Japanese business in Europe

Top 30 Japanese employers in Italy 2021

We’ve just compiled our first ever Top 30 for Japanese employers in Italy (see below for updated 2022 version). We’ve thought for a while that Tōyō Keizai underreported the number of employees in Italy, and that it probably ranked fourth after the UK, Germany and France in terms of numbers employed. Tōyō Keizai records 16,500 employees at 270 companies. We estimate it’s more like 50,000 employees at 350 or so companies. We were also wondering what might be behind the Japanese Ministry of Foreign Affairs data showing a sudden rise from 300 Japanese companies in Italy in 2018 to 425 to 2019.

The answer to both puzzles might lie in the fact that the Hitachi group, which was the largest Japanese employer in Italy, acquired various rail businesses from Ansaldo in 2019 and one of its subsidiaries, Hitachi Chemical, acquired FIAMM in 2020. Hitachi has now dropped one rank, to the second largest Japanese employer in Italy, behind the NTT group, as Hitachi Chemical was acquired by Showa Denko in 2020. Another factor is that the NTT group has also grown substantially in Italy recently, mainly thanks to acquisitions by NTT Data.

Other large Japanese employers in Italy are the result of earlier acquisitions: Denso has some of its major manufacturing operations in Italy, deriving from acquisitions from Magneti Marelli more than 20 years’ ago. Denso Thermal Systems S.p.A. is now the regional headquarters for the air conditioning manufacturing business.

Mitsubishi Electric at #5 acquired Italian firm Climaveneta in 2015. Nidec, the 6th largest Japanese employer in Italy, acquired Ansaldo Sistemi Industriali S.p.A. in 2012. Sumitomo Heavy Industries acquired Lafert (electric motors and drives) in 2018.

So it seems likely the underestimation of Italy lies more in acquisitions unaccounted for than a sudden influx of Japanese greenfield investment.

Half of the Top 30 Japanese employers in Italy are also in the EMEA region top 30, so would be expected to have substantial presence in Italy too. The acquisitions detailed above show that Italy’s strengths, as far as Japanese companies are concerned, are in engineering – particularly rail and air conditioning. Judging by the companies that are only in the Italy Top 30, textiles (Toray) and pharmaceuticals (CBC and Takeda) are still attractive sectors for Japanese investment – and of course food – such as the Princes tomato processing plant, owned by Mitsubishi Corporation.

New 2022 edition

The 2022 Top 30 has just been published – it can be downloaded from our website here.

We can provide more detail on the 85 companies within the Top 30 – each company name in full and employee total per company (a truer indicator of size of the company than turnover in our opinion) for £9.99 – please email us for a PayPal invoice.

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UK still number one in Europe for Japanese automotive manufacturing – just

The recent news about Nissan and its Chinese battery manufacturing partner Envision deciding to go ahead with expanding the battery plant in Sunderland, to supply a new electric vehicle model, led me to revisit my researches on trends on the Japanese automotive sector in the Europe, Middle East and Africa region. I had blogged in October 2020 that for the first time in at least five years, according to Toyo Keizai data, there were more Japanese automotive manufacturers in Germany than in the UK.

Toyo Keizai’s new directory came out this April, and adding in their more recent data, it seems that the number of Japanese automotive manufacturers in Germany actually dropped by 11, from 31 to 22. So the UK is back in the top spot. Cross checking this against all data for Japanese companies in Germany, it seems that this is more that those 11 companies switched categories rather than left Germany. Many automotive suppliers of parts supply parts for other industries, so they may have decided that the bulk of their business was no longer automotive, or preferred not to be classified as automotive. There were also falls in the numbers of Japanese automotive manufacturers in Spain, Russia, Poland and Portugal.

The number of people employed by Japanese automotive manufacturers is perhaps a better indicator of general health than self classified numbers of companies. The numbers employed by Japanese automotive manufacturers in the UK has dropped by 12% comparing 2015/6 to 2020/21 and by around 8% over the year 2019/20 to 2020/2021. I only have comparable employee numbers for the rest of the region for the past two years, and these show that there has been a 2% drop employee numbers from 2019/20 to 2020/2021. The only other notable decrease was in France, where employment fell by 11%. The most growth was in Morocco, but only by 3%.

So the UK still has the most employees of Japanese automotive manufacturers in the region, but the number of employees has dropped below 30,000 for the first time in five years. The Czech Republic, Germany and Poland are not far behind in terms of employee numbers, and it’s possible Germany still does have more Japanese automotive related manufacturers than the UK, it’s just that they have chosen not to classify themselves as being in the automotive sector. The closure of Honda Swindon and other suppliers to the Swindon plant this month will probably result in the UK losing its top spot both in terms of employees and companies hosted.

The biggest Japanese automotive employers, apart from the actual car assemblers themselves, are the wire harness suppliers- Yazaki and Sumitomo Electric being the dominant Japan owned companies. Unsurprisingly, they base most of their factories in lower labour cost countries in Eastern Europe and North Africa.

Overall, Japanese automotive manufacturers employ around 280,000 people in the region, not including those in the supply chain who are wholesale/importing rather than manufacturing. So it is no wonder that any investment by them is welcome news, but it may take a little more than the recent Nissan announcement to reverse the trends in the UK and across the region.

Latest Top 30 Japanese companies in UK shows significant divergence

Our latest Top 30 Japanese companies in the UK shows a 1.3% drop overall in employee numbers from 2019 to 2020*, the first fall we have seen in the seven years we have been tracking the Top 30. As most Japanese companies in the UK use an April 1 to March 31 financial year, the fall in employee numbers dates to before COVID-19 pandemic began to have an impact. The small drop masks significant divergences – there were companies whose workforce shrank by over 10% such as Nissan, Honda and Nomura, and also companies which grew significantly, such as NTT and SoftBank.

This tallies with a recent report from Japan’s Ministry of Economy, Trade and Industry (METI) which reported in March 2021 that whereas automotive sector companies have a bleak outlook on the UK market, manufacturers in sectors such as chemicals, pharmaceuticals, electrical machinery and foods are far more positive about future expansion in the UK. According to METI, manufacturers represent around 39% of Japanese companies in the UK, the remainder being in the services and wholesale sectors. Services sectors, particularly IT related, would seem to be positive too from our researches, apart from Fujitsu, which has slipped down a further place to being the 4th largest Japanese employer in the UK, having been the largest for many years previously, to 2017/8.

The 96,000 who work for the Top 30 Japanese companies in the UK represent around 55% of the 176,000 (down from 179,000 the previous year) or so people who work for over a 1,000 Japanese companies in the UK, according to our estimates. The METI survey shows that despite the small drop in the numbers employed by the Top 30, larger companies (defined by METI as having over £600m turnover) will have weathered Brexit far more easily than smaller ones, having the resources and networks to set up agents in the EU, stockpile and open up new logistics and warehousing hubs on the Continent.

Certainly the 50 or so Japanese companies that have withdrawn from the UK over 2019-20 have been smaller in size (under 50 employees) and the larger ones who have shut down operations have usually not withdrawn entirely but rather turned their subsidiaries into branches or merged them with another UK based operation.

As we have said for some years now, Brexit has brought about an acceleration of trends which were happening anyway, and precipitated some long overdue tidying up.

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*2020 defined as the year ending 2020, where most of the year was in 2019, ie April 2019 to March 2020 or January 2019 to December 2019.

Top Japanese companies for CSR in UK

Only around 10% of Japanese companies in the UK mention any charitable donations in their annual reports, and yet according to Toyo Keizai, many of the largest Japanese companies in the UK top the rankings for contributions to corporate social responsibility, measured in Yen.*

Top of the ranking is Honda, which spent Y9.57bn ($87m) on contributing to society in 2019/20. Activities included a national robot contest and the Honda Eco Mileage Challenge – a competition to see how far a car can be driven on a liter of gasoline, as well as beach cleanups. CSR outside Japan is also included, such as Honda’s professional training course in South America, a Dream Riding Program for women in India and tree planting in Inner Mongolia.

Pharmaceutical companies have always been big corporate givers, unsurprisingly. Takeda is the second largest CSR donor in Japan, spending Y8.55bn (a significant increase on previous years) on the Takeda Science Foundation awards, research grants etc as well as volunteer activities. Third is NTT DoCoMo who have created a DoCoMo forest in 49 locations in Japan and provide scholarships for Asian students.

Other companies in the top 50 who also have substantial presence in the UK include Suntory, SECOM, MUFG, Canon, Panasonic, SoftBank, Sony, Aisin, Eisai, Komatsu, Nomura, Hitachi, Mitsubishi Corporation, Nissan, MS&AD, Daikin, SMFG, Mitsubishi Chemical, Fujitsu, Marubeni, Asahi Chemical, Asahi Breweries, Mitsubishi Heavy and Denso.

By contrast, the largest declared donations in money and “in kind” by Japanese companies in the UK are Toyota who donated £1.3m, Dentsu who donated £900,000 (but this might be across the global network) and Ricoh who donated £500m. None of these appear in Toyota Keizai’s rankings.

Honda of the UK donated £24,000 to charities in the UK last year as well as investing in various sustainability initiatives in education and community, safety, environment and diversity and inclusion.

Fujitsu was also a top 50 donor in the UK, along with MS Amlin (part of MS&AD), Sony Music Entertainment and Sony Interactive Entertainment, Mitsubishi Corp via its subsidiary Princes and Eisai.

As for the other big donors in Japan who don’t seem to be giving much in the UK, it’s either because they are but not reporting it, or it’s an opportunity for their employees to encourage them to contribute to UK CSR activities as well as in Japan.

*Toyo Keizai counts both direct contribution to CSR and business activities which have a social purpose.

Top 30 Japanese employers in Germany in 2021 compared to the UK

Germany and the UK are host to a similar number of Japanese companies, and a similar number of people are employed by Japanese companies in both countries. Comparing the 30 largest employers in each country reveals some significant differences however, reflecting their different strengths in services and manufacturing,

The top 30 largest Japanese employers in Germany employ around 99,000 people* – 57% of the total 167,000 people we estimate work for around 970 Japan owned companies in Germany. The UK top 30 employ around 94,000 people, just over half of the 180,000 people we estimate work for over 1100 Japan owned companies in the UK.

So there’s not that much difference in the scale or proportion, however only 12 companies appear both in the Germany and UK Top 30. They are largely the ICT/electronics companies such as Fujitsu, Sony, Ricoh, Canon, Panasonic, Konica Minolta, NTT and NTT Data, who presumably are at a scale which reflects population size and therefore domestic consumer and B2B demand for their products and services.

Outsourcing Inc is in the Top 30 of both, following a recent aggressive programme of acquisitions throughout Europe such such as acquiring Otto Workforce. Similarly NSG appears in both Top 30s as a result of its acquisition of Pilkington Glass in 2006 and Olympus as a result of building on its acquisitions of Keymed and Winter & Ibe several decades ago.

Hitachi only just makes it into the Top 30 for Germany, whereas it is number 2 in the UK, largely thanks to the organic expansion and acquisitions by Hitachi Rail.

The companies that only appear in the UK Top 30 are either in the automotive sector such as Nissan and Honda, in the financial services sector (MS&AD, MUFG, Nomura, SMFG) or the general trading companies and their acquisitions (Itochu, Mitsubishi Corporation, Marubeni). Toyota appears in both Top 30s, although it only has manufacturing in the UK. In Germany its main companies are Toyota Kreditbank and Toyota Gazoo Racing. Dentsu, the advertising agency, is also in the UK Top 30, reflecting the traditional strength of the UK in marketing services, leading to the acquisition of Aegis and many other British agencies and resulting in Dentsu’s global headquarters being located in London.

The companies that only appear in the Germany Top 30 are Sumitomo Electric, which is at number 1 due to the large numbers employed at its factories acquired from Volkswagen and Siemens in 2006, DMG Mori Seiki (another manufacturing acquisition), Lixil (acquired Grohe), JT International (its German factory a legacy of RJ Reynolds owning Hans Neueberg, in turn acquired by JT International), Showa Denko (owns SGL Carbon), and other companies with manufacturing in sectors of traditional strength for Germany such as chemicals, pharmaceuticals and engineering.

So in a way, the UK hosting (at least until July 2021) manufacturing plants for the three major Japanese car brands is more of an anomaly, and the rest of the Japanese investment in the UK reflects the UK’s strengths in services, particularly financial and commercial, as a centre of international trade, whereas Japanese investment in Germany reflects traditional German manufacturing and engineering strengths.

You can download the Top 30 Japanese companies in Germany and in the UK for free below:

The Top 30 is by corporate grouping, so each entry will contain several Japanese companies. In Germany’s case, there are 186 companies in the Top 30 employers. If you would like more detail on which companies appear in each group, their size in terms of employees and their location, please contact us. Prices start from 10c per company, with a 100 euro set up fee.

FREE PDF DOWNLOAD OF TOP 30 JAPANESE EMPLOYERS IN UK 2021

For the 2022 Top 30 Japanese companies in Germany, please see this post.

*This post and the Top 30 Japanese companies in Germany was updated on 25th April 2021.

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.

“Almost” no hesitation appointing a Belgian president – Mitsubishi Chemical chairman

Yoshimitsu Kobayashi, chairman of Mitsubishi Chemical was interviewed towards the end of 2020 by Nikkei Business magazine. Mitsubishi Chemical is not in our Top 30 Japanese employers in Europe, as it only employs around 3,200 in the region – mainly via the UK company Lucite International which it acquired in 2008 and other acquisitions in Germany, Italy and Switzerland.

Kobayashi has always been his own man, and somewhat unconventional by Japanese corporate standards, having studied at the Hebrew University of Jerusalem before joining Mitsubishi Chemical in 1974. He is nonetheless a leading light in Japanese business circles and sits on various government and employer bodies.

He was asked if capitalism will change, as there seems to be renewed interest in the kind of stakeholder capitalism that Japanese companies prefer to practise. His view is that Japanese companies should not just say “sampo yoshi” (three way satisfaction for the buyer, seller and society) and be complacent, but have to improve their productivity and capital efficiency, and make a profit.

Asked about the surprise appointment of Belgium-born Jean-Marc Gilson to President of Mitsubishi Chemical, Kobayashi said they had been preparing the ground for some time. Even when he chose the previous president, Ochi, he found it hard to make his mind up. So he set up a nominations committee with external directors with overseas experience. They were tasked with finding the best person globally – but it took five years for this message to get through.

He had “no hesitation – almost no” in appointing a foreign president. Rather, he was more afraid of turning back to the past and appointing a Japanese president. He wanted to make sure that whomever became president understood the “KAITEKI” philosophy that he had been promoting and take a radical approach to zero carbon and reduce reliance on oil and coal. This probably needed an outsider to push this portfolio transformation and improve Mitsubishi Chemical’s market capitalization. “What this company lacks most is the awareness of how to make money. I talked to Mr Gilson about this four or five times over Zoom, as he also had experience in a private equity fund, he explained this point very clearly. I hate to say, but a Japanese president could not give such a presentation.”

“Rather than Gilson’s own performance, I am hoping that by him becoming President, the whole company will up its game. Rather than being told to study English or speak English, wouldn’t you try to speak English of your own accord because the president is foreign?”

He is quite critical of the current Japanese government announcing zero carbon by 2050 without any actual design behind it. “There is no serious discussion at all” and yet per capita GDP in Japan is lower than Singapore, Hong Kong and South Korea.

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

Japanese companies in the UK are shrinking – is Brexit to blame?

The number of Japanese companies and their employees in the UK is starting to decline. Given that this is against the trend elsewhere in Europe, it is hard to avoid the conclusion that this is a reaction to Brexit.

Brexit has put up barriers to the UK trading within the Single Market, damaging sectors it used to have a comparative advantage in such as automotive manufacturing and financial services. The UK is now left with its global strength in services such as professional services, IT, design, marketing and education. It remains to be seen how much of this strength was also reliant on being part of the Single Market, in terms of being able to sell those services to the EU and benefit from the freedom of movement of the people providing or benefiting from those services. So far, Japanese companies seem to be happy to continue to access these services by basing their regional head offices in the UK, regardless of Brexit, or through acquiring British companies in the services sector.

The decline is from a high base. The UK has the highest stock of Japanese foreign direct investment, the highest number of employees of Japanese companies, and the most resident Japanese nationals in Europe.

The decline in numbers of Japanese companies in the UK is mainly due to a reduction in Japanese companies in the manufacturing and financial sectors. There has also been a drop in the number employed in automotive manufacturing. On top of this, the main driver of the past few years behind the rising employee and company numbers – big-ticket M&As followed by expansion in employee numbers – has been less of a force more recently.

To understand more about the trends in Japanese companies in the UK in terms of investment and employee numbers, how this compares with Germany, France, the Netherlands and Italy and what this might mean for the UK in future years, please download our report below:

Japanese companies in the UK

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Gravity still matters for Japanese trade and business expansion

TThe Japan External Trade Organisation has published its annual survey of the international operations of Japanese companies. An overview in English is available here, but not the full version that is available in Japanese only.

The English language overview only mentions Europe once, in the context of China, the US and Western Europe comprising 60% of the export destinations that Japanese companies are focusing on. The more detailed Japanese version breaks Western Europe into the UK and Western Europe excluding UK. As a consequence, the UK didn’t make the top 10 of future export destinations. 56.7% selected China (up from 49.1% in 2012), then the USA (50.3% – a large increase on 34.1% in 2012), Taiwan, Vietnam and Thailand. Western Europe excluding the UK was next, at #6, selected by 39.8%, up from 23.2% in 2012. Clearly the gravity model of trade is not dead yet, but a less hostile presidency or an Economic Partnership Agreement helps.

The report also highlights the interest of Japanese companies, particularly SMEs, in using e-commerce to trade abroad. However, digital trade does not seem to be overcoming the gravity model either. Again, China is by far the most popular sales destination for e-commerce, then the USA, Taiwan, Hong Kong, Singapore, South Korea and Thailand. France just pips the UK at 8th, cited by 16.3%, up from 10.4% in 2016. The UK was cited by 14.9% of companies, not much changed from 14.2% in 2012. In terms of where Japanese companies are focusing their future e-commerce efforts, China was selected by 40% (for food, drink, cosmetics, clothing, machinery, and haircare products), then the US for food – particularly tea and rice – cosmetics, clothing and machinery. Germany was selected by 5.2%, France by 4.9% and the UK by 3.4%.

In terms of where Japanese companies are planning to expand their business (not just via exports), a leap in the USA’s popularity stands out again – up 8% from 31.9% in 2019. Western Europe (including the UK) was 6th most popular, after China, Vietnam, the USA, Thailand and Taiwan, selected by 30.4%, up 5% on a year ago. Japanese companies who are looking to expand in Western Europe are mainly manufacturers of ICT and electronic devices, clothing and apparel and “other manufacturing”. Expanding in Western Europe was the fourth highest choice as a destination for expanding the R&D function for new product development, the fifth highest choice for expanding R&D for localisation, high value added manufacturing, regional coordination functions and logistics. The UK did best as the destination for R&D for new product development, coming in at 8th, after China, Vietnam, USA, Taiwan, Western Europe, Thailand, Indonesia and Singapore. It was the tenth ranked choice for R&D for localisation and for regional coordination, 11th for logistics, 12th for high value added manufacturing, 13th for sales and not in the top 15 for applied engineering.

The UK has become the world’s fifth largest economy again, having dropped to 6th, after India was hit by a recession. You might, therefore, have expected the UK to rank higher if market size were all that counted. That it has not is partly due to gravity, but also the maturity of the UK-Japan business relationship and Japanese companies’ search for growth, not to mention the uncertain impact of Brexit in the longer run.

Category: Japanese business in Europe