Medium-term Outlook for Japanese Industry

Mizuho Industry Research
December 2023

See full report (PDF)


Mizuho Industry Research Japan has compiled a report providing a five-year outlook on the Japanese economy – the supply and demand trends from 2024 up to 2028 in each industry, and their implications for Japanese companies.

Industries covered:

  1. Industry overview
  2. Chemistry
  3. Pharmaceuticals
  4. Logistics
  5. Medical
  6. Nursing care


Key highlights

1. Business environment

Short term

Manufacturing industries will see a drop in exports associated with slowing overseas economies, which will weigh on production activities through 2024. Non-manufacturing industries will be boosted by a full resurgence of inbound tourism.

Medium term

  • Structural changes will surface in the medium term, such as Japan’s shrinking population, and sluggish exports of key industries due to increased competition from outside Japan.
  • Materials, automotive, and other key industries will see declining domestic demand in Japan and will have to confront the rise of China. Product and manufacturing processes are also changing in the pursuit of decarbonization.
  • For electronics and IT-related industries, generative AI and other technological developments will offer digitalization opportunities as markets steadily expand.
  • The energy industry will have to tackle the great challenge of balancing transforming supply structures with ensuring stable supply as the world heads towards decarbonization. Amidst a tightening energy-supply demand, competition in procurement will intensify. The lifestyle and social infrastructure industry is centered on domestic demand, so downward pressure on demand due to population decline will intensify even further.
  • Labor shortages will become even more serious. In the healthcare industry, the market will expand steadily amidst growing needs for more efficient medical care against the backdrop of an aging society and Japan’s shrinking population.


2. Medium-term challenges

  • Adapting to digitalization and manifestations of environmental value will be growth areas in response to changes in the business environment. Conventional areas with low added value will shrink.
  • Japanese industry will face three major challenges over the medium-term due to changes in business environments:
  1. Japanese industry and companies should secure their presence in growth areas created by digital transformation and decarbonization trends.
  2. Companies should maintain competitiveness in the face of structural declines in domestic demand, intensified competition from outside Japan, and changes in the demand structure.
  3. Companies should respond to constant supply constraints and additional costs arising from decarbonization, supply chain disruptions, and the ongoing shrinking population.


3. Way forward over the next several years

  • Japanese industry must engage in strategic alliances, structural transformation and structural reform, and strengthen its resilience from a medium- to long-term perspective.


1. Initiatives for Strategic Alliances

  • Digitalization and other such areas will create new demand areas. Vertical collaboration and integration across layers will be required if industries are to thrive in these areas.
  • Horizontal alliances will be necessary to maintain competitiveness given the constant supply constraints in terms of people, resources, and energy.


2. Initiatives for Structural Transformation and Structural Reform

  • The materials industry in particular must optimize supply capacity, focusing on overall efficiency. Redirecting supply capacity based on fuel conversion is one option.
  • Business models will require radical change to break away from existing domains that are becoming superseded due to changes in demand structures.


3. Business Model Changes

  • Supply chains must be strengthened and rebuilt amidst potential future geopolitical risks and trends towards decarbonization. Upstream resource procurement must be diversified, supply systems must be restructured, and collaborative relationships within the supply chain must be strengthened.
  • Sustainable and stable business foundations must be established to prepare for constant supply constraints in domestic demand-oriented industries that are susceptible to population decline. Digital transformation must be promoted, technologies must be used to increase efficiency, and new revenue sources must be secured.


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