Arab News Japan

TOKYO: More than 60% of Japanese companies have suffered serious harm to their overseas business due to the COVID-19 pandemic, a survey by the Japan External Trade Organization (JETRO) found. It said that sales in overseas markets for each company in the survey decreased on average by 40% in 2020.

The survey, conducted from October to December on 2,700 firms said also that export control restrictions introduced by China and the U.S. due to their bilateral friction has become the biggest concern regarding trade policies.

While the motivation to expand operations at existing overseas bases of Japanese companies was the lowest ever, the motivation for creating new opportunities overseas remained unchanged. An increasing number of companies showed motivation to diversify their overseas business development destinations especially to places such as the United States, Vietnam and Taiwan, while also focusing on China, the largest target market. The percentage of companies that “intend to engage in operations in the U.S. market” increased by nearly 10 percentage points from the previous year.

JETRO also found that increasing global risk is pressuring Japanese companies to shift to new business formats. About 70% of companies are currently reviewing their overseas business strategies and organizational structures. In particular, with the desire to develop sales channels using digital technology, the use of cross-border e-commerce is advancing as a new means of overseas sales. The utilization rate of cross-border EC has increased by about 15 percentage points in the past four years.

Regarding the impact on sales in FY2020 under the COVID-19 pandemic, 64.8% of companies conducting business overseas answered that there was a “negative impact” on overseas sales.

Regarding the impact on overseas sales in FY2020, by industry a high percentage of companies that were negatively affected by the slump in the markets of major countries included “cars/ car parts/ other transportation machinery.” A relatively high percentage of companies (13.9%) answered that they saw a positive impact on “food and beverages,” which have been in steady demand even during the pandemic.

The decrease in overseas sales in FY2020 due to COVID-19 reached an unexpected low of 38.4% (on average). This is more than 10 percentage points higher than the decrease in domestic sales (26.1%). This seems to be due to the strong impact of overseas lockdowns and travel restrictions stricter than those in Japan.

Regarding overseas business expansion policies (both new investments and further expansion of existing overseas bases) over the next three years or so, the percentage of companies answering that they “currently have overseas bases and will further expand them” was 19.1%, a decrease of more than 10 percentage points from the previous year (30.9%). Meanwhile, the percentage of companies that “intend to begin overseas business” has remained at almost the same level.

Regarding the countries and regions where companies aim to expand business overseas, China came out on top (48.1%), followed by Vietnam (40.9%) and the U.S. (40.1%).