February 13, 2023
The total amount of orders received for machine tools in Japan in 2022, as reported by the Japan Machine Tool Builders’ Association, was 1.7596 trillion yen. Compared with the previous year, 2021, this was an increase of 14.2%.
Mr. Shu Yasumi, editor-in-chief of SEISANZAI Japan, who presented the “Industry Outlook,” noted: “There was no major slump both in Japan and overseas in 2022. On the other hand, production costs are rising. JMTBA has set a monthly order figure of 100 billion yen as a benchmark for judging whether the industry is booming or declining, but this standard has been rising by 10-20%”.
He then gave his forecast for orders in 2023. The total amount of orders will decrease by 15.7% from the previous year, 2022, to 1.5 trillion yen. The breakdown is as follows: domestic demand will decrease by 11.3% year-on-year (YoY) to 550 billion yen, while overseas demand will decrease by 18.1% YoY to 950 billion yen.
Although there are some concerns that the overall economy will deteriorate this year, demand for production equipment is expected to be firm. In terms of production, parts shortages are being resolved. The industry expects to maintain a monthly production pace of 100 billion yen.
Mr. Yasumi listed the four keywords for the year as (1) turbulent international politics, (2) interacting economic issues, (3) the future of electric vehicles (EVs), and (4) structural changes in manufacturing, which he concluded in his general remarks by saying, “Structural changes in manufacturing industry will be brought about by an unstable political economy”. In international affairs, the confrontation between the US and China continues. Russia’s invasion of Ukraine has led to high-energy prices around the world. There has also been a rise in inflation and interest rates, and labor costs have been on the rise.
Against this backdrop, he predicts that “structural changes in manufacturing will be driven by supply-side issues rather than changes in demand. Under market principles, capital investment is usually made in response to expanding and changing demand. However, demand for capital investment is firm even now that the overall economy has begun to stagnate. The reason for this is supply-side issues such as cost increases due to inflation, labor shortages, and environmental concerns. Mr. Yasumi summarized the answers to these problems as: “restructuring production”.
He went on to suggest that one of the keys to survival in such a challenging situation is to “become a company that can be relied upon. Customers’ business environments tend to change, and as the environment changes, the equipment they need and want changes. Therefore, it is important to be able to explore the potential needs of customers through careful sales activities. It is also important to identify the company’s strengths and appeal to customers.
However, the business environment will be difficult this year and there are signs that cash flow in the FA industry may deteriorate. Therefore, Mr. Yasumi advised companies to focus on profit-oriented strategies. “As the solution business becomes more colorful, products will become more unique in each item. Cash flow will be negatively affected if handoffs are not good enough. Standardization of design and manufacturing processes at the detailed level should be encouraged,” he concluded.