PwC Japan Group releases local report on the results of PwC’s 26th Annual Global CEO Survey
Seventy-two percent of Japanese CEOs are concerned about their company’s survival in ten years’ time; inflation and geopolitical conflict named as key threats
PwC Japan Group
16 February 2023
Tokyo, 16 February 2023 – The PwC Japan Group (Chair: Koichiro Kimura; hereinafter ‘PwC Japan’) today released a report on Japan’s results from PwC’s 26th Annual Global CEO Survey. This local report, based on the global report released by the PwC global network in January, focuses on the responses of 176 CEOs of Japanese companies. By providing a comparative analysis of Japan against the global results and results from other key countries, the report aims to help Japanese companies examine the current situation and future issues facing their businesses.
CEOs are confident in their revenue prospects despite economic volatility, but are less optimistic about the future
The global economy is in a highly volatile state, a fact which is reflected in this year’s survey. In Japan, 65% of CEOs projected a decline in global economic growth, compared to only 8% in the previous survey. This is nearly a return to the 68% of CEOs who predicted such a decline in the 2020 survey, when the global spread of COVID-19 had started to become a serious threat.
While Japanese CEOs are increasingly wary of the economic slowdown, the survey results also show that they remain confident in their own companies’ performance. As the relaxation of business restrictions that arose due to COVID-19 grows more and more likely, 76% of CEOs said they were confident in their company’s revenue growth, with only 5% saying they were not. Compared to the 10% of global CEOs and 16% of US CEOs who reported a lack of confidence in their own revenue prospects, this indicates that most Japanese CEOs view their companies’ performance as stable.
Despite this confidence in short-term performance, however, a look further into the future reveals the opposite results. In Japan, 72% of respondents think that their organisation will no longer be economically viable in ten years’ time if it continues on its current course. This stands in stark contrast to the 39% of global CEOs who gave the same response, highlighting a degree of pessimism among Japanese CEOs regarding the future.
When asked about the forces most likely to impact their profitability over the next ten years, 77% of Japanese CEOs cited ‘labour/skills shortages’. This concern, along with concerns over ‘changes in regulation’ and ‘supply chain disruption’ was more prominent in Japan than the global total.
73% of global CEOs and 65% of Japanese CEOs project that global economic growth will decline in 2023
Many Japanese CEOs think their companies will no longer be economically viable a decade from now if they continue on their current paths
Geopolitical conflict and inflation are seen as key threats
The survey also asked Japanese CEOs about the major threats facing their businesses in the coming months. In 2022, the Russian invasion of Ukraine brought geopolitical conflicts and the resulting international socioeconomic disruption to the forefront. The year was also characterised by signs of an end to the ongoing quantitative easing that arose from the COVID-19 pandemic, including interest rate hikes in the US. On top of this, concerns about inflation, combined with a weaker yen and high raw material prices, are also on the rise.
These concerns also appear to be the biggest near-term challenges for Japanese CEOs, with 49% of survey respondents indicating that they would be ‘highly exposed’ or ‘extremely exposed’ to the threat of inflation over the next 12 months, and 43% indicting the same level of exposure to geopolitical conflict. Japanese CEOs’ level of concern about both of these threats far outweighs figures from the US and China, as well as the overall global result.
Japanese CEOs foresee significant exposure to the threats of inflation and geopolitical conflict
Most Japanese CEOs don’t plan to implement hiring freezes or reduce their workforce
A comparison among the responses given by Japan, US, China and global CEOs when asked what actions they were taking to address an increasingly uncertain and ever-changing global economy reveals a significant difference in attitudes toward employment. An overwhelming 89% of Japanese CEOs responded that they do not plan to implement hiring freezes in the next 12 months, and 77% said they do not plan to reduce their workforce in the same period.
Most Japanese CEOs have no plans to implement hiring freezes or reduce their workforce to mitigate potential economic challenges and volatility
CEOs’ intent to invest in decarbonisation remains unchanged
This year, concerns over rising inflation and an increasingly severe geopolitical environment have made those threats the top priority for many CEOs, reducing the relative urgency of climate change-related concerns. However, the responses from Japanese CEOs indicate an intent to continue their active investment in responding to climate change.
When asked which areas they plan to invest in over the next 12 months, 46% of Japanese CEOs selected ‘decarbonising the company’s business model’—a figure greater than that from either the US or China. Furthermore, 22% selected ‘relocating the company’s operations in response to climate risk’, marking a significantly higher response rate than the global total (7%).
Japanese CEOs plan to invest in decarbonising their companies’ business models
‘International fragmentation, on both political and economic fronts, is advancing at an accelerated pace, and this, combined with extreme inflation and other factors, has led to rising concerns about an economic recession. The results of this survey show that CEOs are facing a number of challenges with no absolute solutions, and are being forced to make difficult leadership decisions. Japanese CEOs see digital transformation and climate change response as an ongoing series of transformations, and continue to have a positive attitude towards building a resilient management foundation, regardless of temporary economic fluctuations. It is precisely because we live in an era of emerging risks such as geopolitical conflicts and inflation that businesses are finding it increasingly essential to build trust and achieve sustainable outcomes through transformation. Going forward, we believe that companies will be further called upon to achieve a high level of balance between their own ongoing transformation and efforts to realise a sustainable society and economy.’
—Koichiro Kimura, Chairman, PwC Japan Group
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About the PwC Japan Group
The PwC Japan Group is a collective name for the member firms of the PwC global network in Japan and their affiliates. Each firm within the PwC Japan Group conducts its business as a separate, independent business entity.
In response to our clients’ increasingly complex and diverse corporate management issues, the PwC Japan Group has put in place a system that consolidates our knowledge in the fields of auditing and assurance, consulting, deal advisory, tax and legal services, and encourages organic collaboration among our professionals in each field. As a professional services network with approximately 10,200 certified public accountants, tax accountants, lawyers and other professional staff, we strive to provide services that more accurately address our clients’ needs.
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 152 countries with nearly 328,000 people who are committed to delivering quality in assurance, advisory and tax services. For details, see www.pwc.com.
