Southern California is one of the leading global hubs for Japanese companies, according to a recent survey by the Japan External Trade Organization (JETRO) Los Angeles and the Japan Business Association of Southern California (JBA).
The “2014 Survey of Japanese Companies in Southern California,” the 11th of its type, went to 673 of the 1,000 Japanese companies in Southern California; 70% responded.
Based in Southern California
Japanese companies’ investment in the regional economy comes through incorporating in the United States, not by acquisitions or capital participation, the survey reported.
Los Angeles County was home for approximately 70% of the companies surveyed, followed by Orange County and San Diego County. Home for many well-established Japanese companies is the City of Torrance, location for 192 companies. The City of Los Angeles has the second highest number with 96 companies, followed by 54 in Irvine and 36 in Gardena.
Nearly half the companies surveyed plan to expand existing facilities/branches or add a new facility/branch in Southern California over the next year or two.
The survey also revealed improved revenues for Japanese companies in the region. Compared to the previous survey in 2012, the number of companies reporting increased sales from the previous year and increased profits was several percentage points higher. The percentage of companies expecting an upswing in operating profit in the next couple of years also has increased.
Industry Distribution
More than half of the Japanese businesses come from the manufacturing (29.9%) and services (27.1%) industries, while wholesale/retail accounts for 15.5%, trading 12.8% and transportation, 7.9%.
Ready access to the Los Angeles and Long Beach ports, as well as the Los Angeles International Airport are significant factors leading to the concentration of these industries in Southern California, which serves as both a major logistics hub in the U.S. and a major trade gateway to Asia.
Job Creation
Japanese firms have more than 57,000 employees in California, nearly 97% of whom are hired locally. The average salary for employees in Japanese firms is $84,000, which totals nearly $8 billion in annual payroll. Nearly 90% of Japanese companies provide health care insurance for their employees, the survey found.
Challenges
The sustainability of California’s economic recovery remains a significant concern for Japanese investors, according to the JETRO/JBA survey. The economic slowdown was cited as a business challenge by 75.9% of those responding to the survey, far more than other concerns—labor cost increases (47.4%), the exchange rate (45%), energy/material prices (20.4%) and tougher regulations (20.4%).
Since 1983, JBA and JETRO have conducted surveys to obtain an accurate assessment of Japanese companies in Southern California. The results of these surveys have been utilized to foster better understanding of Japanese companies in the region and facilitate their business activities.
