biggest challenge for 82% of companies in Japan - due to an ageing and shrinking society. The yen, which has been weak for four years, and Japan's high national debt are leading to increasing currency risks. 77% of companies cite this as a challenge.
  

About the Business Climate Survey

AHK Japan and KPMG AG Wirtschaftsprüfungsgesellschaft surveyed 148 Japanese subsidiaries of German corporations for the business climate survey "German Business in Japan 2025". The survey was conducted between January 31 and February 16, 2025 and focused on the economic outlook of German companies in Japan as well as their challenges and business opportunities.