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80% of companies preparing or considering preparing BCP for Taiwan contingency, Nikkei poll of 100 major Japanese companies

  • September 30, 2022
  • , Nikkei , p. 1
  • JMH Translation

Business sentiment among executives at Japanese companies is declining. In the Nikkei poll of 100 major companies, the number of respondents who answered that the global economy is “deteriorating” exceeded those who said it is “expanding” for the first time in two quarters. In the previous survey, business sentiment improved for the first time in four quarters thanks to the normalization of the economy after the COVID pandemic. In the most recent poll, this positive effect is offset by concerns about an economic slowdown due to interest rate hikes in the United States and Europe as well as rising inflation spurred by soaring energy prices and other cost increases.


The Nikkei survey of major Japanese corporations is conducted once every three months, targeting the presidents (including chairpersons) of major domestic companies. The recent survey was conducted on Sept. 6–20, and responses were received from 145 companies.


Asked for their assessment of the global economy today, a total of 15.2% of respondents said it is either “expanding” or “expanding moderately,” down about 19 percentage points from the previous survey conducted in June (34.3%). In contrast, a total of 31.1% responded the global economy is either “slowly deteriorating” or “deteriorating,” up by approximately 12 points. Meanwhile, 53.7% responded that the global economy is “flat,” an increase of approximately 8 points. The diffusion index (DI), which is calculated by subtracting the percentage of companies indicating the economy is “deteriorating” from the percentage saying the economy is “expanding,” was – 9 (previous survey: + 6), the first negative figure in two quarters.


Katsuki Atsushi, president of Asahi Group Holdings, said, “There are many risks that could last long into the future, including escalating geopolitical tensions, soaring resource prices, and financial instability caused by the domino effect of interest rate hikes.”


When asked about the reasons for the worsening business conditions, 77.8% of the business executives answered “inflation,” up about 26 points from the previous survey (multiple answers permitted). This was the most frequently given response. Komiya Satoru, president of Tokio Marine Holdings, commented, “Growth in real income is expected to slow or turn negative due to inflation, and we forecast a gradual deterioration in the economy going forward.”


Shimizu Hiroshi, president of Nippon Life Insurance Co., added, “The U.S. Federal Reserve Board (FRB) has made it clear that it will prioritize curbing inflation over the economy, increasing the risk of an economic recession.”


Japan’s consumer price index (excluding fresh food) rose 2.8% year-on-year in August, not as large a rise as in the U.S. and Europe. However, 88.6% of Japanese business executives said the cost increase of raw materials and other items is “not being sufficiently passed on to consumers,” an increase of 1.9 points from the previous survey. A total of 86.4% of respondents said they either “will raise prices” or “consider raising prices” in six months or less.


Inflation has accelerated worldwide due to Russia’s invasion of Ukraine. An even greater geopolitical risk for Japan, however, is a “Taiwan contingency” in which China invades Taiwan. A total of 95.8% of respondents said they are either “strongly concerned” and “somewhat concerned” about a Taiwan contingency.


Over 80% of respondents said they either have prepared business continuity measures based on the scenario of a contingency in Taiwan (14.2%) or are considering developing them (67.5%). Kyoya Yutaka, president of Mitsubishi Shokuhin, said, “China is Japan’s largest trading partner and it will not be easy to reduce our dependence on China, but we must prepare business continuity plans based on the worst case scenario.”

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