JETRO Releases the Results of its Survey of Japanese Manufacturers in Europe and Turkey.

Tokyo, Japan, May 26, 2006 - (JCN Newswire) - The Japan External Trade Organization  (JETRO) today released the results of its latest annual survey of Japanese manufacturers in Europe and Turkey.

According to JETRO research, a total of 1,008 Japanese manufacturers were operating in Europe and Turkey as of the end of 2005: 818 in Western Europe, 174 in Central and Eastern Europe and 16 in Turkey. By country, the UK hosted the largest number (241), followed by France (172), Germany (97) and the Czech Republic (65). The inclusion of the Czech Republic here underscores the increasing preference Japanese manufacturers have for situating operation bases in Central and Eastern European countries.

A total of 30 Japanese firms started new operations in the region during 2005 (17 in Western Europe and 13 in Central and Eastern Europe). By country, Poland was a top destination for these new investments, followed by the Czech Republic and France. By industry, transport equipment (auto) parts led the new investments, followed by electric/electronics equipment and parts, and pharmaceuticals/medical equipment. Overall, however, there were fewer new Japanese entrants to the region in 2005 (compared to previous years), JETRO research also revealed.

According to the survey, which received replies from 325 firms (or 32.2% of the 1,008 firms sent questionnaires), 16.9% of respondents (52 firms) indicated plans to set up new operation base(s). Asked where they plan to situate these new bases (multiple replies were allowed), the majority (31) are eyeing locations in Central and Eastern Europe, while just 12 cited countries in Western Europe. By country, Poland ranked highest, followed by the Czech Republic and Hungary.

The majority of respondents (60.9%) in the region expect to post an operating profit in 2005, while just 25.0% project negative earnings. In Central and Eastern Europe, a higher percentage of firms expect negative earnings (41.3%), compared to 39.7% foreseeing profits in 2005, reflecting the fact that many Japanese operations in this region are relatively new and so are not yet profitable.

Regarding the outlook for 2006, more than half of all respondents (52.5%) foresee improved profit/loss performance compared to 2005--an even higher percentage (64.6%) was recorded for firms in Central and Eastern Europe.

Asked to indicate difficulties in doing business in the region (multiple replies were allowed), a majority of respondents pointed to labor issues (90.9%) and problems procuring parts and materials (73.6%). Many respondents in Western Europe cited high labor and procurement costs, while a majority of those in Central and Eastern Europe cited difficulties in recruiting and retaining personnel.

The percentage of respondents citing difficulties from environmental regulations increased by 9.2 points from last year's survey to 38.1%. Asked about the new EU environment directives (such as WEEE*1, effective from 2005; RoHS*2, scheduled to take effect July 2006; and REACH*3, scheduled to take effect in early 2007), nearly half of respondents (49.5%) replied that their products are/would be subject to at least one of the three directives: RoHS (cited by 35.4% of firms), WEEE (cited by 20.3%) and REACH (cited by 17.5%) A majority of firms (70.8%) affected by these or

other directives replied that such regulations impact their production costs.

*1 WEEE=Waste Electrical and Electronic Equipment. The WEEE directive requires electrical/electronic manufacturers/sellers in the EU to be responsible for collecting and recycling their products.

*2 RoHS= Restriction of Hazardous Substances. The RoHS directive limits the use of six chemicals and heavy metals in electrical/electronic equipment manufactured in or imported to the EU.

*3 REACH= Registration, Evaluation, and Authorization of Chemicals. The REACH directive requires chemical importers and producers in the EU to conduct risk assessments of imported/produced chemicals and register information on these materials with the new European Chemicals Agency.

About JETRO

The Japan External Trade Organization, or JETRO, is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO's core focus in the 21st century has shifted toward promoting foreign direct investment into Japan and helping small to medium size Japanese firms maximize their global export potential.

Source: JETRO

Contact:

Mr. Masakazu Tachikawa
Mr. Go Miyabe
Europe Division
Overseas Research Dept.
Phone: [phone]

Mr. Atsushi Ikeda
Middle East and Africa Division
Overseas Research Dept.
Phone: [phone]

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