From Asia★ We asked 451 Japanese expatriates! "What will this year bring?"

The biggest risk factor for Japanese companies expanding their business in Asia is "rising labor costs." This was revealed in a survey conducted by NNA, which disseminates economic information on Asia. The survey was conducted in December 2013 targeting Japanese expatriates across Asia, with 451 respondents.

Q: What do you consider to be the risks for Japanese companies in your host country/region? (Multiple answers allowed)

 

The most frequently cited risk factor (multiple answers allowed) for Japanese companies in their host countries/regions was "rising labor costs" (305 respondents), accounting for over two-thirds of the total. Wage issues are a major concern, as they erode the cost advantage—one of the biggest benefits of expanding into Asia. Background factors cited included "labor shortages" (China), "frequent strikes" (Indonesia), and "legislation on minimum wages" (Malaysia). Many companies expressed distress, stating "labor costs are rising about 10% annually" (China) and "wages are becoming comparable to Japan's" (Hong Kong).
The next most frequently cited factor was "exchange rates" (207 respondents), which significantly impact cost competitiveness. Concerns persist over further currency depreciation this year, as seen last year in Indonesia and India.
Ranking third was "Political and Security Conditions" (181 respondents), with Thailand (58 respondents), where anti-government protests are ongoing, accounting for about 30% of this category. Harsh opinions were heard, such as "Political instability worsens all economic activities" and "(With labor costs also rising) there's no reason to produce in Thailand."

Q: What is your outlook for the economy in your assigned country/region in 2014?

 

Regarding economic outlook by country/region, the Philippines had the highest percentage of respondents expecting "improvement" (76%). Reasons included "It's attracting global attention, and foreign capital inflows will likely increase," and "It seems more mid-sized and larger local corporations are being established," reflecting a tangible sense of the favorable economic situation. India also exceeded half at 55%. Outside the Philippines, ASEAN countries showed subdued "improve" responses ranging from 20% to 35%. In Indonesia, facing general and presidential elections, negative opinions like "impact is unpredictable" were prevalent, with "deteriorate" (25%) being the highest in ASEAN.
In China, where growth slowdown is a concern, "will worsen" rose 4 percentage points from the previous year to 18%. Some point out that "inequality issues have reached a breaking point." In South Korea, concerns over the impact of exchange rate fluctuations, such as "exports plateauing due to the strong won," led to the highest proportion of "will worsen" responses (45%).
In the automotive sector, a key growth industry in Asia, positive sentiments were evident, such as "robust production activity driving the economy" (Thailand) and "steady growth in orders" (China). However, pessimistic views also emerged, including "demand has paused" (Thailand) and "decline due to the end of Thailand's eco-car tax breaks, plus excess inventory across Asia" (Malaysia).