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Survey on Planned Capital Spending forFiscal Years 2017, 2018 and 2019
August 1, 2018
Substantial Growth in Both Manufacturing and Non-manufacturingDriven by Investment for Expansion of Production Capacity and Urban Functions
Economic & Industrial Research Department
(Conducted in June 2018)
1
Outline of the Survey1. Survey subjects(1) Planned capital spending
Carried out since 1956, the survey provides an overview of capital spending in Japan by analyzing capital spending activity by Japanese firms (domestic non-consolidated; domestic and overseas consolidated). Investment trends, motivating factors, and other items are examined by industry.
(2) Opinion pollThis survey is mainly designed to identify the attitudes and perspectives of firms on key current issues.This year’s survey focuses on corporate “investment in a broader sense,” including tangible fixed asset investment, R&D and M&A, as well as environmental, social and governance–related activities.
2. Companies surveyedThe survey covers private corporations capitalized at JPY 1 billion or more, excluding those in the finance and insurance industries.(For the regional breakdowns, corporations with capital of JPY 100 million up to JPY 1 billion were added.)
3. Survey periodJune 25, 2018. Most of the responses to the questionnaire were obtained in June.
4. Response (questionnaires sent to 3,240 firms)Number of firms giving responses on domestic capital spending: 2,059 (response rate, 63.5%) Number of firms giving responses on overseas capital spending: 867 (response rate, 26.8%)Number of firms giving responses for the opinion poll: 1,220 (response rate, 37.7%)
5. Detailed resultsPlease visit: https://www.dbj.jp/investigate/equip/index.html (Japanese only)
2
ContentsExecutive Summary
1. Trends in Domestic Capital Spending
1-1. Total
1-2. Manufacturing
1-3. Non-manufacturing
2. Attitudes toward “Investment in a Broader Sense”
2-1. Concept of “Investment in a Broader Sense”
2-2. Capital Spending Overseas
2-3. R&D Activities
2-4. Investment in Information Technology
2-5. Human Investment
2-6. M&A
3. ESG Activities
(Appendices)
1. Planned domestic capital spending in FY2018 by major firms (capitalized at JPY 1 billion or over) shows an increase for the seventh consecutive year overall, up 21.6%, with investment rising substantially in both the manufacturing (up 27.2%) and non-manufacturing (up 18.5%) sectors.
2. Characteristics of domestic capital spending in FY2018 identified from the survey results
(1) In the manufacturing sector (up 27.2%), spending is expected to increase in a wide range of industries, led by investment in new electric vehicle models in automobiles, and in capacity enhancement and labor-saving including for auto components.
(2) In the non-manufacturing sector (up 18.5%), spending will continue for developing urban functions in transportation and real estate, and for attracting inbound tourists, mainly in services, while investment is expected to increase in retail stores and logistics to cope with the labor shortage.
3. Continuing from the previous year, our opinion poll this year focuses on “investment in a broader sense,” including overseas tangible fixed asset investment, R&D, information technology investment, human investment and M&A, as well as domestic tangible fixed asset investment.
As regards R&D, almost 40% of the manufacturers responded that they are increasingly utilizing open innovation, etc. Even among such manufacturers, however, most of the projects are implemented in collaboration with Japanese universities or research institutes, whereas cases of collaboration with SMEs, ventures or overseas institutions still represent a minority. As for information technology investment, about 30% of the respondents reported that they are utilizing, or considering utilizing, big data and AI, among others. In order to address human investment challenges, firms have improved the treatment of their employees, but still struggle to ensure diversity in working styles. Likewise, many respondents indicated difficulties in human resource development due to busy working schedules and the shortage of mentors. Japanese firms also became more aggressive in M&A over the previous year, as the percentage of firms acquiring another firm has risen in recent years.
Environmental, social and governance interest has been increasing, as 90% of the companies responded that they feel the need to act in this area. As important aspects of ESG, 40% of the respondents cited the environment or corporate governance, but only a handful of firms emphasized social aspects such as respect for human rights.
3
Executive Summary
1. Trends in Domestic Capital Spending
4
5
1-1. Total
▲40
▲30
▲20
▲10
0
10
20
30
90 95 00 05 10
(FY)
(Year-on-year, %)
FY2017(actual)
FY2018(planned)
(1,896 firms) (2,059 firms)
Total(excluding electric power)
2.3 [0.6]
21.6[21.3]
Manufacturing 0.8 27.2
Non-manufacturing 3.0 18.5(excluding electric power) [0.5] [17.7]
1-1-1. Trends in Domestic Capital Spending (Overview)
6
Figure 1-1-1-1. Domestic Capital Spending Figure 1-1-1-2. Growth in Capital Spending (FY1990-2018)
Notes: Based on the DBJ “Survey on Planned Capital Spending”; the same applies hereinafter unless otherwise noted.
(Year-on-year, %)
Manufacturing
Non-manufacturing
Total
[Planned]
18[Planned]
17[Actual]
Seventh straight year of growth driven by spending on capacity and enhancing urban functions
In the manufacturing sector, spending is expected to increase in a wide range of industries, led by investment in new electric vehicle models in automobiles, and in capacity expansion and labor-saving including for auto components.
In the non-manufacturing sector, spending will continue for developing urban functions in transportation and real estate, and for attracting inbound tourists, mainly in services, while investment is expected to increase in retail stores and logistics to cope with the labor shortage.
Manufacturing27.2
Total 21.6 Non-manufacturing
18.5
-
-
-
-
82
84
86
88
90
92
94
96
98
100
2000 05 10 15
10.9
11.2
21.6
1.6 2.3
▲ 20
▲ 15
▲ 10
▲ 5
0
5
10
15
20
25
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
1-1-2. Planned vs. Actual Figures
7
Planned figures for the current fiscal year tend to be revised downward before being materialized, as some of the planned projects do not go as planned due to revision or close examination of the plan or delay in construction works.
Figure 1-1-2-1. Planned vs. Actual Capital Spending Growth (Total)
Average for FY2011-17
Figure 1-1-2-2. Plan Realization Rate (Total)
(Actual/planned spending as of June, %)
(FY)
(Year-on-year, %)
Planned for current year
Actual
(FY)
-
-
-
-
14.5 14.2
27.2
4.7 0.8
▲ 40
▲ 30
▲ 20
▲ 10
0
10
20
30
40
00 02 04 06 08 10 12 14 16 18
1-1-3. Planned vs. Actual Figures (by Sector)
8
[Manufacturing] [Non-manufacturing]Figure 1-1-3. Pattern of Revision to Capital Spending Growth (Planned → Actual)
(Year-on-year, %)
(FY)(FY)
Planned for current year
Actual
8.8 9.5
18.5
0.2 3.0
▲ 40
▲ 30
▲ 20
▲ 10
0
10
20
30
00 02 04 06 08 10 12 14 16 18
In manufacturing, spending in FY2017 was reduced considerably vs. the plan due to delays in completion and revision to the plan, particularly in chemicals, general machinery and transport equipment. As for the non-manufacturing sector, the spending plan was revised downward mainly in real estate and transportation.
(Year-on-year, %)
-
-
-
-
-
-
-
-
9
1-1-4. Factors for Downward Revision to Capital Spending in FY2017
Figure 1-1-4. Factors for Downward Revision to Capital Spending in FY2017
Actual capital spending often fails to reach planned spending in both the manufacturing and non-manufacturing sectors largely due to leeway on budgets during the planning phase, or closer examination or revision of the plan. In many cases, the gap is also attributable to delays in construction works.
(Response rate, %)
Notes: Respondents may choose up to three answers. Data only covers those firms reporting less-than-planned capital spending.
(1) Manufacturing
(1) Decline in current earnings
(2) Increased uncertainty of business environment
(3) Decline in expected medium- to long-term rate of return
(4) Change in investment plan at the request of client
(5) Leeway on budget during the planning phase
(6) Closer examination of investment plan and elimination of waste
(7) Delay in construction schedule
(8) Cancellation/reduction of investment due to rising cost of construction
(9) Deterioration in the financing environment
(10) Other
(Response rate, %)
(2) Non-manufacturing
020406080
2017年度
【324社】
2018年度
【332社】
0 20 40 60 80
2017年度
【370社】
2018年度
【379社】FY2017 (324 firms)
FY2018(332 firms)
FY2017 (370 firms)
FY2018(379 firms)
9.8
▲ 10
▲ 8
▲ 6
▲ 4
▲ 2
0
2
4
6
8
10
12
2010 11 12 13 14 15 16 17 18(FY)
1-1-5. Estimate of Actual Capital Spending vs. Plan
10
Experience shows that the change of actual capital spending on the previous year often approximates the year-on-year change of planned capital spending, effectively serving as a reference for forecasting actual performance.
A mechanical estimation regarding the firms reporting their plans for both FY2018 and FY2017 indicates that actual capital spending in FY2018 will increase some 10% on the previous year in both manufacturing and non-manufacturing.
Figure 1-1-5. Change in Actual and Planned Capital Spending on Previous Year
(Year-on-year, %) (Year-on-year, %) (Year-on-year, %)
(1) Total (2) Manufacturing (3) Non-manufacturing
Planned spending current/previous year
Actual spending current/previous year 10.8
▲ 10
▲ 8
▲ 6
▲ 4
▲ 2
0
2
4
6
8
10
12
2010 11 12 13 14 15 16 17 18(FY)
9.2
▲ 10
▲ 8
▲ 6
▲ 4
▲ 2
0
2
4
6
8
10
12
2010 11 12 13 14 15 16 17 18(FY)
-----
-----
-----
71.9
49.5
96.7
40
50
60
70
80
90
100
110
120
130
140
150
91 95 2000 05 10 15
(%)
1-1-6. Capital Spending/Cash Flow Ratio and DI on Sales & Ordinary Profit
11
Domestic capital spending still stays within the limit of cash flow. Total capital spending/cash flow ratio, after rising for three straight years from FY2014, shows a decline in FY2017 as the growth of cash flow exceeds that of capital spending. The diffusion index on ordinary profit remains positive for FY2018, pointing to a continuing uptrend in corporate earnings.
Capital spending/cash flow ratio levels off
Note: Cash flow is calculated as follows: ordinary profit/2 + depreciation expenses(simplified formula assuming an effective corporate tax rate of 50%).
Total
Manufacturing
DI on sales DI on ordinary profit
FY2017actual
1,083 firms
FY2018planned
1,306 firms
FY2017actual
1,083 firms
FY2018planned
1,306 firms
Total 41.4 40.4 20.6 2.1
Manufacturing 52.0 49.5 25.9 6.7
Non-manufacturing 33.7 33.7 16.7 -1.2
(% pts)Non-manufacturing
(FY)
Figure 1-1-6-1. Trend of Capital Spending/Cash Flow Ratio Figure 1-1-6-2. DI on Sales & Ordinary Profit
[Actual]
Note: DI on sales, DI on ordinary profit =
(“increased revenue/profit” – “decreased revenue/profit”)valid total responses.
0
10
20
30
40
50
60
70
0 10 20 30 40 50 60 70 80 90 100
0
10
20
30
40
50
60
0 10 20 30 40 50 60 70 80 90 100
1-1-7. Plan for FY2018 (Skyline Graph)
12
Iron & steel5.2%
General machinery
21.7%
Electric machinery
34.1%
Transport equipment28.8%
Other28.9%
Construction16.3%
Wholesale & retail
26.2%
Real estate26.5%
Transportation26.2%
Telecommunications& information
4.3%Other11.5%
(Year-on-year, %)
(Share in non-manufacturing, %)
Figure 1-1-7. Composition and Growth of Capital Spending, by Major Industry (FY2018 Plan)
Paper & pulp51.6%
Chemicals29.3%
Food & beverages
27.9%
Manufacturingaverage27.2%
Non-manufacturingaverage18.5%
Services 23.8%
Non-ferrous metals37.9% Precision machinery
30.4%
Notes:Figures indicate changes in FY2018 on previous year. The larger the area, the greater the contribution to total spending.
(Year-on-year, %)
(Share in manufacturing, %)
Manufacturing○ Food & beverages (8.8%→27.9%)
Spending will increase substantially, driven by investment in rationalization and in high-value-added foods on the back of rising health consciousness.
○ Chemicals (-0.6%→29.3%) Spending will increase substantially, driven by the continued rise in investment in automobile components and R&D, as well as for fast-moving consumer goods and electronic/battery materials.
○ Petroleum (4.6%→46.6%)Spending will increase substantially with not only investment in distribution and power generation facilities but also maintenance and repair of refineries.
○ Iron & steel (7.3%→5.2%) Spending will rise for the third consecutive year, with expectations for continued construction works, including for the relining of coke ovens, and investment in a wide range of automobile components.
○ Non-ferrous metals (24.4%→37.9%)The second of substantial back-to-back increases is expected, driven by capacity investment in semiconductors, as well as automobile and electronic equipment components.
○ General machinery (0.6%→21.7%)Spending will increase substantially, led by capacity investment in industrial machinery and general machinery parts.
○ Electric machinery (-4.4%→34.1%)A substantial increase is expected, driven by capacity investment in electronic parts, particularly power semiconductors on the back of automobile electrification and energy-efficiency requirements, as well as in organic LED–related materials.
○ Precision machinery (7.4%→30.4%)Spending will rise with capacity investment in semiconductor production equipment, including the construction of new plants.
○ Automobiles (-1.5%→30.6%) Spending will increase substantially, driven by investment in new models, including for electrification, rationalization & labor-saving by leveraging IoT, and the development of R&D sites in anticipation of next-generation technologies including computer-aided software engineering.
Non-manufacturing○ Wholesale & retail (-2.1%→26.2%)
A substantial increase in spending is expected, as department stores increase investment in flagship stores, CVS Pharmacy continues investment in labor-saving, and GMS Japan enhances investment in outlets.
○ Real estate (-0.3%→26.5%)Spending will increase, led by investment in large-scale projects in urban areas, including international business centers and large complex facilities.
○ Transportation (3.9%→26.2%)Spending will increase substantially, driven by the expansion of works for speeding up and enhancing the safety improvements of railways, further increases in real estate development, as well as increased spending to acquire aircraft and develop logistics facilities.
○ Telecommunications & information (1.6%→4.3%)Spending will continue to increase, led by the further development of base stations in mobile communications and increased investment in network development in fixed-line telecommunications.
○ Services (16.8%→23.8%)Spending will rise for the fourth consecutive year, buoyed by active investment in hotels and in theme parks for increased value added, as more foreign tourists visit Japan.
1-1-8. Planned Capital Spending for FY2018 by Industry
Note: Figures in parentheses ( ) indicate changes in capital spending in the industry concerned (FY2017→FY2018).
13
1-2. Manufacturing
14
1-2-1. Trends in the Manufacturing Sector (1)
15
Figure 1-2-1. Industries with the Greatest Contribution to Planned Capital Spending for FY2018 (Manufacturing)
Increased spending planned in transport equipment and a wide range of industries, including chemicals and electric machinery
In the manufacturing sector, FY2018 will see capital spending rise for the fifth straight year as increased investment is planned in transport equipment for new models, including electric vehicles, and R&D, as well as in many other industries such as chemicals and electric machinery for capacity expansion and labor-saving, including for auto components.
(%)Year-on-
yearComposition
ratio Drivers of the increase/decrease
(1) Transport equipment 28.8 23.3Investment in new models, including for electrification and development of R&D centers for next-generationtechnologies
(2) Chemicals 29.3 15.7 Automobile battery–related materials, semiconductor materials, cosmetics
(3) Electric machinery 34.1 10.6Capacity expansion for electronic parts to be used in automobiles and smartphones, and for improving production efficiency
(4) General machinery 21.7 13.3 Capacity investment in industrial robot parts
Manufacturing as a whole 27.2
Note: Composition ratio is defined as the ratio of capital spending by each industry to that of the whole manufacturing sector in FY2017.
1-2-2. Trends in the Manufacturing Sector (2)
16
Investment in auto components to expand in various industries
In the manufacturing sector, investment in auto components will expand in a wide range of industries, including chemicals and non-ferrous metals for battery materials, and electric machinery for electronic parts.
Auto-related Other
Capital goodsGeneral machinery Machine tools and industrial robot parts
Precision machinery Semiconductor production equipment
Materials/components, intermediate
goods
ChemicalsBattery materials, exhaust purifying agents
Semiconductor materials, cosmetics, R&D
Iron & steel Components for reducing body weight Coke oven relining
Non-ferrous metals Battery materials Semiconductor materials
Electric machinery Electronic parts for automobiles Electronic parts for smartphones and production efficiency
Final demand
Automobile
Investment in new models, including for electrificationDevelopment of R&D centers for next-generation technologies
-
Food & beverages - High-value-added foods
Petroleum -Power generation/distribution facilities
Figure 1-2-2. Highlights of Planned Capital Spending for FY2018 in the Manufacturing Sector
Actual
Planned
1-2-3. Investment Motives (Composition)
17
Rising weight of production capacity expansion The share of “expansion of production capacity” will rise for the second straight year, driven by investment in
electronic parts, along with the share of “rationalization and labor-saving.” In contrast, the weight of “maintenance and repair,” which reached a record high in FY2017 according to the present survey, is expected to decline for the first time in three years, as investment in the relining of blast furnaces slows down in FY2018.
Note: Share of each investment motive in total capital spending, by value.
32.0
31.8
42.8
28.3
23.3
24.2
27.1
16.2
16.7
12.3
14.6
16.3
15.0
14.9
10.5
8.3
6.2
10.8
10.2
9.0
8.8
17.1
14.7
10.0
9.8
10.7
10.2
11.0
9.4
14.8
16.6
21.6
25.6
26.7
23.8
14.8
13.7
12.1
14.9
13.9
14.9
14.4
1990
2000
07
15
16
17
18
Figure 1-2-3. Trend of Investment Motives (Manufacturing)(FY) (%)
Researchand development
Product development and upgrading
Expansion of production capacity
Rationalization and labor saving
Maintenanceand repair
Other
0
10
20
30
40
50
製造業【426社】
非製造業【524社】
全産業【950社】
When responding to labor shortages, firms sometimes report the spending motive not only as “rationalization and labor-saving,” category (5) below, but also as “expansion of production capacity,” (1), or “maintenance and repair,” (4).
It appears that spending in response to the labor shortage may effectively serve to expand production capacity or repair production facilities, as well as to save labor.
18
1-2-4. Classification of Investment Motives in Addressing the Labor Shortage
Figure 1-2-4. Classification of Investment Motives in Addressing the Labor Shortage(Response rate, %)
Note: Choose up to two answers.
(1) Expansion of production capacity
(2) Product development and upgrading
(3) Research and development
(4) Maintenance and repair
(5) Rationalization and labor-saving
(6) Other
Manufacturing (426 firms)
Non-manufacturing (524 firms)
Total (950 firms)
60
70
80
90
100
110
120
0
10
20
30
40
50
60
2005 06 07 08 09 10 11 12 13 14 15 16 17 18
能力増強
新製品・製品高度化
合理化・省力化
研究開発
維持・補修
その他
1-2-5. Investment Motives (Absolute Levels)
19
Figure 1-2-5. Historical Capital Spending, by Investment Motive (Manufacturing)
Despite losing its share in planned investment for FY2018, “maintenance and repair” remains at a record-high level as capital spending continues to grow.
Investment for “expansion of production capacity” has followed an uptrend after hitting bottom in FY2013 and is expected to overtake spending for “maintenance and repair” in FY2018.
(FY)
(Total spending in 2005 = 100)
(Planned)
(Total spending in 2005 = 100)
Total capital spending in manufacturing sector(left scale)
Note: The chart shows capital spending indexed on the total spending in FY2005 in the manufacturing sector. For each year, the capital spending indices (right scale) for individual investment motives add up to the capital spending index for the whole manufacturing sector.
Expansion of production capacity
Product development and upgrading
Rationalization and labor saving
Research and development
Maintenance and repair
Other
(5) Other
(2) Need to invest in expansion of production capacity
(1) Need to increase investment in maintenance and repair
(3) Sufficient investment already made in maintenance and repairwith ample production capacity
(4) Need to consolidate or downscale aged sites
20
Rising share of firms recognizing the need to increase capacity investment
1-2-6. Current Situation of Primary Domestic Production Base
Figure 1-2-6. Recognition of Overall Situation of Domestic Production Base
Half of the manufacturers recognize “need to increase investment in maintenance and repair,” category (1) below, showing a decline on the previous year and attesting to the progress in maintenance and repair spending in recent years.
Meanwhile, the share of firms citing “need to invest in expansion of production capacity,” category (2) below, shows a substantial increase on the previous year, pointing to the intention of manufacturers to increase production capacity going forward.
(Composition rate, %)
53.7
49.9
14.3
25.0
24.8
17.8
4.1
3.5
0 10 20 30 40 50 60 70 80 90 100
【488社】
【511社】
Manufacturing total
FY2017 (488 firms)
FY2018 (511 firms)
54.1
47.7
67.3
59.2
48.9
42.9
41.5
38.5
47.4
54.1
58.0
54.9
17.6
31.8
11.5
24.5
15.6
26.2
13.2
32.3
15.8
24.6
13.0
18.3
21.6
14.8
19.2
10.2
28.9
23.8
35.8
23.1
26.3
13.1
21.6
18.3
4.1
1.1
1.9
4.1
2.2
3.6
3.8
0.0
1.8
3.3
6.8
6.1
0 10 20 30 40 50 60 70 80 90 100
【74社】
【88社】
【52社】
【49社】
【90社】
【84社】
【53社】
【65社】
【57社】
【61社】
【162社】
【164社】
1-2-7. Current Situation of Primary Domestic Production Base (Major Industries)
Figure 1-2-7. Recognition of Overall Situation of Domestic Production Base (by Industry)
21
(Composition rate, %)
(1) Need to increase investment in maintenance and repair
(2) Need to invest in expansion of production capacity
(3) Sufficient investmentalready made in maintenance and repair with ample production capacity
(4) Need to consolidate or downscale aged sites
(5) Other
ChemicalsFY2017 (74 firms)
FY2018 (88 firms)
Iron & steel and non-ferrous metals
FY2017 (52 firms)
FY2018 (49 firms)
General and precision machinery
FY2017 (90 firms)
FY2018 (84 firms)
Electric machineryFY2017 (53 firms)
FY2018 (65firms)
Transport equipmentFY2017 (57 firms)
FY2018 (61 firms)
OtherFY2017 (162 firms)
FY2018 (164 firms)
1-3. Non-manufacturing
22
1-3-1. Trends in the Non-manufacturing Sector (1)
23
Spending increase planned for seventh straight year In the non-manufacturing sector, planned capital spending shows an increase for the seventh consecutive year, driven
by investment in transportation and real estate for enhancing urban functions, increased spending on outlets in wholesale & retail, and continued investment in inbound tourism in services.
(%) Year-on-year Compositionrate Drivers of the increase/decrease
(1) Transportation 26.2 29.2Speeding up trains and enhancing safety measures in railways, development of logistics facilities, acquisition of aircraft, real estate development
(2) Real estate 26.5 13.6 Development projects in central Tokyo, including international business hubs and large complex facilities
(3) Wholesale & retail 26.2 10.7Labor-saving investment in CVS Pharmacy, spending on flagship shops in department stores, development of logistics facilities in wholesale
Reference: Services 23.8 3.2 Investment in hotels and theme parks to attract inbound tourists, etc.
Non-manufacturing as a whole 18.5
Figure 1-3-1. Industries with the Greatest Contribution to Planned Capital Spending for FY2018 (Non-manufacturing)
Note: Composition ratio is defined as the ratio of capital spending by each industry to that of the whole non-manufacturing sector in FY2017.
Labor shortage
1-3-2. Trends in the Non-manufacturing Sector (2)
24
Expansion of spending in response to regeneration and upgrading of urban areas, to inbound tourists, to labor shortage, etc.
Capital spending in the non-manufacturing sector continues to be driven by transportation-related industries and real estate, including for speeding up trains and enhancing safety and disaster prevention in railways, as well as real estate development focused on central Tokyo and the development of logistics facilities nationwide.
Spending will also continue on infrastructure, hotels and theme parks to capture the increase in inbound tourists in the run-up to the Tokyo Olympics/Paralympics in 2020.
The spending will be propped up by labor-saving investment in CVS Pharmacy and logistics facilities to cope with the labor shortage.
Figure 1-3-2. Backdrop of Capital Spending in the Non-manufacturing Sector
Tokyo Olympics & Paralympics
Aging population and declining birth
rate
Regeneration and upgrading of urban areas
Inbound tourists
Transportation, etc.
Real estateRetailServices
Speeding up train and enhancing safety/ disaster prevention
measures for railwaysLogistics facilities & distribution systems
Central Tokyo developmentInternational business hubs and
large complex facilities
Investment in outletsLabor-saving in CVS
Pharmacy
Improvement in employment
Aging urban infrastructure and safety/disaster
prevention measures
Development of emerging economies
Revitalization of regional
economies
Hotel refurbishment and rehabilitation
Theme parks
Airport facility development and
aircraft equipment
34
41
21
28
9
22
21
16
19
30
22
20
45
42
60
43
69
58
0 20 40 60 80 100
【58社】
【153社】
【148社】
【105社】
【68社】
【689社】
1-3-3. Impact of Increase in Inbound Tourists
25
Among non-manufacturers, 40% respond that the increasing number of inbound tourists will affect their business, particularly in real estate, transportation and services.
In response to the increase in inbound tourists, over 30% of the firms plan “enhancement of training in foreign languages, category (5) below. Also, “expansion of facilities,” (1), and “enhancement of advertising and PR,” (6), are each cited by some 20% of the respondents.
Figure 1-3-3-1. Impact of Increase in Inbound Tourists(Non-manufacturing)
Enhanced investment in foreign language training and facility expansion in response to the increasing number of inbound tourists
(Composition rate, %)
Direct impact Indirect impact No impact
(1) Expansion of facilities
(2) Enhancement of manpower
(3) Enhanced collaboration with other firms or local authorities
(4) Consideration/development of new products or services
(5) Enhancement of training in foreign languages
(6) Enhancement of advertising & PR
(7) None, etc.
Figure 1-3-3-2. Response to Increase in Inbound Tourists (Non-manufacturing)
0 10 20 30 40 50
【回答社数:290社】
(Composition rate, %)Note: Choose up to two answers.
Non-manufacturing (689 firms)
Construction (68 firms)
Real estate (105 firms)
Wholesale & retail (148 firms)
Transportation (153 firms)
Service (58 firms)
(290 firms)
0
2
4
6
8
10
12
10 11 12 13 14 15 16 17 18
(%)
Non-manufacturing Total
Wholesale & retail
(FY)
26
The labor shortage is restricting business development in 60% of non-manufacturers
1-3-4. Impact of Labor Shortage
Figure 1-3-4-1. Impact of Labor Shortage on Business Development (Non-manufacturing)
Among responding non-manufacturers, 60% indicate both that the current labor shortage constrains their business development and that the situation is expected to deteriorate further in three years.
In view of the labor shortage, the share of rationalization & labor-saving investment in total capital spending has been increasing in some industries, including wholesale & retail.
(Composition rate, %)
No constraint
Constraint
59 73
41 27
0
10
20
30
40
50
60
70
80
90
100足元【658社】 3年後【653社】
Figure 1-3-4-2. Share of Rationalization & Labor Saving in Investment Motives among Non-manufacturers
(Planned)
Current (658 firms) 3 years on (653 firms)
5 46 49
0 20 40 60 80 100
【680社】
27
Many firms have not fully passed the rising labor cost onto service prices
1-3-5. Impact of Rising Labor Cost on Selling Prices
The labor shortage has resulted in higher labor costs in a majority of non-manufacturers, many of which respond that they have not fully passed the rising labor cost onto service prices. As reasons for not doing so, over 40% of the firms cite “expected decline in demand,” category (1) below. Also, 40% of the respondents cite “absorption of rising cost through labor-saving investment or improvement of operational efficiency,” (3).
Figure 1-3-5-3. Reasons for Not Passing Rising Labor Cost Due to Labor Shortage onto Service Prices (Non-manufacturing)
Note: Choose up to two answers. (Response rate, %)
(1) Expected decline in demand
(2) Pricing regulation
(3) Absorption of rising cost through labor-saving investment or improvement of operational efficiency
(4) Response by refocusing service content or quantity
(5) Other
0 20 40 60 80
回答社数【316社】
Figure 1-3-5-1. Impact of Labor Shortage on Labor Cost(Non-manufacturing)
(Composition rate, %)
Substantial YoY increase Slight increase No change/impact
Figure 1-3-5-2. Passing of Rising Labor Cost Due to Labor Shortage onto Service Prices (Non-manufacturing)
Fully Inadequately Not at all
6 48 47
0 20 40 60 80 100
【345社】
(Composition rate, %)Note: Firms pointing to an increase in labor cost.
(680 responding firms)
(345 responding firms) 316 responding firms
2. Attitudes toward “Investment in a Broader Sense”
28
2-1. Concept of “Investment in a Broader Sense”
29
2-1-1. Corporate Approach to Future
Corporate approach to future“investment in a broader sense”
General actions for corporate growth, survival and future improvement of business valuation
Figure 2-1-1. Domestic Tangible Fixed Asset Investment and Other Investment in a Broader Sense
30
(JPY trillion)
(1) Domestic tangible fixed asset investment
(2) Overseas tangible fixed asset investment
(3) R&D expenditure(4) Intangible fixed asset
investment(software investment, etc.)
(5) M&A
(6) Human investment (not shown in the chart as the amount is hard to quantify)
(CY)
Investment in a broader sense
Investment in a narrow sense
Notes:
Categories (1), (3) and (4): Cabinet Office
“Annual Report on National Accounts”
Category (2): METI
“Basic Survey on Overseas Business Activities”
Fiscal year data for overseas tangible fixed asset investment
Category (5): RECOF Corporation data(total of domestic and cross-border markets)
2017 data for categories (1)–(4) is extrapolated from DBJ “Survey on Planned Capital Spending” (actual data for FY2017).
0
10
20
30
40
50
60
05 06 07 08 09 10 11 12 13 14 15 16 17
Figure 2-1-2. Priority of “Investment in a Broader Sense”
2-1-2. Priority of “Investment in a Broader Sense”Three pillars of the manufacturing sector:
domestic tangible fixed asset investment, R&D and human investment In the manufacturing sector—“domestic tangible fixed asset investment,” category (1) below; “R&D,” (3); and
“human investment and HR development,” (5), form the three pillars of “investment in a broader sense.” In the non-manufacturing sector, top priority is given to “domestic tangible fixed asset investment,” category (1), followed by “human investment and HR development,” (5).
31
(Composition rate, %)Note: Choose up to three answers.(Composition rate, %)
(1) Manufacturing (501 firms) (2) Non-manufacturing (660 firms)
49
9
24
3
10
3
3
11
12
20
13
24
8
5
7
3
21
19
15
5
7
020406080
1
2
3
4
5
6
7
61
2
3
6
21
5
2
7
4
6
23
32
9
2
3
1
3
26
13
9
2
0 20 40 60 80
1
2
3
4
5
6
7
優先度1
優先度2
優先度3
(1) Domestic tangible fixed asset investment
(2) Overseas tangible fixed asset investment
(3) R&D
(4) Investment in information technology
(5) Human investment (HR development)
(6) Domestic M&A
(7) Overseas M&A
Priority 1
Priority 2
Priority 3
2-2. Capital Spending Overseas
32
2-2-1. Trend of Capital Spending Overseas (Overview)
Figure 2-2-1. Trend of Capital Spending Overseas (Consolidated Basis)
Actual capital spending overseas (consolidated basis) in FY2017 rose 5.5% overall on the previous year, as the decline, led by construction in the non-manufacturing sector, was more than offset by the buoyant spending in the manufacturing sector, driven by automobiles and electric machinery for emerging markets.
Planned capital spending for FY2018 indicates an increase of 19.1% overall on the previous year, as transport equipment will increase investment in Europe.
(Year-on-year, %)FY2017(actual)
(743 firms)
FY2018(planned)(867 firms)
Total 5.5 19.1
Manufacturing 10.2 21.2
Nonferrous metals 27.0 17.4
General machinery 19.9 34.2
Electric machinery 37.6 62.0
Transport equipment 6.1 13.0
Non-manufacturing -9.4 10.9
Construction -59.0 23.2
33
0
100
200
300
400
500
600
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
(FY)
(FY2002 = 100)
0
50
100
150
200
250
300
350
400
450
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
(FY)
(FY2002 = 100)
2-2-2. Trend of Capital Spending Overseas (Time Series)
34
Capital spending overseas, which had stagnated until around FY2016 due to slowdowns in the world economy, turned upward in the manufacturing sector in FY2017 on the back of the recovery of the global economy starting in the second half of 2016. Both manufacturers and non-manufacturers plan to increase spending overseas in FY2018.
Figure 2-2-2. Trend of Overseas Capital Spending Ratio[Manufacturing] [Non-manufacturing](Planned) (Planned)
Domestic capital spendingDomestic capital spending
Capital spending overseas
(yen basis)
Capital spending overseas(dollar basis)
Capital spending overseas
(yen basis)
Capital spending overseas(dollar basis)
37.7
0
10
20
30
40
50
60
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Manufacturing
Non-manufacturing
Total
(%)
2-2-3. Overseas Capital Spending Ratio
35
The overseas capital spending ratio (consolidated) in FY2018 is expected to remain almost unchanged on the previous year in the manufacturing sector, as domestic spending and overseas spending show similar growth rates.
Figure 2-2-3-1. Trend of Overseas Capital Spending Ratio (Overseas/(Overseas + Domestic))
The overseas capital spending ratio is currently steady
Figure 2-2-3-2. Overseas Capital Spending Ratio, by Industry (Consolidated Basis)
(Planned)
(Planned)
(FY)
37.8
45.2
33.5 33.2
41.337.7
45.3
33.5 33.4
43.0
0
10
20
30
40
50
60
製造業
輸送用機械
電気機械
化
学
一般機械
2017年度
2018年度
Manufacturingtotal
(%)
FY2017
FY2018
Transport equipment
Chemicals General machinery
Electric machineryNotes: Dotted lines: consolidated overseas/(non-consolidated domestic + consolidated overseas)
Solid lines: consolidated overseas/(consolidated domestic + consolidated overseas)*Data on consolidated domestic capital spending are available since the FY2010 survey.
2-2-4. Domestic and Overseas Operation: Medium-term Outlook (Manufacturing)
36
Planned enhancement of domestic and overseas production sites over the coming three years
Over three years or so In 10 yearsOver three years or so In 10
years
Figure 2-2-4. Medium-term Domestic and Overseas Supply Capacity (Manufacturing)(1) Overseas production sites (2) Domestic production sites
Survey year
39 22 22 29 32
24 35
45 47
54
66 70 61 61 69
62 54 45
6 13 8 10 7 7 3 1 9
0102030405060708090
100
2011 2012 2013 2014 2015 2016 2017 2018 2018
64 78 73 73 69 63 59 63 68
35 21 25 26 29 33 40 37 30
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2018
(Composition rate, %) (Composition rate, %)
Survey year
Reduce
Keep
Enhance
Reduce
Keep
Enhance
Note:Data covers the firms reporting both domestic and overseas operations (334 firms in FY2018).
With regard to medium-term domestic and overseas supply capacity over the coming three years in the manufacturing sector, the share of firms intending to enhance overseas operation remains at around 60%, which is expected to rise to about 70% in 10 years.
Among the respondents, 54% intend to keep their domestic supply capacity at the current level, but the share of firms intending to enhance domestic capacity for the moment has risen to 45%. Meanwhile, 9% of firms respond that they will reduce domestic capacity over 10 years.
Over three years or so In 10 yearsOver three years or so In 10
years
2-2-5. Domestic and Overseas Operation: Medium-term Outlook (Transport equipment)
37
Figure 2-2-5. Medium-term Domestic and Overseas Supply Capacity (Transport equipment)
(1) Overseas production sites (2) Domestic production sites
Survey year
96 94 98 89
73 66
58 66 63
4 4 2 11
24 34 40
34 34
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2018
15 13 5 5
15 19 20 34 37
81
65 70 66
61
72 78
66 50
4
23 25 29 24
9 3 0 13
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2018
(Composition rate, %)(Composition rate, %)
Survey year
Reduce
Keep
Enhance
Reduce
Keep
Enhance
Note: Data covers the firms reporting both domestic and overseas operations (41 firms in FY2018).
Investment overseas primarily intended to expand production capacity “Expansion of production capacity,” category (1) below, is the primary motive for investment overseas by
manufacturers, seemingly reflecting their intention to increase production capacity on the back of buoyant demand overseas. Many firms also cite “maintenance and repair,” category (5), or “rationalization and labor-saving,” (3), to follow up on investments made in the past.
38
2-2-6. Motives for Capital Spending Overseas (Manufacturing)
Figure 2-2-6. Motives for Capital Spending Overseas (Manufacturing, FY2017)
(Composition rate, %)
57
9
9
4
16
5
12
20
26
5
15
1
5
7
19
6
23
3
0 10 20 30 40 50 60 70 80
1
2
3
4
5
6
金額1位
金額2位
金額3位
Priority 1
Priority 2
Priority 3
(1) Expansion of production capacity
(2) Product development and upgrading
(3) Rationalization and labor-saving
(4) R&D
(5) Maintenance and repair
(6) Other
Manufacturing (351 firms)
2-3. R&D Activities
40
41 52
31 47
59 46 69
53
2
0102030405060708090
100
向こう3年程度 10年先 向こう3年程度 10年先
Increase
R&D expenditure (consolidated basis) in FY2017 rose 5.6% overall, while planned R&D expenditure for FY2018 shows an increase of some 5%. Development of cutting-edge technologies is expected to make headway in transport equipment, including for driving support / autonomous driving and electrification.
Forty percent of the respondents expect that R&D activities will increase in Japan over the coming three years or so. Although only 30% of the firms respond that they will increase R&D in the near future, R&D activities overseas are expected to be increased in 10 years.
Figure 2-3-1-1. R&D Expenditure (Consolidated Basis)
2-3-1. R&D Expenditure
Note: For the purpose of this survey, R&D expenditure comprises all costs related to R&D, including personnel cost, raw materials cost, depreciation cost and allocated overhead.
(Response rate, %)FY2017 (actual)
year-on-year(718 firms)
FY2018 (planned)year-on-year(805 firms)
Composition ratio
FY2017
Total 5.6 5.3 100.0
Manufacturing 5.5 5.1 98.6
Transport equipment 7.2 5.5 46.5
General machinery 8.9 4.6 7.6
Electric machinery 2.5 5.3 18.2
Chemicals 4.8 3.6 17.2
Non-manufacturing 8.4 19.3 1.4
Increase in R&D expenditure to continue at 5% per year
41
Figure 2-3-1-2. Prospects for R&D Activities (Manufacturing)(Composition rate, %)
Hold
Reduce
Over three years or so In 10 years Over three
years or so In 10 years
Domestic Overseas
Note: Firms reportedly conducting R&D activities both in Japan and overseas (258 firms in FY2018).
42
Almost 40% of the respondents report increased utilization of open innovation, etc.
2-3-2. Utilization of Open Innovation and Other External Resources
Figure 2-3-2-1. Opportunities for Utilizing OpenInnovation and Other External Resources (Manufacturing)
Almost 40% of the manufacturers report increased utilization of open innovation, etc. The increase is primarily intended for “speeding-up of R&D,” category (1) below, “preparation for future technology
development,” (2), and “utilization of technologies and IP of business partners,” (4).
Increasing
No change
Decreasing
None
35
41
1
22
0
10
20
30
40
50
60
70
80
90
100【回答社数:470社】
Figure 2-3-2-2. Purpose of Implementing Open Innovation, etc. (Manufacturing)
(1) Speeding-up of R
&D
(2)Preparation for technology developm
ent expected in future
(3) Reduction of
R&
D cost
(4)Utilization of
technologies and IP of business partners
(5)Other
32 33
2
33
0
14
34
5
46
1 0
1020304050607080
増加している【164社】
変化なし・減少している【185社】
Opportunities for utilizing open innovation, etc.
(Composition rate, %)
(470 firms)
Increasing (164 firms)No change or decreasing (185 firms)
(Composition rate, %)
40
8 15 11
26
1
27
12 17 21 22
2 0
1020304050607080
増加している【156社】
変化なし・減少している【178社】
43
Challenges in open innovation include finding partners and sourcing
2-3-3. Challenges in Open Innovation (Manufacturing)
Many respondents cite “exploration of partners and sourcing,” category (1) below, as a major challenge in implementing open innovation, etc.
Even among the firms reporting increased utilization of open innovation, etc., most of the projects are implemented in collaboration with Japanese universities or research institutes, whereas less than 20% report cases of collaboration with different industries in Japan, SMEs, ventures or overseas institutions.
Figure 2-3-3-1. Challenges in Implementing Open Innovation, etc. (Manufacturing)
(1)Exploration of partners and sourcing
(2)Outflow
of proprietary technologies
(3) Attribution of
development results
(4)Level of technology, research or credibility of partners
(5) Verification of
effect and setting of key
performance
indicators
(6)Other
Opportunities for utilizing open innovation, etc.
Figure 2-3-3-2. Partners in Implementing Open Innovation, etc.(Manufacturing)
Same industry in Japan
Different industries in Japan, SMEs, ventures or overseas institutions
Japanese universities or research institutes
9
74
18
0
10
20
30
40
50
60
70
80
90
100【回答社数:164社】
Firms with increasing opportunities for open innovation, etc.(Composition rate, %)
(164 firms)(Composition rate, %)Increasing (156 firms)
No change or decreasing (178 firms)
2-4. Investment in Information Technology
44
2-4-1. Trend of Investment in Information Technology (1)
Substantial growth of IT investment continues
Industry FY2017 Actual (937 firms)
FY2018 Planned (1,075 firms) Project examples in FY2017 and 2018
Total 15.8 27.1Manufacturing 27.3 24.0
General machinery 24.6 14.5 Production progress control by introducing IoT to factories
Electric machinery 77.4 0.3 Integrated production management at multiple factories in Japan by introducing IoT
Transport equipment 15.8 18.4 Introduction of cameras and sensors to the assembly inspection process at factories
Non-manufacturing 6.4 31.2Wholesale & retail -2.1 22.8 Introduction of checkout and other store operation systems
Transportation -7.0 39.3 Enhancement of free Wi-Fi service, improvement of warehousing and logistics efficiency
Electric power & gas 14.6 57.0 Operation/maintenance systems at power stations
Figure 2-4-1. Plan for IT Investment(Year-on-year, %)
Note: Includes IT investment accounted for as expenses.
45
In FY2017, spending in the manufacturing sector on information technology increased almost across the board, driven by investment in improving the productivity of factories in electric machinery and transport equipment. In the non-manufacturing sector, spending also grew led by investment in electric power & gas for operation/maintenance systems.
Further substantial increases are expected in IT investment in FY2018, driven by continued spending on factory efficiency in transport equipment among manufacturers, and by increased spending on store operation systems in retail among non-manufacturers.
2-4-2. Trend of Investment in Information Technology (2)
46
Among the responding firms, 80% indicate that in recent years investment has grown faster in information technology than in tangible fixed asset investment.
Spending on information technology in FY2017 increased some 20% compared with two years ago as the introduction of IT devices and system replacement progressed on the back of automation of domestic production sites, demand for efficiency, and the labor shortage.
IT investment to grow faster than other kinds of investment
Figure 2-4-2-1. Trend of IT Investment in Recent Years (Comparison with Tangible Fixed Asset Investment)
8 9 9 10
72 74 69 69
18 16 19 16
2 1 4 5
0102030405060708090
100
2017年度 2018年度 2017年度 2018年度
【467社】 【479社】 【655社】 【664社】
製造業 非製造業
Figure 2-4-2-2. Trend of IT Investment in Recent Years(Comparison with Tangible Fixed Asset Investment, Indexed)
80
90
100
110
120
130
140
150
160
170
15 16 17 18
Investment in Information Technology
Domestic Tangible Fixed Asset Investment
(Composition rate, %)
FY2017
(467 firms)
FY2018
(479 firms)
FY2017
(655 firms)
FY2018
(664 firms)
Manufacturing Non-manufacturing
Substantial reduction
Modest reduction
Modest increase
Substantial increase
(FY2015 = 100)
(Planned)
(FY)
6
9
5
3
11
10
6
22
28
19
28
31
30
28
41
37
35
40
39
43
43
31
26
41
28
19
18
24
0 20 40 60 80 100
【150社】
【68社】
【682社】
【60社】
【62社】
【61社】
【486社】
①活用している ②活用を検討
③活用予定ないが、関心が上昇 ④活用予定なく、関心も低い
0
20
40
60
80
1 2 3 4
製造業【162社】
非製造業【160社】
2-4-3. Utilization of Big Data and AI
47
In total, about 30% of the respondents either “already utilize,” category (1) below, or “consider utilizing,” (2), big data and AI. This share is higher in general and electric machinery, among others, at around 40%.
As regards actual application, many respondents assume utilization in production or sales, but a relatively large number of non-manufacturers assume or consider utilization in marketing or administrative departments, including HR and accounting.
About 30% of the firms utilize, or are considering utilizing, big data and AI
Figure 2-4-3-2. Application of Big Data and AI(Composition rate, %)
Figure 2-4-3-1. Utilization of Big Data and AI
(1) Utilization in
production or sales
(2)Utilization in
marketing
(3) Utilization in
administrative
departments,
including HR
and accounting
(4)Other
Note: Depicts firms responding that they already are utilizing or are considering utilizing big data and AI.(Composition rate, %)
Manufacturing (486 firms)
General machinery (61 firms)
Electric machinery (62 firms)
Transport equipment (60 firms)
Non-manufacturing (682 firms)
Construction (68 firms)
Wholesale & retail (150 firms)
Manufacturing (162 firms)
(1) Already utilize(3) Not planned but increasingly interested
(2) Consider utilizing(3) Not planned and little interest
Non-manufacturing (160 firms)
2-5. Human Investment
48
010203040506070
製造業【498社】
非製造業【690社】
全産業【1188社】
49
Progress in curtailing overtime in a majority of firms and delays in diversification of working styles
2-5-1. Initiatives for Working Style Reform and Better Employee Treatment
Figure 2-5-1. Initiatives for Working Style Reform and Better Employee Treatment
Responses on working style reform indicate progress in “introduction of measures to curtail overtime hours,” category (1) below, and “introduction of retirement extension and reemployment schemes,” (2), but show delays in initiatives to realize diverse working styles such as “teleworking,” (3), and “acceptance of side jobs,” (4).
Initiatives for better treatment are making headway, including “pay raise,” category (5).
(Response rate, %)
(1)Introduction of m
easures to curtail overtim
e hours
(2)Introduction of retirem
ent extension and reem
ployment
schemes
(3)Introduction of flexible w
orking styles, including telew
orking
(4)Acceptance of
side jobs
(5)Pay raise (basic w
age hike)
(6)Increase in bonuses
(7)Enhancement of
employee benefits
(8)Equal pay for equal jobs
(9)None, etc.
Working style reform Better treatment Other
Manufacturing (498 firms)
Non-manufacturing (690 firms)
Total (1,188 firms)
Note: Choose up to three answers.
0
10
20
30
40
50
60製造業【485社】
非製造業【655社】
全産業【1140社】
Firms need to improve productivity if they are to cope with the labor shortage and promote the reform of working styles. The most popular such measure is “promotion of leave taking,” category (1) below. Primary measures for developing skills include (2) “dispatch of employees overseas or training of selected employees,” (2), and “enhanced training of younger employees,” (3). Meanwhile, little interest is shown in “recurrent training,” mainly for senior employees, category (6).
Twenty percent of the respondents are working to promote diversity through the advancement of women and the disabled.
50
Initiatives for improving productivity include encouraging leave taking and enhancing training
2-5-2. Initiatives for Improving Productivity
Figure 2-5-2. Initiatives for Improving Productivity(Response rate, %)
(1) Promotion of
leave taking
(2)Dispatch of m
ore em
ployees overseas or training focused on selected em
ployees
(3)Enhanced developm
ent and training of younger em
ployees
(4)Measures to
retain senior em
ployees including retirem
ent extension
(5)Regularization of
irregular employees
(6)Recurrent
training for em
ployees
(7)Increase in the ratio of fem
ale m
anagers
(8)Increase in the ratio of disabled em
ployees
(9) Other
Leave Skill development Promotion of diversity Other
Manufacturing (485 firms)
Non-manufacturing (655 firms)
Total (1,140 firms)
Note: Choose up to three answers.
0
10
20
30
40
50
製造業【484社】
非製造業【649社】
全産業【1133社】
51
Challenges for HR development include busy working schedules, shortage of mentors and action for employee diversification
2-5-3. Challenges for Human Investment & HR Development
Firms tend to prioritize HR development but face considerable challenges including “busy working schedules,” category (1) below, “shortage of mentors,” (2), and “changing need for talent and action for employee diversification” (3).
Figure 2-5-3. Challenges for Human Investment & HR Development(Response rate, %)
Note: Choose up to two answers.
(1)No room
for HR
developm
ent due to busy w
orking schedules
(2)Shortage of mid-
level and senior em
ployees capable of serving as m
entors
(3)Changing need for
talent and action for em
ployee diversification
(4)HR
development
in response to em
ployee diversity
(5)Turnover of talent developed w
ith investm
ent
(6) Shortage of talentw
arranting investm
ent
(7) Difficulty in
verifying results and setting keyperform
ance indicators
(8) Other
Resources for development Action for diversification Talent to be developed Other
Manufacturing (484 firms)
Non-manufacturing (649 firms)Total (1,133 firms)
2-6. M&A
52
2
5
3
7
1
1
34
38
32
32
14
13
25
22
23
19
26
24
39
35
42
42
59
62
0 20 40 60 80 100
【439社】
【423社】
【438社】
【424社】
【434社】
【414社】
Figure 2-6-1. Attitude toward M&A
2-6-1. Attitude toward M&A
Indicative of the aggressive attitude of Japanese firms toward M&A, in both the manufacturing and non-manufacturing sectors, more respondents have become “very active,” category (1) below, or “rather active,” (2), toward business acquisition in Japan and overseas.
Increasingly aggressive attitude toward M&A
53
(2) Rather active (4) Inactive(3) Rather inactive(1) Very active
Manufacturing Non-manufacturing
2
8
1
3
0
0
28
36
14
18
9
9
15
12
12
11
15
15
54
44
73
68
75
76
0 20 40 60 80 100
【611社】
【535社】
【602社】
【517社】
【601社】
【509社】
(Composition rate, %) (Composition rate, %)
Dom
esticacquisition
FY2017 (439 firms)
FY2018 (423 firms)
Overseas
acquisition
FY2017 (438 firms)
FY2018 (424 firms)
Sale of business
FY2017 (434 firms)
FY2018 (414 firms)
Dom
esticacquisition
FY2017 (611 firms)
FY2018 (535 firms)
Overseas
acquisition
FY2017 (602 firms)
FY2018 (517 firms)Sale of
business
FY2017 (601 firms)
FY2018 (509 firms)
0 5 10 15 20 25 30
1
2
3
0 5 10 15 20 25 30
1
2
3
2-6-2. Implementation of M&A
About 10% of the manufacturers conducted M&A. Also, the share of companies that engage in acquisition has been rising in both the manufacturing and non-manufacturing sectors in recent years.
Expanded scope of M&A implementation
54
Figure 2-6-2. Implementation of M&A
FY2015
FY2016
FY2017
(Response rate, %)
Manufacturing Non-manufacturing
FY2015
FY2016
FY2017
(Response rate, %)
(1) Acquisition in Japan(2) Acquisition overseas(3) Sale to Japanese firm(4) Sale to foreign firm
01020304050607080
1
2
3
4
製造業【82社】
非製造業【82社】
0 10 20 30 40 50 60 70 80
1.工場新増設等、設備
取得のための買収(固定
資産投資)
2.知財・技術取得のた
めの買収(研究開発投
資)
4.相手先のシステム取
得のための買収(ソフト
ウェア投資)
3.人材獲得のため買収
(人的投資)
製造業【73社】
非製造業【25社】
2-6-3. M&A as Alternative to Other Types of Investment
Many respondents utilize M&A as an alternative to other types of investment for the purpose of “acquisition of facilities, including new or additional factories,” category (1) below, revealing that many firms implement M&A to expand the scope of their business. Also, a considerable number of respondents cite “acquisition of IP or technology,” category (2), indicating the use of M&A as an alternative to R&D.
Purposes of M&A include expansion of scope and IP acquisition
55
Figure 2-6-3. Utilization of M&A as Alternative to Other Types of Investment
(Response rate, %)
(1) Acquisition of facilities, including new or additional factories (alternative to fixed asset investment)
(2) Acquisition of IP or technology (alternative to R&D)
(3) Acquisition of the target’s systems (alternative to investment in information technology)
(4) Acquisition of talent (alternative to human investment)
Overseas acquisition
(Response rate, %)
Domestic acquisition
Manufacturing (82 firms)Non-manufacturing (82 firms)
Manufacturing (73 firms)Non-manufacturing (25 firms)
3. ESG Activities
56
58 64
32 31
10 5
0
10
20
30
40
50
60
70
80
90
100
全産業
【1151社】
うち上場企業
【586社】
3-1. ESG Activities and Its Background
57
Ninety percent of the firms, particularly listed companies, feel the need for environmental, social and governance activities at present or in the future.
Primary reasons for ESG Activities include “risk management,” category (5) below, and “advertising & branding strategy,” (6), indicating that the firms look at ESG from both risk and opportunity perspectives. The relative emphasis on risk management, however, highlights their rather defensive attitude. Other key reasons include investor relationship considerations, such as “expansion of ESG investment,” category (1), and “request from shareholders,” (2).
90% of the firms feel the need to act in ESG
Figure 3-1-1. Relative Need for ESG Activities(Composition rate, %)
Feel the need at present
Feel the need for the future
Feel no need
(1) Expansion of ESG investment
(2) Request from shareholders
(3) Request from business partners
(4) Considerations for employees
(5) Risk management
(6) Advertising & branding strategy
(7) Other
Note: Choose up to two answers.
Figure 3-1-2. Reasons for ESG Activities
0 20 40 60 80
全産業
【1025社】
うち上場企業
【541社】
(Response rate, %)
Total(1,151 firms)
Total(1,025 firms)
Of which: listed companies(586 firms)
Of which: listed companies(541 firms)
58
Many of the respondents prioritize “E” and “G” in ESG, whereas their awareness of “S,” including human rights and HR development, remains weak.
As regards internal structure, 40% of the respondents adopt “assignment of responsibilities to relevant departments depending on the theme,” category (1) below. Meanwhile, a small number of respondents cite “company-wide structure,” (5), or “consultative structure at the management level,” (6), suggesting a lack of integrated internal operation. Indeed, just over 20% of the firms designate a “corporate planning department,” (4), as the responsible section.
Priority in ESG Activities given to corporate governance and the environment
3-2. Priority in ESG Activities and Internal Structure
(1) Environment
(2) Respect for human rights
(3) HR development
(4) Health and productivitymanagement
(5) Corporate governance
(6) Risk management
(7) International developments, including SDGs
(8) Social contribution
(9) Other
Note: Choose up to two answers.
Figure 3-2-1. Priority in ESG Activities
(Response rate, %)0 20 40 60 80
全産業
【1032社】
うち上場企業
【545社】
Of which: listed companies(545 firms)
(1) Assignment of responsibilities to relevant departments depending on the theme
(2) CSR department
(3) PR/IR department
(4) Corporate planning department
(5) Company-wide structure for consultation or promotion
(6) Consultative structure at the management level, including board of directors
(7) Other
Note: Choose up to two answers.
Figure 3-2-2. Internal Structure to Identify ESG Issues
(Response rate, %)0 20 40 60 80
全産業
【986社】
うち上場企業
【520社】
Total(1,032 firms)
Total(986 firms)
Of which: listed companies(520 firms)
Appendices
60
61
Appendix 1-1. Capital Spending in FY2017, 2018 and 2019
Appendix 1-1. Domestic Capital Spending in FY2017, 2018 and 2019
FY2017 (actual)
(1,896 firms)
FY2018 (planned)
(2,059 firms)
FY2019 (planned)
(848 firms)
FY2016Actual
FY2017Actual Change FY2017
ActualFY2018Planned Change FY2018
PlannedFY2019Planned Change
Total 180,164 184,320 2.3 162,332 197,468 21.6 41,030 37,287 -9.1
(excluding electric power) 155,599 156,585 0.6 156,618 189,909 21.3 39,409 35,593 -9.7
Manufacturing 58,800 59,297 0.8 58,255 74,126 27.2 16,303 15,207 -6.7
Non-manufacturing 121,363 125,024 3.0 104,078 123,343 18.5 24,727 22,080 -10.7
(excluding electric power) 96,799 97,289 0.5 98,363 115,783 17.7 23,106 20,386 -11.8
(JPY 100 million, %)
▲ 10
0
10
20
30
0 10 20 30 40 50 60 70 80 90 100
▲ 10
0
10
20
30
0 10 20 30 40 50 60 70 80 90 100
Appendix 1-2. Actual Performance in FY2017 (Skyline Graph)
62
Notes: Figures indicate changes in FY2017 on previous year. Figures in parentheses ( ) indicate contributions to the whole manufacturing or non-manufacturing sector.
Chemicals-0.6 (-0.1)
Iron & steel7.3 (0.9) General
machinery0.6 (0.1)
Electric machinery-4.4 (-0.4) Transport equipment
-3.2 (-0.8)Other
-2.7 (-0.3)
Wholesale & retail-2.1 (-0.2)
Transportation3.9 (0.9)
Telecommunications & information
1.6 (0.3)
Other6.0 (1.8)
Manufacturing average0.8%
Non-manufacturing average3.0%
Real estate-0.3 (0.0)
Figure 1-2. Composition and Growth of Capital Spending, by Major Industry (Actual FY2017 Data)
Paper & pulp0.5 (0.0)
Food & beverages8.8 (0.6)
Services16.8 (0.4)
Non-ferrous metals24.4 (0.8)
Precision machinery7.4 (0.2)
-
-
Construction-6.5 (-0.2)
(Year-on-year, %)
(Share in non-manufacturing, %)
(Year-on-year, %)
(Share in manufacturing, %)
63
Appendix 2. Capital Spending, by Region (Planned for FY2018) Planned capital spending, by region, for FY2018 (covering 5,102 companies: see note) shows the seventh consecutive year of increase
overall (up 20.3%), with positive growth observed across the board, led by transportation, transport equipment, real estate, wholesale & retail, chemicals and electric machinery.
Actual capital spending in FY2017 rose for the sixth consecutive year nationwide (up 2.4%), with the declines in Hokkaido, North Kanto & Koshin and Tokai more than offset by the increases in the remaining seven regions.
(%)
Figure 2-1. Change in Capital Spending, by Region, FY2018/FY2017 Figure 2-2. Change in Capital Spending, by Region and by Sector, FY2018
Note: Our survey on capital spending, by region, covers medium-sized firms (capitalized at JPY 100 million to 1 billion), as well as large-sized companies(10,081 firms in total, of which 5,102 firms responded to the questions on planned capital spending, by region).
全産業 製造業 非製造業
北 海 道 11.8 ▲ 1.4 16.0
東 北 17.7 26.0 9.1
北関東甲信 20.1 21.5 16.6
首 都 圏 28.4 21.2 30.3
北 陸 43.6 30.0 60.2
東 海 23.5 25.9 14.6
関 西 23.0 25.7 21.4
中 国 7.6 23.1 ▲ 21.2
四 国 27.1 31.9 17.1
九 州 29.1 24.6 33.1
全 国 20.3 25.4 17.3
Hokkaido 11.8 (-12.9)30% -20% -10% -0% -Under 0%
Hokuriku 43.6 (6.8)
Chugoku 7.6 (18.0)North Kanto and Koshin 20.1 (-13.1)
Tokyo metropolitan area 28.4 (0.6)Tokai 23.5 (-6.3)
Kansai 23.0 (8.9)Shikoku 27.1 (0.2)
Kyushu 29.1 (11.5)Nationwide 20.3 (2.4)
Hokkaido
Tohoku
Total ManufacturingNon-
manufacturing
North Kantoand Koshin
Tokyo met. area
Hokuriku
Tokai
Kansai
Chugoku
Shikoku
Kyushu
Nationwide
-
-
Difference from 2017/2018 in parentheses ( )
Tohoku 17.7 (18.4)
▲ 10
0
10
20
0 10 20 30 40 50 60 70 80 90 100
▲ 20▲ 10
0102030405060
0 10 20 30 40 50 60 70 80 90 100
64
Appendix 3. Trend of Capital Spending OverseasFigure 3-1. Composition and Growth of Capital Spending, by Region (Actual for FY2017) (%)
Figure 3-2. Composition and Growth of Capital Spending, by Region (Planned for FY2018) (%)
Total average19.1%
North America -8.0 (-3.1)
Other17.6 (2.8)
China46.9(4.1)
Other-8.1 (-1.5)
(Year-on-year, %)
(Composition rate, %)
Notes: Figures show changes of planned FY2018 spending versus actual FY2017 performance. Figures in parentheses ( ) indicate contributions to the total.
Notes: Figures show year-on-year changes of actual FY2017 performance versus FY2016. Figures in parentheses ( ) indicate contributions to the total.
(Composition rate, %)
(Year-on-year, %)
Europe2.0 (0.3)
China18.4(1.3)
Asia(excluding China)
17.0 (4.2)
North America8.8 (2.7)
Europe50.0 (6.2)
Asia (excluding China)25.2 (7.5)
Total average5.5%
--
-
65
Downside risks for future business include fluctuations in resource prices and exchange rates
Appendix 4-1. Political and Economic Risks in Business
Figure 4-1. Downside Risks with Major Impact on Business Going Forward
Major business risks going forward include “fluctuations in oil and resource prices,” category (4) below, and “exchange rates,” (5). Other key risks include “US politics and economy,” (1), and “Chinese economy,” (2), for the manufacturers, and “drop in demand after Tokyo Olympics/Paralympics,” (7), and “consumption tax hike,” (8), for the non-manufacturers.
(Response rate, %)
Note: Choose up to three answers.
0102030405060708090
100
製造業【505社】 非製造業【670社】 全産業【1175社】
(1)US politics and
economy
(2)Chinese econom
y
(3) Tightmonetary
policy in developed countries
(4) Fluctuationin oil
and resource prices
(5) Exchange rates
(6)Sudden drop in asset prices
(7) Drop in dem
and after Tokyo O
lympics &
Paralym
pics
(8)Consum
ption tax hike
(9)Geopolitical risk
(10)None, N
.A., etc.
Manufacturing (505 firms) Non-manufacturing (670 firms) Total (1,175 firms)
0
10
20
30
40
50
60
製造業【397社】 非製造業【402社】 全産業【799社】
66
Risk control measures include business diversification and selection & focus
Appendix 4-2. Risk Control Measures
Many respondents cite “business diversification and collaboration with other companies,” category (3) below, and “selection and focus,” (4), as measures to control risks going forward.
Notes: Choose up to two answers. Excludes the firms answering “none” when asked about risk control measures.
Figure 4-2. Measures to Control Risks Going Forward(Response rate, %)
(1)Restriction of
investment
(2)Increase of cash and deposits
(3)Business
diversification and collaboration w
ith other com
panies
(4)Selection and focus of business activities
(5)Leveling of production and order receipts
(6)Utilization of
financial instruments
including insurance and futures
(7)Other
Manufacturing (397 firms) Non-manufacturing (402 firms) Total (799 firms)
37 33 32 29
11 5 10 11
52 61 58 60
0102030405060708090
100
2017年度
【476社】
2018年度
【498社】
2017年度
【661社】
2018年度
【671社】
製造業 非製造業
Appendix 5. Exploration of Opportunities in Growth Markets
67
Forty percent of the respondents are making efforts to explore opportunities in growth markets, but the share of those giving priority to the core business increased on the previous year to 60%.
Cases of exploration of opportunities in growth markets are related to medical care and automobiles in the manufacturing sector, continuing from the previous year, and to nursing care, integrated resorts and hotels & lodging in the non-manufacturing sector.
Figure 5-1. Medium-term Actions to Explore Opportunities in Growth Markets
Efforts made by 40% of the firms
No plan, due to priority given to core business
Planned
Already in progress
Figure 5-2. Specific Examples of Exploring Opportunities in Domestic Growth Markets
Industry Example
Manufacturing
Chemicals Medical care, life science, electronics
General machinery 3D metal printers, medical sensors, services leveraging ICT/IoT
Electric machineryAutonomous driving, car-mounted components, life innovation, medical equipment
Transport equipmentProducts for next-generation vehicles, rechargeable battery technologies, logistics engineeringN
on-manufacturing
Transportation Integrated resort business, space-related business, accelerator programs
Wholesale & retail Health, electricity retailing, e-commerce
Construction & real estate
Renewable energy business, hotels & lodging, nursing care, agriculture
Note: Opportunity in growth market = Offering of any new business or service other than the existing core business.
Note: Respondents include group subsidiaries of major firms and public–private joint ventures established for specific projects, etc.
(Composition rate, %)
FY2017
(476 firms)
FY2018
(498 firms)
FY2017
(661 firms)
FY2018
(671 firms)
Manufacturing Non-manufacturing
70
80
90
100
110
120
130
12013
4 7 10 114
4 7 10 115
4 7 10 116
4 7 10 117
4 7 10 118
4 7 10
< 100
≧100 and < 105
≧105 and < 110
≧110 and < 115
≧115 and < 120
≧120
Appendix 6. Foreign Exchange Rate Assumed by Manufacturers USD 1 = JPY 110–115 is the foreign exchange rate range most commonly assumed by manufacturers, followed by
USD 1 = JPY 105–110, with an average of 108.1 yen to the dollar.
Figure 6-1. Actual USD/JPY Rate
Source: Bank of Japan (Monthly average of interbank rate at 17:00).
(Monthly)
Annual average
(JPY)
Stronger yen
Figure 6-2. USD/JPY Rate Assumed by Manufacturers
Source: Development Bank of Japan, “Survey on Planned Capital Spending.”
(Composition rate, %)
68
Average: USD 1 = JPY 108.1
0 10 20 30 40 50 60
1
2
3
4
5
6 302 firms
Reference: Assumed EUR/JPY rateAverage of 193 firms: EUR 1 = JPY 128.6 Mode: ≧130 yen and < 135 yen
©Development Bank of Japan Inc. 2018
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