Japanese Companies in Vietnam Express Highest Profit Optimism Since 2009

### Expanding Horizons: Japanese Investment in Vietnam

The latest survey by the Japan External Trade Organisation (JETRO) reveals that a remarkable 68.7% of Japanese firms in Vietnam plan to expand their investments in 2025. This represents a notable increase of 3.4 percentage points from the previous year, highlighting a growing confidence in Vietnam’s economic landscape. Notably, this is the first time in five years that Vietnam has outperformed the ASEAN average of 65.3%, underscoring its rising stature as a preferred investment destination.

### Profitability and Sector Performance

The survey highlights improvements across various sectors, particularly in manufacturing, where the profitability ratio has surged to 74.1%, up 3.9 percentage points. This sector is thriving thanks to robust export demand, which has allowed many firms to post significant gains. Following suit, the loss-making ratio has dropped sharply to 13%, indicating a healthier business environment.

In contrast, the non-manufacturing sector reported a profit margin of 61.2%. Though this is an increase of 3.3 points, the loss-making ratio has also edged up to 22%. Industries like real estate leasing, education, and healthcare particularly excelled, showcasing improvements of over 20 points. However, sectors including transport equipment and mining have lagged, with less than half of the firms expecting profitability.

### Challenges in the Landscape

Despite the positive trends, challenges remain. JETRO attributes the surge in the manufacturing sector’s profitability primarily to strong export demand. However, intensifying competition and rising labor costs are significant obstacles that firms must navigate. Moreover, 30% of transport equipment and parts manufacturers are bracing for poorer performance, reflecting apprehensions about future market conditions.

### Projections for Growth

Looking ahead, the optimism is palpable among Japanese companies in Vietnam. Approximately 47.6% expect higher profits, with an increasing rate of firms planning to expand operations over the next year or two. That number stands at 56.9%, marking the highest rate in ASEAN for the second consecutive year. Remarkably, only 4.2% anticipate scaling down their operations, while just 0.7% are considering relocation or withdrawal from the market.

### Export Dynamics and Market Concerns

Around 35% of Japanese firms in Vietnam are currently exporting to the U.S., higher than the regional average. Nonetheless, a third of these exporters expect considerable negative impacts from U.S. tariffs, driven largely by declining demand. In response, many companies are implementing strategies to cut costs, renegotiating prices, and diversifying their markets to mitigate the risks posed by external factors.

### Vietnam’s Investment Advantages

Vietnam continues to present significant advantages that attract Japanese investors. A noteworthy 68.4% of firms cite the market size and growth potential as key factors, while low labor costs (55.2%) and a stable political environment (53.2%) follow closely. However, the landscape is not without its complications. A staggering 67.5% of firms express concerns about complex administrative procedures, alongside issues related to legal transparency and rising labor costs.

### A Snapshot of Investment Figures

Japanese investment in Vietnam was estimated at a substantial US$3 billion last year, reflecting a robust increase of 19.5% from 2024. There is a growing interest in sectors related to digital transformation and high technology, illustrating a shift towards innovation and sustainability in investment choices. While Vietnam remains a leading investment hub in ASEAN, JETRO emphasizes the need for continuous administrative reform and workforce development to maintain and enhance its appeal.