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

Comprehensive Survey on the Economic Situation of SMEs

In a recent study conducted by Freeway Japan, a comprehensive survey aimed at assessing the ongoing economic conditions of small and medium-sized enterprises (SMEs) in Japan has shed light on the increasing concerns of businesses as they approach early 2025. The survey gathered insights from a total of 481 participants, comprising both employees and executives from various SMEs, conducted between July 11 and July 17, 2025.

Economic Sentiment Takes a Hit

The findings illustrate a growing sense of pessimism among respondents regarding the state of the economy. Over 50% of respondents, specifically 50.5%, expressed that they feel the economic climate has deteriorated. This figure marks a significant 16.6-point increase from the previous year's survey results. When individuals were asked about their perceptions of the economic conditions in their respective workplaces or industries, 27.4% reported feeling that the situation had worsened, while 23.1% indicated a slight decline. Meanwhile, only a small minority, 4.8%, believed the economic conditions had improved.

Reasons for the Economic Decline

Those who reported feeling negative about the economic outlook cited various reasons. The primary concern, highlighted by 58.4% of respondents, was the fluctuations in order volume and sales figures. Additionally, 41.2% noted the changes in order and sales prices, with 39.1% citing issues related to their trading partners as another significant factor influencing their sentiments. The survey underscores a clear disconnect between the operational realities faced by SMEs and the broader economic indicators.

Revisiting Business Strategies

Responding to the challenging conditions, 35.1% of surveyed companies confirmed they have undertaken actions to revise or strengthen their business strategies and models, marking a continual increase of 10.3 points from the previous year’s figures. Notably, 43.2% of those actively adapting their strategies focused on updating existing products and services, while 35.5% concentrated on developing new offerings.

Outlook for Future Profitability

As for future profitability projections for the latter half of 2025, only 40.5% of respondents anticipated operating in the black. This presents an 8% decrease compared to survey responses from 2024. Alongside this, 49.1% of respondents expected no significant change in their profitability, reflecting a cautious optimism amidst ongoing economic turbulence.

Wage Adjustments in Consideration

On the topic of employment and remuneration, the survey revealed that 23.3% of businesses intended to raise wages—a decrease from the previous year's figures. The most cited motivations for planned increases included enhancing employee retention rates and addressing the impacts of rising prices on employees' lives.

Government Support: A Pressing Need

When asked about desired economic support measures from the government, the predominant request from 47.2% of participants was for price stabilization assistance. An additional 46.2% sought more robust support programs targeted at SMEs, while 42.6% mentioned the need for personal tax reductions. This indicates a clear preference for government intervention as businesses navigate the complexities of the economic landscape.

Challenges of Pricing Strategy

The issue of price pass-through also emerged as a critical concern; only 26.6% of SMEs reported successfully passing on increased costs to consumers, suggesting a struggle to maintain pricing power in the face of rising costs for resources and electricity.

Conclusion: Navigating Economic Turbulence

The findings from Freeway Japan's survey present a stark portrait of the current challenges facing SMEs in Japan as they prepare for early 2025. With a palpable decline in economic sentiment and ongoing adaptations in business strategies, it’s clear that these enterprises will require not only resilient planning but also supportive government measures to thrive in a shifting economic climate. The commitment of Freeway Japan to support these businesses through innovative solutions remains vital to fostering a more stable economic environment, particularly in these trying times.