The changing Japanese market amid COVID-19 and prospects for business development

JETRO has published “Invest Japan Report 2020,” a comprehensive report covering recent trends in inward foreign direct investment (FDI) to Japan.

Three main points

1. 2019 sees second largest amount of FDI, 2020 onward to require close monitoring

  • The FDI flow to Japan in 2019 increased 37.3% from the previous year to ¥4 trillion. Since 2014, for which comparable data is available, this is the second largest amount following 2016. Investment from the United States and major Asian countries in particular increased.
  • The stock of FDI in Japan at the end of 2019 was ¥33.9 trillion, a record high for the sixth consecutive year.
  • From January to September 2020, the FDI flow to Japan as a whole increased from the same period of the previous year, of which equity capital increased 13.6% from the same period of the previous year to ¥610 billion. On the other hand, as the number of greenfield investments was low compared to the same period of the last few years, the number of new investments will continue to require close monitoring.

2. Impact of COVID-19 crisis on foreign-affiliated companies

  • According to JETRO’s survey of foreign-affiliated companies in Japan*, more than 90% of enterprises responded that they were negatively affected by COVID-19, as of April and July 2020, respectively. Many companies cited a decline in sales as a specific impact, and the largest number of respondents answered that it would take until the first half of 2021 to compensate for the sales decrease.
  • Even under these circumstances, less than 10% of companies would consider downsizing or withdrawing business in Japan, and the majority said that they would continue their business. Regarding the attractiveness of the Japanese market, more than 60% of companies cited the current market size and growth of relevant industries.

3. Further acceleration of digitalization of Japanese market expected due to COVID-19

  • While many companies are introducing telework, the rapid introduction has also raised awareness of issues, which is leading to business growth for foreign-affiliated companies that provide relevant digital tools.
  • While motivation to consume has declined, an increase in online expenditures and cashless payments have been observed in line with efforts to reduce contact between people, which is expected to result in the future growth of relevant industries.
  • JETRO has been strengthening efforts at dissemination of information and company support in response to COVID-19. We plan on holding events highlighting regional issues and strengths, such as “Sendai, Fukushima × Disaster Prevention and Mitigation” and “Kyoto, Osaka, Kobe × Startups” in February 2021, by inviting foreign companies with interest and providing support to encourage investment in each region.
* Surveys on foreign-affiliated companies conducted by JETRO during the COVID-19 crisis:
JETRO conducted a survey in April 2020 and June to July 2020 on the impact of COVID-19 and future business development, mainly targeting JETRO client companies. Responses were collected from 376 foreign-affiliated companies in April and 193 in July.


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