Tokyo Report

Corporate Japan’s Best Chance for Survival: Abroad

With dim long-term growth prospects at home, companies innovate overseas.

Clint Richards
Corporate Japan’s Best Chance for Survival: Abroad
Credit: Japan containers via Cristina Negoita /

Japanese companies have become adept at expanding into foreign markets over the last twenty years as the country’s economy has stagnated and the population now begins to contract. These companies are beginning to adapt their strategies to meet the demands of their foreign markets while confronting the realities of their domestic market. Several recent examples highlight how Japanese companies are meeting these coexisting challenges.

One example of doing more with less is Japan’s Aeon, which plans to generate profits in Southeast Asia and China by helping companies improve their energy efficiency. This has become an increasing concern in Japan as energy imports have skyrocketed over the last three years. Aeon plans to take what it’s learned at home and expand by purchasing more foreign subsidiaries. According to the Nikkei Asian Review, its plan calls for “boosting Asian sales from the building management business 500% over the fiscal 2013 level to 30 billion yen ($292 million) in fiscal 2016.” It aims to expand from its base in northern China southward toward Southeast Asia, taking advantage of the wave of new real estate that has been built over the last few years and helping companies become more efficient in lighting, refrigeration and air-conditioning.

Another Japanese grocery chain, Maruetsu, has a similar approach in China, but instead of expanding with new stores it aspires to increase overall profitability. While the company has yet to be in China a year, it plans to have a profitable 20 store network in the country by 2017. It is attempting to build its brand on food quality, an issue for many Chinese grocers. The company plans to build market knowledge and learn how to be competitive before branching out into new markets. While the goal of 20 stores by 2017 may not happen, Maruetsu’s President Makoto Ueda has expressed confidence in the company’s ability to expand with this approach.

Two of Japanese automakers’ biggest production and sales markets in Southeast Asia, Indonesia and Thailand, are seeing a significant increase in their used auto markets. With auto sales increasing 40 percent among ASEAN countries, Indonesia and Thailand represented around 70 percent of that market. Companies like Japan Bike Auction in Indonesia and V-Gulliver in Thailand (the former is Japanese owned and the latter Japanese managed) are expanding auctions and dealership networks while also putting inventories online to boost sales and make the second-hand car market in these countries truly nationwide.

Probably the largest and most mainstream expansion recently will be a joint effort between the Japanese trading firm Sumitomo and telecommunications company KDDI to invest 200 billion yen in a joint venture with state-owned Myanmar Posts & Telecommunications (MPT) to develop Myanmar’s wireless network. The investment will span ten years as the venture attempts to expand a wireless network that only reaches 10 percent of Myanmar’s 65 million people. As one of the last few largely untapped consumer markets in the world, Myanmar represents a strategic opportunity for Japanese companies frustrated by thin and declining margins at home.

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The last example, while not spearheaded by Japanese companies, definitely has the future of Japan’s agricultural and infrastructure sectors in mind. The foreign ministers of the five Central Asian countries (Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan) and Japan met on Wednesday in the Krygyz capital of Bishkek and agreed to promote agricultural cooperation. For this industry, where Japan seeks to automate and drive-up the scale of its production capacity in order to better feed its own people and compete in global markets, it will need external markets for its new technologies to offset its large research and implementation costs. Japan will also provide aid to Kyrgyzstan to improve its road network, in which Japanese construction companies can be expected to participate.

As the Bank of Japan on Friday released minutes from a meeting on June 12 and 13 that raised concerns about “structural factors” that may be leading to a slowdown in exports, Japanese companies will increasingly be looking to remain profitable by expanding and innovating on the ground in foreign markets. By identifying emerging sectors where they can scale up quickly with relatively little competition (especially compared to their domestic market), these companies stand the best chance of surviving the inevitable market downturn that Japan will experience as its population declines over the coming decades.