Summary 1 1. Introduction 2 2. Asia business – business strategies to obtain a larger piece of a growing pie 3 (1) The current state of Asia business 3 (2) Japanese corporate involvement in Asia business 5 3. Business strategies – categorized by geographic area and outlook on demand in Asia 9 4. The current state and future challenges regarding marketing strategies for the Chinese market 15 5. Views regarding the foreign exchange rate and the impact of the appreciation of the yuan upon overseas affiliates 18 (1) Views regarding the exchange rate of major currencies 18 (2) Exports from affiliates in China 21 (3) The impact of a stronger yuan upon overseas affiliates of Japanese corporations in China 22 6. Overseas affiliates of Japanese corporations in China are shifting their emphasis toward the reinforcement of profit bases 25 7. Concluding remarks: division of labor with the countries of Asia 29 Supplement: Overview of the Questionnaire Survey of Japanese Corporate Enterprises Regarding Business in Asia 32 Bibliography 34 Summary 1. Given the crucial importance of business in Asia for Japanese companies, the Mizuho Research Institute Ltd. (MHRI) conducted a questionnaire survey of 2,339 Japanese corporate enterprises titled the Questionnaire Survey of Japanese Corporate Enterprises Regarding Business in Asia to shed light upon the current state of business endeavors of Japanese companies in Asia. This report is based upon the findings in this survey. 2. In our survey, we found that 70% of the companies surveyed are involved in business of some form in Asia. In response to a question regarding the geographic area of their affiliates, nearly 80% of the companies with overseas affiliates in Asia said that they have affiliates “in China”, surpassing by far the ASEAN region and NIEs. However, we also found that 80.0% of the overseas affiliates in NIEs and 74.8% in the ASEAN region have been “in operation for more than (and including) five years”. In contrast, only 52.5% of affiliates in China fall into this category. In short, the findings suggest that the future business strategy among Japanese companies is to (1) expand in China, and (2) strive for more operational efficiency while maintaining existing affiliates in the NIEs and ASEAN region. 3. Asked how they would like to see foreign currencies such as the yuan to trade against other currencies for the benefit of their business performance, many of the respondents said that they preferred to see all foreign currencies “strengthen” against the yen, underscoring their concerns regarding exports from Japan. In contrast, an estimation of the impact of the appreciation of the yuan upon the overseas affiliates of Japanese companies in China revealed a wide gap among different industrial sectors. Going forward, Japanese companies with affiliates in China would have to engage in a strategic rebalancing of its exports and domestic sales in China in view of a comprehensive analysis of yuan risks and Chinese domestic market trends.