Japanese SMEs Optimistic about Asian Economic Growth

Singapore, July 08, 2010

UPS today announced the results of its 2010 "UPS Asia Business Monitor (ABM)" survey, which looks at competitiveness from the perspective of small and medium sized enterprises (SMEs) in Asia. This year's survey reveals a noticeable shift from a pessimistic to an optimistic outlook of the Asian economy by Japanese SME decision makers. However, the 2010 UPS ABM also shows that Japanese SMEs are more cautious with their own company’s prospects. Many Japanese SMEs are also looking at ways to maintain their competitiveness and differentiate themselves.

Now in its sixth year, the annual survey has been commissioned by UPS since 2005. With Vietnam newly added this year, it covers approximately 1,350 SME leaders in 13 countries and territories in the Asia Pacific region, including Japan, China, and India. The survey looks at SME perspective and awareness of a variety of issues including the outlook for economic growth, employment, trade expansion, SME competitiveness and others.

Masato Umeno, president of UPS Japan, commented, "This survey shows that while Japanese SMEs have high hopes for Asian economic growth, they are cautious when it comes to the prospects of their own business growth. It also became clear that they aim to maintain competitiveness by adopting strategies that play to their strengths, such as their advanced technological capabilities and higher value-added products and services.  As a global trade expert, UPS will support Japanese SMEs as they strive to leverage their strengths in order to benefit grow their business."

1) Japanese SMEs optimistic about the region’s economic growth in 2010 
There is high optimism among SMEs in Japan, with 81 percent believing that Asia Pacific will experience growth this year. This is a huge improvement from the 19 percent last year.

The survey also revealed that 89 percent of Japanese SMEs expects higher trade growth prospects within Asia Pacific. Last year, only 22 percent of Japanese SMEs expected trade growth within the region. In addition, 35 percent of Japanese SMEs expect trade with Latin America to grow, followed by 33 percent who expect growth in trade with Africa.

2) Japanese SMEs pessimistic about their own business prospects
While Japanese SMEs have high hopes for Asian economic growth, they are concerned about the prospect of their own businesses. Only 24 percent are confident about their growth prospect versus 23 percent who believe their business will decline. The rest expect to remain status quo even when they expect the Asia Pacific economy to grow. The workforce projection also remains bleak, with just 10 percent of Japanese SMEs saying they will take on additional employees, 79 percent saying they will be not increase their workforce, and 11 percent saying they will reduce their workforce.

The dismal business prospects reflect a lack of confidence in their ability to compete with SMEs from other nations.  In survey questions on their competitiveness, Japanese SMEs showed a strong desire for funding and public support. Seventy-eight percent of Japanese SMEs considered access to funding and working capital as important and 69 percent regarded this as lacking, both of which are the largest percentage among all factors. Meanwhile, 73 percent said labor costs were important and 65 percent said this was lacking. Government support also rated highly with 71 percent seeing it as important and 67 percent as lacking.

3) Japanese SMEs aiming for growth through specialization and superior technology
The ABM survey shows that Japanese SMEs are moving towards differentiating themselves through better product quality and superior technology in order to remain competitive. When asked what was most needed for the continued growth of the Japanese economy in view of the increasing presence of emerging countries, 66 percent of Japanese SMEs said "value-added products and services generated by high technological skills." At the same time, only a few companies named options that involved looking overseas, such as "employment of human resources from overseas” (10 percent) and "Japanese companies expanding overseas for sales channels and production bases" (5 percent).

When asked how SMEs can outcompete large corporations, 24 percent of Japanese SMEs said "more specialized in a specific area," and 13 percent said "artisan skills", revealing the intention of Japanese SMEs to differentiate themselves from big corporations through specialization and technological prowess.

A new trend has emerged in regard to the type of industries that have the potential to utilize Japan's strengths. When asked which industries would be the key industry pillars in Japan over the next three to five years, “Automotive” was the top choice for Japanese SMEs with 45 percent followed by “Renewable resources/energy” at 38 percent. This illustrates their hopes that the green industries and automotive industries, with the promise of supplying environmentally friendly cars and meeting demand from emerging countries, will drive Japan’s economy in the future.

About "UPS Asia Business Monitor" Survey:

• UPS ABM series provides the latest insights into the changing opinions, attitudes and habits of business leaders from the region’s small and medium sized enterprises.
• UPS ABM 2010 surveyed 1,351 decision-makers of SMEs between March 11, 2010 and April 20, 2010. Interviews were conducted by an independent research organization, TNS, in Hong Kong using the respondents’ native language. SMEs are defined as companies with fewer than 250 employees.
• Interviews were conducted in the following 13 markets: Australia (100), China (150), Hong Kong (100), India (101), Indonesia (100), Japan (100), South Korea (100), Malaysia (100), Philippines (100), Singapore (100), Taiwan (100), Thailand (100), and Vietnam (100).
• Respondents were from a range of industries: electronics & electricals, construction, food and beverage, services, machine, manufacturing, automotive, garments & textiles, IT, tourism and hotel, healthcare and pharmaceuticals and others.