Japanese Business Blog - Page 2 of 61

EU-Japan EPA Forum panel discussion on PR and the stakeholder ecosystem

Pernille Rudlin will be moderating a panel at the 3rd EU Japan EPA Forum at 13:30 BST/14:30 CET/21:30 JST on May 11 on “The value of strategic communications and public relations in the Shareholder and Stakeholder Ecosystem. What are the strategic tools? Why, when and how?”with panellists from Fujitsu, Asahi Breweries, Brunswick, Inoue PR and Kekst CNC.

The three days virtual event will be covering all aspects of M&A and is free, with a great line up of speakers. More details on the EU-Japan EPA Forum website.

For more content like this, subscribe to the free Rudlin Consulting Newsletter. 最新の在欧日系企業の状況については無料の月刊Rudlin Consulting ニューズレターにご登録ください。

Where Japanese employees feel most engaged

There isn’t really a Japanese word for employee engagement, which tells you something in itself, so the concept of “hatarakigai” – which Google Translate renders as “rewarding work” – is more often used when conducting surveys on employee engagement. Foreign companies tend to dominate surveys of top hatarakigai companies in Japan, in contrast to the ranking we covered in a previous post, of companies that are most popular choices for new male graduates, where only Accenture appeared in the top 100.

In the most recent Open Work survey of nearly 90,000 Japanese who had been working at a Japan based company for over a year, in terms of hatarakigai, foreign companies take the top 3 positions – Procter and Gamble is at #1, Salesforce.com at #2, Presidential Life Insurance at #3.

The obvious overlap with the popularity rankings for graduate hires is the Japanese trading companies. Itochu is #4 in terms of hatarakigai and was top of the popularity rankings for new graduate hires too. Itochu‘s rivals Mitsui and Mitsubishi Corp are at #9 and #10 for hatarakigai. The other major trading house, Sumitomo Corporation, trails somewhat at #25.

Various consulting companies, foreign and Japanese, including Accenture again, feature in the top 50 hatarakigai. Japanese manufacturers such as Sony, Asahi Chemical, Keyence, Murata and Astellas are also in the top 50.

The financial services companies that were so popular with the Japanese male graduates are not so dominant – Tokio Marine at #14, Nomura at #36, SMBC at #37 and Daiwa Securities at #43.

Open Work includes in its criteria:

satisfaction with pay and benefits,
employee morale,
transparency,
mutual respect between employees,
opportunity for growth for people in their 20s,
long term human resource development,
regulatory compliance/awareness

It points out the biggest gap between those companies who were in the top 10 and those in the top 50 was satisfaction with pay. Foreign companies are well known to pay better and not follow seniority based pay the way Japanese companies do. Japanese companies also have a tendency to sit on their cash for a rainy day rather than use it to raise the pay of their employees.

However those companies who had improved their ranking the most over the year were those who had improve their scores on long term human resource development. Japan Intercultural Consulting, which Rudlin Consulting represents in EMEA, is delighted to offer their training and coaching services in this regard.

Most popular employers for graduate men in Japan are companies that would make their mum proud

It’s probably a legacy from the good old sexist days in Japan when men and women followed very different corporate entry paths that Toyo Keizai chooses to split its graduate employer popularity ranking between males and females. Back in the day, men tended to be graduates of 4 year universities and follow the management track, whereas many of the women went to 2 year junior colleges and entered the administrative track.

It’s intriguing nonetheless to speculate why men in particular choose the companies they do, compared to the most popular choices for men and women combined.

Top choice for men for the second year running is the Japanese trading company Itochu. Known to be more maverick than its rather more staid rivals Mitsubishi Corp and Mitsui & Co, it has been beating them on net income in recent years too. And it pays well. It tops the combined male/female chart too. Mitsubishi Corp has regained some ground, however, and is at number 3 for men, up from 14 the previous year, but is clearly less popular with women, as the combined ranking is 8th. Mitsui is #30 for men, up from #43 a year ago and also less popular with women as the combined rank is #36. Sumitomo Corporation is at #38, down from #31 a year ago.

6 out of the top 10 choices for men are financial services companies – Nippon Life Insurance at #2 this year, up from #7 the previous year, Daiwa Securities at #4 (#3 the previous year), SMBC Nikko at #7 (down from #2), Mizuho Securities at #8 (down from #6), Mizuho Financial Group at #9, same rank as the previous year, Sumitomo Mitsui Trust and Banking at #10 up from #19.

SMBC had a big jump to #11 from #28 and MUFG is at #21 up from #29. However Nomura has significantly lost popularity, down to #27 from #17 and fares even worse in the combined male/female rankings, at #39.

Manufacturers are doing well – Sony up to #20 from #35, Toyota at #29 up from #49, Suntory up to #28 from #62. Panasonic is only at #67, but that’s a big improvement on #115 of a year ago.

The only non-Japanese employer for men in the top 100 is Accenture at #33, up one place from #34.

Overall, Japanese 21 year old men seem to have a preference for established Japanese companies that are performing well, pay well, and would make your mum proud.

Top 30 Japanese employers in Germany 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.

Top 30 Japanese Companies in Germany April 2021

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Free pdf of Top 30 largest Japanese employers in UK

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*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.

The path Japan should take to zero carbon – former Hitachi president Kawamura Takashi

Kawamura Takashi is famous in Japan for being instrumental in turning Hitachi round after its largest ever loss in 2009. He has just finished 3 years as chairman of TEPCO (Tokyo Electric Power). Nikkei Business asked for his view on the Japanese government goal of achieving zero carbon by 2050. While more diplomatic than Mr Kobayashi of Mitsubishi Chemical, he points out that country level goals need to be translated into industry based goals, and this cannot be left up to individual companies. Government, electric power companies, manufacturers and citizens will have to unite to do this, he says.

This could apply to Japanese companies in Europe as well in our opinion. There is more scope for Europeans working in Japanese companies to network with each other to collaborate to achieve sustainable development goals, and not just leave it up to the Japanese exaptriates.

Kawamura points out that it’s tough for each company to go it alone. Equipment around the world for companies such as steel manufacturers will become obsolete if they were to switch away from current product methods. Chemical companies could no longer make plastic from petroleum but artificial photosynthesis has been worked on for decades and is still unsuccessful.

“But if it cannot be done, the earth will be destroyed first”. It may seem that the solution is for Japan to “choose the path of returning to the lifestyle of the Edo period (1603-1868) living quietly with a small population” but Kawamura thinks this is not a responsible thing to do when Japan has the third largest GDP in the world.

Hydrogen can be one solution but the problem is making it. It can be made from water with nuclear power but of course this is controversial. There are few regions in Japan where the efficiency of generation of renewable power is high enough to make hydrogen however. So it might be necessary to find methods of producing hydrogen from overseas renewable energy power generation and transporting it to Japan for distribution as energy.

Kawamura says Japanese business leaders are too emotional. They cannot cut business lines which have been developed in their companies over the years, so end up having to bring in foreign executives to do it. “It’s a lie that Japanese can’t do it. Japanese companies don’t want to make calm decisions based on economic rationality, but Japanese really should do this for themselves.”

Asked if he will stay on another 3 years at TEPCO to help with zero carbon he says that at 81 he is too old and he is wanting to do things that give him ikigai (a reason for living outside of work – see our Japan Intercultural Consulting video on this) such as taking his time to read books, which he said he could not do when he was an executive.

“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%.

Further details of the Top 30 Japanese Employers in Europe can be found in our 1 pager here:

Top 30 Japanese companies in Europe 2021

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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.