Survey of Overseas Business Activities

Summary of The 27th Survey of Overseas Business Activities (Gist)

Highlights of The 27th Survey of Overseas Business Activities of Japanese Companies
MAY 1998

ENTERPRISE STATISTICS DIVISION RESEACH and STATISTICS DEPARTMENT, and INTERNATIONAL BUSINESS AFFAIRS DIVISION INDUSTRIAL POLICY BUREAU

E-Mail:qqcebh@meti.go.jp

Outline of the Survey:

The MITI published a business survey on business activities by Japanese companies in abroad. The survey covers 12,637 foreign affiliates by Japanese companies as of the end of March 1997 (excluding companies in the banking and finance, insurance and real estate industries).
It is the purpose of research to provide information on the business situation such as profits, sales, employment, etc. An analysis of these activities on domestic economy is also included. Main findings are as follows.

Main Points

1. Total foreign direct investment from Japan declined in FY1996, after 3 consecutive year increase, though that of the manufacturing sector was still on an upward trend. The number of manufactures starting up overseas business also decreased considerably.
2. The amount of sales achieved by foreign affiliates of Japanese companies increased considerably in both manufacturing and non-manufacturing sectors. For the first time, the sales by those affiliates in the manufacturing sector have surpassed total amount of exports from Japan. The overseas production ratio to domestic production rose to 11.6%. Current profits of those affiliates have increased since 1994 in both manufacturing and non-manufacturing sectors, and they still keep high profit level.
3. Plant and equipment investment by foreign affiliates in the manufacturing sector increased steadily, based on their stable profitability. Their internal reserves, which would be source of the funds of investment, were also on a high level.
4. By region, the affiliates sales in North America, as well as their current profits were at high level because of the economic prosperity in the U.S. In Asia, sales, ordinary profits as well as plant and equipment investment were increasing to the level beyond those in the U.S.
5. In Asian countries, the presence of foreign affiliates of Japanese companies had been very high, so there are growing concerns about an impact of Asian currency crisis which happened in summer of 1997.
6. The estimate of the effects of overseas business activities on the domestic economy suggests that those activities by Japanese affiliates may have a negative impact as a whole on trade balance, production and employment, and that the magnitude of impact has been gradually increasing. On the other hand, the amount of direct investment returns has been increasing every year, though it is still far below the level of that of U.S.

In the future, in order to make Japan's industrial structure level higher, it is necessary to remove the barriers of profit collection and also to promote economic structural reform to create business circumstances in Japan more attractive.

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