The country known as the Land of the Rising Sun is not only noted for its economic, cultural and innovative achievements, it is currently in the international spotlight owing to its organisation of this year's Olympics. For German companies, the Japanese market remains very profitable and highly important, despite the difficult conditions brought about by the Covid-19 pandemic. In 2020 83% (prior year: 94%) of surveyed companies generated profits in Japan, with around one in five even reporting profit before taxes of more than 10% of revenue. This is evident from our current survey 'German Business in Japan 2021', which we conducted in collaboration with the German Chamber of Commerce and Industry in Japan (AHK Japan).
Positive expectations for the future
56% of German companies in Japan expect higher revenues for 2022 than in the current year, with 12% even expecting to be able to realise a substantial increase in revenue of more than 20%.
German companies are even more optimistic over the medium term: almost three quarters of respondents (73%) expect rising revenues and over half (55%) expect rising profits in the Japanese market. By contrast, only 5% and 4%, respectively, expect a decline in these two key performance indicators.
Japan is and remains a reliable partner for German companies
Japan is regarded by German companies as an anchor of stability and a safe haven. 95% of those surveyed respect the country for its reliability and stability in economic relations. Equally, 90% value Japan's economic robustness as well as social stability and security. As such, Japan is and remains an important partner for German companies.
The Japanese market is undisputedly of great relevance for the companies surveyed. The three most important strategic reasons cited for their company's presence in Japan are high sales potential in Japan (86%), the opportunity to identify trends at an early stage (59%), as well as the ability to observe Japanese competitors who are active on all world markets in their home market (53%).
The country's importance is also reflected in the choice of location for the Asian headquarters of German companies. Although Japan declined as the preferred Asia HQ location from 20% in the prior year to 16%, it remains in third place, closely behind Singapore and China.
48% of German companies see fuel cell and hydrogen technology as the most important fields of future cooperation with Japanese companies, closely followed by digital technologies and Greentech (39% each).
Pandemic and demographics impact German businesses in Japan
The biggest challenges for German companies in Japan this year are the pandemic-related entry and visa restrictions (76%). Almost as many respondents (74%) feel negatively affected by Japan's aging society and declining population as the country has the highest average age in the world.
Personal-related topics are main operative challenges
79% of companies surveyed cited the recruitment of qualified employees as the greatest operational challenge. Almost half of German companies in Japan (47%), or 13 percentage points more than in the previous year, also report difficulties in laying off employees.
Another trend appears to be a reduction in the number of employees posted to Japan from Germany: around one in two companies (47%) is expecting this. In addition to the pandemic-related visa restrictions, this is due to the increased use of digital communications and the relocation of functions to other Asian countries.
All other results and expectations of what German companies in Japan are anticipating can be found in our survey "German Business in Japan 2021".