AHK Japan News

Good Prospects for German Business in Japan

2018/06/07

German companies in Japan are in even higher spirits compared to last year. According to the new Business Climate Survey by the AHK Japan among 400 companies, 71 percent of the managers (previous year: 58 percent) expect their business activities to improve over the next six months. With regard to the coming twelve months, 73 percent (previous year: 69 percent) are confident. According to Marcus Schuermann, Delegate of German Industry and Commerce in Japan and CEO of AHK Japan, “this points to good business in Japan this year.”

Profitable Business with Third Markets

One of the most noticeable results of the survey is how much promise German subsidiaries in Japan see in the business potential with Japanese partners outside Japan: The revenues they generate in third markets are up to four times higher than their local revenues in Japan. Here, German companies are able to get involved in particular because, as a result of having a subsidiary in Japan, they are already acquainted with the people in charge at the Japanese company headquarters and can actively accompany the decision making process. 64 percent of the companies think this way. Regarding this, Schuermann comments that "the strategic importance of engaging with Japan is strongly increasing."

German Suppliers as Project Partners

According to the survey, the factor of globalisation continues to exert the biggest impact on German business in Japan. 86 percent of the managers say so (previous year: 75 percent). One third describes the influence as "strong". One of the driving forces behind globalisation are general trading houses, which often take up a leadership role in large projects. "Companies involved in said projects often prefer German suppliers as partners", Schuermann explains. At the same time, to German companies, Japan increasingly presents an attractive location for their regional headquarters for Asian markets due to the increasing integration in Asia. 59 percent of the respondents report this. "This shows that Japan's importance as a global player is increasing", Schuermann says.

Many Arguments for Japan as a Location

The survey of the AHK Japan also outlines the reasons for German business in Japan. The managers particularly value the high sales potential in Japan (84 percent) as well as with Japanese clients worldwide (53 percent). 87 percent see the stability and reliability of business relationships as an important factor in location. For 40 percent of the parent companies the revenues generated in Japan are of high or a very high priority. According to the survey, the EU-Japan Free Trade Agreement, which could enter into force at the beginning of 2019, will have no influence on the situation of the German companies in Japan. One third of those companies expects a positive or very positive impact.

Further Results of the Survey

Out of the German companies active in Japan…

  • 87 percent record a profit before tax
  • 47 percent surpass a profit margin of eleven percent
  • 64 percent are involved in projects with Japanese companies outside Japan
  • 62 percent praise the openness for high-tech and innovation