#Japan #Economic Outlook #Shinjuku #Freeway Japan #SME survey

Survey on the Current State and Future Expectations of SMEs

Introduction

In December 2025, Freeway Japan conducted a survey titled "2025 Economic Situation of SMEs" targeting 575 individuals, including SME executives, employees, and self-employed persons. The results shed light on their perceptions of the economic climate and their expectations for the near future.

Survey Overview

The survey's key findings reveal a mixed sentiment among SMEs regarding the state of their industry and the broader economy.

Economic Sentiment

Current State: 48.2% of respondents reported a negative outlook on their respective industries, indicating that the situation is either in decline or showing no significant improvement. The majority, 29.9%, feel that their industry is slightly worse off compared to the prior period, with only 5.4% believing it has improved.

Reasons for Deteriorating Outlook

When asked about the factors contributing to the negative outlook, 51.3% cited a decrease in order volume and sales as significant concerns. Additionally, 37.9% pointed to issues with trading partners, while 34.3% were affected by changes in order and sales pricing.

Profit Projections

Regarding profits, 50.2% reported no change in their operating income compared to the first half of 2025, and only 41.7% perceive a positive outlook for profits in the first half of 2026, indicating a cautious approach to financial forecasting.

Business Strategies Moving Forward

Future Direction

A striking 74.6% of respondents conveyed intentions to maintain their current business practices, underscoring a commitment to stability during uncertain times. Only 15.3% plan to expand their business activities.

Review of Business Strategies

The survey indicated that a significant 74.6% of SMEs have not implemented changes to their business strategies recently, reflecting a lack of proactive measures. When strategies were re-evaluated, the most common actions centered around upgrading existing products and services.

Price Adjustments Amid Rising Costs

Despite challenges posed by increased costs due to inflation and energy prices, only 26.1% of respondents reported successfully passing price increases to consumers, highlighting struggles within the sector to cope with these pressures.

Wage Adjustments and Employment

Future Wage Plans

When it comes to wage adjustments, 44.2% of SMEs plan no changes, while 25.2% indicate intentions to increase wages. Notably, companies aiming for expansion are more likely (38.6%) to increase wages compared to those expecting to scale back.

Hiring Trends

A staggering 64.5% of companies reported no recruitment activities within the year. For those who did hire, the primary reasons centered around business expansion and replacing former employees.

Anticipated Economic Support from the Government

In light of the changing political landscape and the new Takai administration, 55.4% of respondents expressed hope for improved economic conditions. The top areas of anticipated support include substantial fiscal stimulus and tax incentives to promote wage increases within SMEs.

Long-term Support Expectations

SMEs were asked about the long-term economic support they seek from the government, with 61.0% prioritizing reductions in personal consumption tax, income tax, as well as social security contributions.

Conclusion

The survey provided invaluable insights into the current economic sentiments of SMEs in Japan amid ongoing challenges. While there are expectations for policy improvements under the new administration, many businesses remain cautious, prioritizing stability and careful planning as they navigate the complex landscape ahead.