News
The Japan External Trade Organization (JETRO) recently has released the results of its latest surveys on Japanese manufacturers in Europe and Turkey and Japanese manufacturers in the US. Both surveys were conducted between July and August 2010, and 314 valid replies were received from firms in Europe (including Turkey) (or 56.0% of companies sent questionnaires), while 806 replies were received for the US survey (68% of firms). The followings are the result of the survey.
Outlook for 2010
1.Against the backdrop of uncertainties in the US and European economies due to the euro crisis driven by Greece's debt woes and the risk of a double-dip recession, about 70% of Japanese manufacturers in both the US and Europe expect to post an operating profit in 2010, largely on the back of increased sales.
Comparing operating profits for this year with a year earlier, the difference between ratios of firms citing ''improved'' and ''declined'' (by both firms in the US and Europe) was the largest in a decade. Looking ahead to 2011, more than 90% of firms in both regions expect profits to ''improve'' or ''remain the same,'' revealing a positive outlook for the economic situation rather than concerns over a possible double-dip recession.
Meanwhile, Japanese manufacturers and their counterparts in both the US and Europe are facing intensifying price competition. And while respondents have a more positive outlook for 2010, mainly due to increased sales, they still are planning retrenchments in personnel and management/utility costs.
2. Biggest challenges for firms in Europe: exchange rate fluctuations and price competition
More than 60% of Japanese manufacturers in Europe forecast improved business in 2010 (compared to a year earlier), showing a recovery in business confidence. Reflecting this, nearly 70% of respondents expect operating profit for 2010 (the third highest in the past decade), compared to 50% for 2009, showing that firms managed to prosper (i.e. increase sales), despite uncertain economic conditions. The majority of respondents have plans to increase local production in the next one to two years and also expand sales in neighboring emerging countries, including Russia, which is on its way to an economic recovery.
Ranking at the top of firms' management problems/issues were ''exchange rate fluctuations'' and ''price competition with Korean or Chinese counterparts.'' To counter these challenges, more than 40% of respondent firms plan to ''expand local production,'' and an increasing number are eyeing to ''diversify or shift procurement source to China or other locations.'' To reduce costs, a notable number of respondents said they would “hire executive-level personnel locally.''
3. While facing challenges such as price competition, manufacturers in the US are hopeful for benefits from the environment market and government policies to boost exports.
According to the survey, growth in capital investment and employment among Japanese manufactures in the US seems to be leveling off, suggesting that firms are still waiting to make their next moves, as the economic recovery gains speed. However, they feel the worst is over.
Management problems/issues cited most by firms included ''lower sales due to price competition'' and ''cost increases due to yen rise and spike in raw material costs.'' Firms expressed concerns over possible rising health care costs under the health care reform bill passed by Congress in March.
Firms seem mostly positive about the booming environment market, seeing opportunities in solar and environmentally-friendly vehicles, while others anticipate increased orders from local firms on the back of the Obama Administration’s export growth strategy.
