In Japan, multinationals rediscover a forgotten market

The slowdown of markets like China and the realisation that overheated growth projections are unachievable in countries like Indonesia is prompting a number of multinationals to look at Japan with renewed interest. That does not mean, of course, that China is paling into insignificance. As one would expect, for most major foreign companies, Chinese advertising spend still dwarfed investments in Japan last year, according to Nielsen.

The biggest spending foreign brand in Japan, Coca-Cola, shelled out US$216 million against nearly $757 million in China; Apple spent just under $130 million compared with nearly $363 million; McDonald’s, $65 million to $483 million. Nonetheless, the appetite to derive new growth from Japan appears to be there. The shifting focus is not simply a default reaction. While optimism in Japan is cautious, it has grown noticeably thanks to stronger (although controversial) national leadership and the prospect of hosting major sporting events.

In addition, with jitters around Brexit, investors are seeing the yen as something of a safe haven. Takeshi Miyazawa, managing director of UM Japan, suggests that the Trans Pacific Partnership (TPP) will encourage US brands to enter or invest more in the market, particularly in sectors such as food, telecoms and entertainment. Miyazawa also notes that companies like Mondelez are regaining control from distributors and investing in Japan as centralised global brands. At the same time, consumer spending dropped following the sales tax rise in 2014 and remains sluggish. Decreasing mystique Magna Global, part of IPG Mediabrands, forecasts growth of 2.5 percent in Japan’s advertising market in 2016 to 4.1 trillion yen (nearly $40 billion).

That’s still behind China, which is predicted to reach $53 billion, but observers note that while Japan does not promise spectacular growth, it does offer a degree of stability, which is attractive at a time of such global uncertainty. It’s also important to remember that the purchasing power of the average consumer still far exceeds that in any other Asian market of comparable scale.