Foreign Direct Investment

Japan in the UK – The Brexit Agreement 5 and 10 years on

It is five years ago today that David Henig, director of the UK Trade Policy Project at the think-tank European Centre for International Political Economy (ECIPE) and Pernille Rudlin, Managing Director of Rudlin Consulting, were the speakers for the Japan Society’s webinar – The Brexit Agreement One Month On.

Viewing it again, and looking at the data five years on, have our predictions stood the test of time?

David Henig‘s 5 key points:

No surprise that it was disruptive – this was the biggest change in international trade for many years, and would inevitably have a disruptive impact, particularly in terms of food and VAT. The disruption would lessen over time, but the barriers to trade and unpredictability of further impacts will not go away.
Long-term economic adjustment will occur – because of the barriers to trade – this will impact smaller companies particularly, and there will be a loss of manufacturing capability. There will be an absolute decline in goods trade. The impact on services is less clear – they are likely to be less affected, and there may even be an increase in the supply of remote services. There may also be a substitution of UK based production for imports.
The UK government does not understand trade, in particularly the importance of non tariff barriers, and focuses too much on tariff reductions.
Nissan was a national champion of getting a deal rather than a “no deal” – particularly getting a better deal on rules of origin for electric vehicles than might have been expected.
The UK will seek to improve relations with the EU, after some interval – years rather than weeks or months. The UK could join the CPTPP and have deals with Australia and New Zealand. The US deal is likely to be delayed because Biden is not interested. These deals will not, however, have much impact on the British economy, which is likely to continue to be negatively impacted by Brexit.

Pernille Rudlin’s “Big Theory of Brexit” for Japanese companies in the UK

Pernille Rudlin described her Big Theory of Brexit as being that it had accelerated trends that were already there for Japanese companies. Japanese companies are highly risk averse, and had been preparing for a hard Brexit for six years already, and this had given them an incentive to undertake consolidation and restructuring which they might have been contemplating already.

Three trends in Japanese companies in the UK 2016-2021

Looking over the past five years (2016-2021), some trends were already apparent:

The number of Japanese companies based in the UK has declined
The number of UK based employees of Japanese companies has fallen since 2018
Investment flows from Japan into the UK have decreased, with some disinvestment

However this is from a high base, and very few Japanese companies are quitting the UK entirely – and it is unlikely they ever will.

The 2026 update on the above 3 trends:

The number of Japanese companies based in the UK has continued to decline since 2015, whereas there has been an increase in the number of Japanese companies hosted by other major European countries.

2. The number of UK employees of Japanese companies has stagnated since 2018-9

…with a small uptick in the past two years – resulting in a 20% net growth since 2015/6. This was lower than the overall growth in employees of Japanese companies in the Europe, Middle East and Africa region since 2015/6 which we estimate as being around 30%.

3. Investment flows from Japan into the UK have decreased, with some disinvestment, but seem to be picking up again

and the net flow over 2016-2024 was higher for the UK than for the Netherlands or Germany.

Pernille then looked at sector by sector trends in the Japan Society webinar, for 2016-2021. Comparing this with what happened in the next five years to each sector will be covered in a later post.

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Biggest foreign companies in Japan

It all depends on what you mean by big, of course. And, it turns out, what you mean by foreign.

Our favourite way of measuring size and growth at Rudlin Consulting has been by numbers of employees, because ranking by capital or turnover risks comparing apples to oranges. Taking a look at the rankings compiled by Toyo Keizai, the top 10 foreign companies in Japan in terms of numbers of employees are:

Accenture (25,000 employees)
Gibraltar Life Insurance (12,003 – US parent company Prudential)
Mitsubishi Fuso Truck and Bus (10,633 – German parent company Daimler Truck)
Metlife (8,569 US parent company)
Prudential Life Insurance (6,169 US parent company)
AIG (6,064 US parent company)
Proterial (5,759 was Hitachi Metals, now owned by Bain)
Sharp (5,603, now owned by Taiwan’s Foxconn/Hon Hai)
Starbucks (5,505 US parent company)
Bosch (5,254 German parent company)

It’s interesting to note that the majority of these companies are services sector, particularly insurance companies. Three out of the four manufacturing companies were originally Japanese but have been acquired by foreign companies. Some of the life insurance companies have also built up presence in Japan through acquisition, but are also divesting. Bosch also acquired a few Japan owned businesses but also divested its stake in Denso.

Toyo Keizai has not designated a nationality or parent company for Accenture, presumably because of being a federation of local partnerships. Similarly, EY and Deloitte should be in the top 10 as both employ over 10,000 but because of the partnership structure are not included in Toyo Keizai Rankings.

The rankings by capital (not market capitalization) are dominated by financial services sector companies:

Nippon Paint (now majority owned by Singapore based Wuthelam Holdings)
Metlife
IBM Japan
BNP Paribas Securities
Citigroup Securities
Axa Life
Goldman Sachs Securities
Bank of America Securities
Gibraltar Life
JP Morgan Securities

The rankings by turnover are:

Sharp
Nippon Paint
Microsoft Japan
Chugai (owned by Roche)
Proterial
IBM Japan
Mitsubishi Fuso Truck
NOK (owned by German company Freudenberg)
Accenture
Mercedes Benz

60% of these companies were originally Japanese.

Looking at all three rankings, it’s not surprising to see that these companies are long established in Japan. Looking at the newcomers, and the sectors of the future, there is a clear trend of IT, systems and software companies entering the Japanese market, primarily from the USA, but also France, Germany, Luxembourg, South Korea, Taiwan, Vietnam, and the UK. We’ve certainly seen a marked increase in enquiries for our services at Japan Intercultural Consulting from non-Japanese companies in this sector over the past couple of years. Japanese companies are embarking on digital transformation and further globalization, and the organisational change that this entails throws up plenty of cross cultural challenges both for the suppliers of digital technology and their clients.

Japan Intercultural Consulting holds regular online seminars covering topics such as cross cultural communications, business trips to Japan and what Japanese customers want.

The puzzle of Japanese foreign direct investment in the UK

Something has been puzzling me for a few years about Japanese foreign investment in the UK. The net investment by Japanese companies in the British “communications” sector since 2016 is US$55bn, over three times more than the next largest net investment, which was in the food manufacturing sector.

There have been various acquisitions and investments over the past few years in British food manufacturers that I am aware of; Zensho acquiring Taiko Foods and Yo! Sushi, Mizkan acquiring various British food brands and factories for Branston, Haywards and Sarsons, Calbee acquiring Seabrook Crisps and various acquisitions in fish processing.

But what Japanese “communications” companies could have invested billions in the UK? The Japanese term used by the Ministry of Finance for the communications sector is 通信業 (tsuushingyou) and the main players in Japan in this sector (perhaps in the UK we would use the term telecommunications) are considered to be NTT, KDDI and SoftBank. NTT and KDDI have been investing in data centers in the UK in recent years, and NTT placed its global non-Japan HQ in London, but surely this would not have cost tens of billions. Which leaves SoftBank.

SoftBank spent US$6.5bn on acquiring ARM in 2016, which may account for the amount shown in 2017. But what about the $10bns thereafter, and the large withdrawal of over US$20bn in 2020? I am guessing this must be money moving in and out of SoftBank’s Vision Fund, which is headquartered in London and managed by SoftBank Investment Advisers.

Another puzzle is what is going on in the services sector – US$33bn was invested in Britain 2016 and then a disinvestment of US$32bn in 2018, leaving a net investment of only US$661m. “Services” is a very large umbrella, and may have covered the shifting of European logistics, warehousing and headquarter services functions out of the UK and the capital to go with it, to the EU in preparation for Brexit.

There were disinvestments in the finance and insurance sector in 2018, 2019 and 2022 but overall a net investment of US$6.7bn. Judging by the dates, the net positive total is “despite” Brexit and the Truss budget.

Transportation equipment manufacturing, which would include car manufacturing saw a few instances of disinvestment, primarily related to Honda closing Swindon in 2021 and some of its suppliers shutting up shop in the UK. Overall, despite some tough years, the sector is $3bn in the black, in terms of net investment since 2016, helped by a $2bn investment in 2024. Japanese net investment in almost all other sectors apart from services has outstripped this, however.

For comparison, the charts for the main investments in Germany and the Netherlands are given below:

Comparing by sector, in finance and insurance, the Netherlands has yet again been the clear beneficiary of Brexit, receiving around US$21bn in net investment, with Germany receiving around around US$9bn, compared to US$6.7bn for the UK.

For transportation equipment manufacturing, Germany is the clear winner with US$9.5bn net investment 2016-2024, compared to US$3.7bn to the UK and US$1.75bn to the Netherlands – even though Germany does not host any Japanese OEM car manufacturing.

The investment by Japanese companies into the UK “communications” sector at US$55bn dwarfs the US$2.8bn invested in the Netherlands and US$1.5bn invested in Germany – which does reinforce the view that this is a SoftBank Vision Fund driven figure, rather than any actual investment in the British telecommunications infrastructure. You might have expected to see comparable investments from NTT in Germany and the Netherlands if it had been a business decision rather than an investment fund decision.

Overall, the comparative advantages in trade and investment between the three economies, in Japanese eyes is clear – Britain – digital, services and communications (despite the SoftBank reality distortion effect), Germany – automotive and chemical related manufacturing and corporate banking and the Netherlands – continuing to be strong in food manufacturing, but now also seen as an EU base for financial services headquarters – effective from a tax perspective, but not needing as many employees as manufacturing.

For further insights on Japanese foreign direct investment in the UK and EMEA financial services sector, our Japanese Financial Services in the UK and EMEA 2025 report and directory can be purchased and downloaded here.

What is a Japanese company anyway?

One of many jobs I did not get over the years was a board position for an investment trust focused on Japan. In the “any other questions for us?” bit at the end, I raised the issue of “how do you define a Japanese company? Is it enough just to say it is listed on the Tokyo Stock Exchange? Or headquartered in Japan?” In retrospect, a foolish question to ask at that point and the chair simply shut me down and said that was a topic for debate for another day. Which of course never happened. And a year or two after that interview, I had a certain amount of schadenfreude watching the fund’s Net Asset Value take a dive.

Is SoftBank?

What triggered that question was that the fund had made a lot of money over the years investing in SoftBank, which is listed on the Tokyo Stock Exchange and is headquartered in Japan, but to my mind, not really a Japanese company. This is not some racist point about the founder, Masayoshi Son, being ethnically Korean. More that, as an investor, rather than just simply thinking of your portfolio as a series of aggregated regional or national risks, with each regional or national economy moving in a particular direction and counterbalancing each other, in the case of Japanese companies, another risk to consider might be the particular way that traditional Japanese companies behave and whether the fund is investing in those traditional Japanese companies, or emerging ones.

Nissan – run by a Mexican, using Chinese batteries, manufactured in the UK for sale to the US?

Even some of those traditional Japanese companies are no longer owned by Japanese shareholders. I was reminded of this by the recent coverage in the UK of the British government contributing a substantial part of the £1bn funding for an AESC electric vehicle battery factory to be built in Sunderland, to supply Nissan. AESC is described as “Japan-owned” but actually the controlling majority of shares is owned by Envision, a Shanghai based company. AESC’s headquarters are in Japan, however, and Nissan still owns some shares in it.

That this news came a day after the announcement of a UK-US trade deal which will (if signed) dramatically reduce tariffs on UK cars being exported to the USA does not seem a coincidence – even though some commentators say this scanty deal was rushed through so as to be announced in time for the 80th anniversary VE day.

Another announcement the UK government might have wanted to synchronise with was the leaked news that that the new, Mexican CEO of Nissan will announce tomorrow (13th May) plans to cut 20,000 jobs worldwide. Looking at the capacity utilisation and sales data for Nissan, Japan, the USA and China look likely to bear the brunt of this. Production has already ended in Argentina and India. Nissan will also announce that it is not going ahead with building a battery factory in Japan. So, using the Sunderland plant and the AESC factory for batteries for the new Leaf, and exporting to the USA looks like a plausible plan now and one that the UK government is presumably also happy to back.

Other Nissan suppliers, traditionally Japanese, are also now foreign owned, depending on how you classify this. Marelli (which used to be Calsonic Kansei in the UK) and Vantec (a logistics company) are both now owned by KKR Japan – the Japanese operation of the US owned private equity and investment company, Kohlberg Kravis Roberts.

Back to SoftBank again

If you look at our 30 largest Japan-owned companies in the UK, employing around 65,000 people, you’ll see some surprising names such as Kwik-Fit and The Fulham Shore (owners of The Real Greek and Franca Manca), which was acquired by Toridoll, who have other more obviously Japanese brands such as Marugame Udon. Other companies such as Stapleton’s Tyre Services, the Financial Times, Micheldever Tyre Services, Building Design Partnership and Liberata are also all acquisitions by Japanese companies. And of course, ARM, which was acquired by SoftBank in 2016 An acquisition which, according to the British government at the time, showed Britain’s economy can be successful after leaving the EU. SoftBank then tried to sell ARM to Nvidia, and finally floated it in 2023 – on NASDAQ, rather than the London Stock Exchange.

Hitachi Energy to expand operations in Sweden

Hitachi Energy has announced it will invest $4.5bn in its Swedish and Indian operations over the next three years. Hitachi Energy is the product of Hitachi’s acquisition in 2020 of ABB’s power grids business. ABB was itself the product of the merger of the Swiss Brown, Boveri & Cie and the Swedish Allmänna Svenska Elektriska Aktiebolaget in 1988.

In Sweden the investment will go towards expanding an existing factory and building a new plant, which will include a research and development center. It is expected the investment in Sweden and India will lead to an additional 3,500 employees. Hitachi Energy already has over 1,000 employees in Sweden.

MUFG Bank to invest in Hitachi’s UK based EV bus business

Hitachi set up two companies in the UK in 2023 – Hitachi ZeroCarbon Battery Holding and Hitachi ZeroCarbon Ltd – which lease storage batteries for EV buses. The company has expertise in the maintenance and management of storage batteries, and provides storage batteries on a flat-rate subscription basis.

MUFG Bank has just announced that it will initially invest £7.4m in the business and will further increase its investment in line with Hitachi ZeroCarbon’s business expansion. This is part of its “business co-creation investment” strategy whereby it is increasing the supply of risk funds through co-investments in companies’ new businesses and investments in startups. So far, it has invested in companies such as Astroscale Holdings, a Japanese company which is working on removing space debris.

Japanese companies in “wait and see mode” for 2023 overseas expansion

Japanese companies are increasingly in “wait and see” mode with regard to expanding their business overseas, according to a JETRO survey at the end of 2022. Although 43.5% of all those who responded to the survey (3,118) who already had operations outside Japan said they were going to invest further in their global business, this was outstripped by the 49.1% who said they would maintain their investment levels overseas “as is” and 5.2% who said they would reduce or withdraw from overseas business. This compares to 2019 where 66.9% who said they would invest more, 28.5% said they would maintain investment levels and 1.7% who were shrinking or withdrawing from overseas. This trend is stronger in larger companies than small and medium sized ones. 51% of those respondents who did not have any overseas operations said they were not intending to invest outside Japan in 2022, compared to 40.9% in 2019.

EU selected by 20.7%, UK by 2.6% for expansion

Chemicals, foods, electrical machinery and software were the bright spots in terms of overseas expansion. Top 3 destinations were USA (selected by 29.6%), Vietnam (26.5%) and China (26.4%), with the EU at number 4 (20.7%). The UK was 16th, selected by 2.6%. Product areas most focused on the EU were textiles and clothing and timber products – furniture and pulp.

Reasons for choosing regions to expand in were primarily around market size and growth potential, that there is a concentration of purchasers there – interestingly there is a clear difference between the USA (most of the sectors being targeted being manufacturing, so presumably Japanese companies B2B sales to other Japanese or US companies) whereas to Vietnam it is non-manufacturing, and more B2C, logistics and construction.

Onshoring

13% of respondents with overseas operations have already onshored or are looking at onshoring, particularly in health and beauty products, petrochemical and plastic products and IT equipment and components. Unsurprisingly, the key reason cited by 60% for doing so was the increased cost of manufacturing outside Japan. Other concerns are the falling yen and the long term the shortage of supplies – however it seems global logistics is becoming easier again.

Business transformation and hiring non-Japanese employees

In terms of changing business strategy or business model to deal with global trends, 30.5% said they were already undertaking business transformation, 39% said there was a need to change their strategy or model but they had not done it yet and 26.8% did not see any need for change.

Those who were transforming their businesses were doing it through acquiring new personnel (both domestic and overseas), or redeploying existing personnel. 51.5% have now hired someone non-Japanese in Japan – the highest level yet. A shortage of domestic personnel was the top reason for doing so, but not far behind were reasons to do with improving overseas marketing, management and negotiation strength, and also to globalise the HQ.

33.5% are undertaking digital transformation in 2022, compared to 28% in 2021, particularly in financial services and IT services. Reducing carbon emissions is well advanced in Japan (78.4% of large companies are undertaking zero carbon initiatives) but not so advanced with their overseas supply chains, with 40.6% of large companies having taken any steps and only 11.6% of small and medium sized companies including their overseas supply chains in any initiatives. Japanese customers are more demanding on carbon emission standards than overseas customers – 17% of Japanese have asked for statements of compliance on carbon emissions, but only 12% of overseas customers have done so.

Only 10% of Japanese companies have been conducting due diligence on human rights, but over 50% intend to do so within the next year. Over 50% of large Japanese companies have been asking for statements of compliance on human rights from their suppliers.

UK becoming like Japan in seeing overseas as growth driver

The spring 2022 Santander Bank Trade Barometer survey showed that 33% of UK businesses who were only domestic in focus up until now have ambitions to internationalise in the next three years – a greater proportion than in any previous survey. It was also the first time that overseas markets were seen as the most important driver of business recovery from the pandemic.

With growth prospects looking dim in the UK and trade with the EU having become more difficult thanks to Brexit, British companies are seeing overseas markets as their main source of growth, just as Japanese businesses did when the economic bubble burst.

This conclusion is illustrated in the Santander report with a photograph of a geisha in a taxi, looking at a mobile phone, but according to the survey, the main non-EU overseas markets that British companies are interested in are the US and Australia, EU countries such as Germany and France, and then India and China – ahead of Japan.

The survey was of around 1000 UK businesses with a minimum £1m turnover. Those companies who already had business overseas said they are selling more into non-EU markets than before Brexit. They saw the main operational challenges in most markets as shipping costs and bureaucracy. It was only for Japan that language and culture and having to adapt products and services accordingly were seen as the primary challenges. Perhaps deregulation in Japan and smoothing of inward investment has had an impact – bureaucracy in Japan was far less of a concern than for China, USA, India, Germany, UAE, Spain, Italy and France.

Of those British business who are currently domestic only, 42% are expecting to use online marketplaces and 40% are expecting use their own ecommerce site to sell their products. They will no doubt find that language and culture will indeed be an issue, even virtually, if they want to do business with Japanese customers. Their website will not only have to be translated, but their offering needs to be adapted to Japanese customer preferences. My belief is that physical presence in Japan is necessary for success, but only 20% are considering physical presence in the overseas markets.

Those businesses who are UK domestic but are now looking overseas also say their primary source of advice on overseas business is the internet. Whereas those who already have experience of overseas business say their main source of advice is a business partner in the target market.

I suspect many of these internet searches for advice will end up on our Japan Intercultural Consulting website, but it is notable that the only serious consulting enquiries we get are from companies who already have a physical presence or are about to set up an office in Japan. They have all been service sector companies – in recruiting, IT, advertising and financial services.

For them, the key challenge in Japan is recruiting, managing and retaining good quality employees – which may be why partnering with a Japanese company is still a preferred route.

This article by Pernille Rudlin first appeared in the Teikoku Databank News on 10th August 2022

Japanese companies’ employee numbers shrinking more in Europe than elsewhere

The quarterly survey by Japan’s Ministry of Economy, Trade and Industry reveals that employment in Japanese companies in Europe fell more than other regions in October to December 2020, a reflection of the continued declines in capital investment and sales in the region.

Globally, Japanese companies’ sales improved 3.8% on the previous year, the first increase in 8 quarters, but for Europe there was a 1.8% decline, the tenth consecutive quarterly decrease. Sales in North America fell slightly more, by 2%, but the decline has been more recent – over 5 quarters. Sales in Asia rose 9.3% (and comprise over half of Japanese companies’ sales overseas), the first growth in 8 quarters.

Capital investment declined across the board, by 17.6% – the fifth quarterly consecutive decline. The fall in investment in Europe was 19.6%, greater than North America’s 16.2% drop, but lower than the 23% fall in investment in Asia.

The total number of employees fell globally by 4%, the 7th consecutive quarterly decline, and by 7.9% in Europe, the 4th consecutive quarterly decline. The number of employees only fell by 3.8% in Asia (7th consecutive quarterly decline) and 3% in North America (4th consecutive quarterly decline).

Sectorally, the decline in sales in Europe was mainly in electrical machinery (13.9% drop) and transportation equipment (which includes automotive) with a 2.9% fall. Capital investment in the European transportation equipment sector fell by nearly 40% and there was a 15.4% decline in capital investment in the European electrical machinery sector too. European employee numbers fell 26.5% in electrical machinery and 3.8% in transportation equipment. There were increases in sales, investment and employment for Japanese companies in Europe in the chemical and general purpose machinery sectors, however.

Top 30 Japanese employers in Europe, Middle East, Africa 2021

The major Japanese employers in Europe, Middle East and Africa employ over 540,000 people, a 1.4%* rise comparing financial year 2018/9 to 2019/20, even though their global employee numbers have shrunk by around 1% over the same period. As in previous years, acquisitions of companies in the region are the main growth drivers.

The top 5 largest employers remain the same – Sumitomo Electric Industries, Yazaki, NTT Data, Fujitsu and Canon. The rest of the top 10 are the same, apart from Hitachi rising from 14 to 9, bumping Toyota Tsusho to number 11.

Exiting the Top 30 are Mitsubishi Corporation, Mitsubishi Electric and Olympus – not so much due to any decline as the growth of the new entrants LIXIL (following its acquisition of Grohe), NEC (acquiring KMD in Denmark and Northgate in UK) and Asahi (having acquired various European beer brands such as Peroni, Fullers and Grolsch).

Which company to work for

We have previously recommended that people wanting to work for a Japanese company should consider not just whether it is growing in the region but also what proportion of its employees are in the region. The greater the proportion, the more influence the region is likely to have in headquarters’ decisions.

The average for proportion of employees in the EMEA region of the top 30 is around 14%. Those with more than a quarter of their global employees in EMEA are NSG (due to its acquisition of Pilkington), Asahi Group (due to the acquisition of the beer brands mentioned above), Asahi Glass (the continuing influence of the 1981 Glaverbel acquisition), Sumitomo Electric Industries (the continuing influence of acquiring Volkswagen Bordnetze in 2006), Toyota Tsusho (acquired French company – mainly operating in Africa – CFAO in 2012).

The companies who score highly both in terms of growth and proportion of employees in the region are Sumitomo Electric Industries, Toyota Tsusho and NTT Data. The latter grew through acquisitions of Dimension Data, Keane and Itelligence but appears to have shrunk its EMEA employees over the 2018/9 to 2019/20 period. This is actually due to Latin America being excluded from the regional total in 2019/20, having been previously included. Dentsu also has nearly a quarter of its employees in EMEA and has grown nearly 50% since 2014/5 due to the acquisition of Aegis Network and subsequent smaller acquisitions, but the numbers are starting to decline as it starts to consolidate and restructure, aiming to cut its overseas roles by 12.5%.

Dentsu does not publish consolidated regional employee numbers, and neither do trading companies such as Mitsubishi Corporation, Toyota Tsusho and Itochu. Some have been inconsistent in publishing details – JT International for example – so we have had to use our best guesses and our own database. Overall the level of transparency in Japanese companies’ reporting on overseas employees has improved tremendously over the six years we have been tracking them, thanks to Japanese companies’ enthusiastic adoption of UN Sustainable Development Goals. Perhaps a lack of transparency on employee details should be a factor to consider in terms of desirability as an employer.

If you’re thinking of working for a Japanese company, a good way to signal that you know what you’re letting yourself in for would be to obtain the certificates from doing the e-learning modules on working in a Japanese company from the leading global Japan focused intercultural training company, Japan Intercultural Consulting.

*If NTT Data is excluded, as the 2018/9 employee numbers for the EMEA region in their annual report included Latin America, but Latin America was not included in the 2019/20 regional employee numbers. Including NTT Data in 2019/20 figures produces a small decline in the regional employee total for the Top 30 of -0.24%.

FREE PDF DOWNLOAD OF TOP 30 JAPANESE EMPLOYERS IN EMEA

Last updated by Pernille Rudlin at 2026-02-05.

Category: Foreign Direct Investment