While Western Europe Debates Costs, Japanese Manufacturers Are Quietly Betting on Central and Eastern Europe

The number buried in a routine survey

JETRO released its 2025 survey of Japanese-affiliated companies operating in Europe — 778 companies across 14 Western and 11 Central and Eastern European countries, surveyed these past months. Most of the headline numbers are unremarkable: overall profitability across Europe dipped slightly, down 0.7 points to 65.5%, consistent with a year most European executives would describe as difficult.

One number isn't unremarkable at all. Among Japanese manufacturers operating in Central and Eastern Europe, the share reporting expected profitability jumped from 52.4% to 64.5% — a 12.1-point swing in a single year, pulling the entire CEE regional figure up 5.5 points even as manufacturing elsewhere in Europe held flat or softened.

Japanese manufacturers aren't leaving Europe. They're quietly reallocating their confidence within it.

What's pulling that confidence east

The same survey makes clear this isn't happening in a vacuum. Japanese affiliates across Europe named the EU's Corporate Sustainability Reporting Directive (43.6%), the Packaging and Packaging Waste Regulation (42.7%), and the Carbon Border Adjustment Mechanism (33.6%) as the policies most affecting their operations — and 67.1% said they're hoping regulatory simplification efforts will actually reduce cost and compliance burden, not just rhetoric.

Put those two data points together and the pattern is straightforward: Japanese manufacturers are weighing where in Europe the returns justify the compliance load, and Central and Eastern Europe is currently winning that calculation more often than it was a year ago.

There's a second signal worth noting alongside it. The share of Japanese affiliates in Europe already using AI in their operations nearly doubled year-on-year, from 27.9% to 52.5%, while the share with no plans to adopt it fell from 22.8% to just 9.4%. Whatever else is shifting, Japanese manufacturers in Europe are digitising faster than most outside observers would assume — a relevant detail for any European supplier or technology partner positioning itself to them.

What this means depends on where your factory sits

If your operations are in Central or Eastern Europe, this is a validating signal worth acting on rather than simply noting. Japanese manufacturers have just told JETRO, in aggregate, that their confidence in the region grew sharply this year. That's the moment to deepen an existing relationship or open a new one — not after the shift becomes obvious to every other regional investment promotion agency reading the same survey.

If your operations are in Western Europe, the more useful signal is what Japanese partners are asking for: relief from compliance complexity, not from Europe itself. A supplier or partner who can genuinely reduce the CSRD (Corporate Sustainability Reporting Directive), PPWR (Packaging and Packaging Waste Regulation), or CBAM (Carbon Border Adjustment Mechanism) burden a Japanese manufacturer carries is offering something more valuable right now than a lower unit price.

The caveat worth naming

This is one year of survey data against a genuinely volatile backdrop — US tariff policy, energy costs, and geopolitical risk all feature prominently elsewhere in the same report. A 12-point swing in manufacturing sentiment is significant, but it's a signal to investigate, not a verdict to build a five-year strategy on without further diligence into which sectors and countries within CEE are actually driving it.

The takeaway

Japanese manufacturers just gave Europe a clear, if quiet, signal about where their confidence is growing and what they need from the rest of the continent to stay invested. Reading that signal correctly — and acting on it before it's common knowledge — is worth more than reading the same headline everyone else will read next quarter.