During a reporting trip across Japan, from Tokyo to Osaka, DirectIndustry met with industrial companies, technology providers, and business institutions to explore a structural question: why is Europe becoming increasingly central in Japanese companies’ global strategies? In this conversation, Koumi Ishikawa, from Tokyo SME Support Center, explains why Europe has become a strategic destination for Japanese SMEs and the challenges they face when entering the market.
As Japanese SMEs expand beyond their domestic market, Europe is increasingly seen as a strategic destination, not only because of its economic importance, but also because success there strengthens a company’s global reputation. Yet entering the European market requires far more than technological expertise. Companies must navigate complex regulations, identify trusted local partners and adapt their products and business strategies to local market expectations.
Tokyo SME Support Center is a public organization that helps small and medium-sized enterprises expand internationally by providing business matching, market intelligence and practical support for overseas market entry.
In this interview, Koumi Ishikawa, from the International Business Sector at Tokyo SME, explains why Europe has become a priority for many Japanese SMEs, the services companies need most to succeed, and how geopolitical changes and Europe’s regulatory environment are reshaping their international expansion strategies.
Why are more Japanese SMEs becoming interested in the European market today? How do they perceive Europe compared with other international markets such as the US or Southeast Asia?
Koumi ISHIKAWA: “As you know, Southeast Asia and the US are markets that offer significant potential for “volume” due to their large populations. However, they also tend to be characterized by fierce price competition and a strong demand for immediate results and speed.
In contrast, Europe serves as the epicenter for new trends and global standards. We believe that for Japanese SMEs, earning recognition in the European market translates into building global brand power and credibility. Furthermore, we feel that the European market tends to highly value the core strengths of Japanese SMEs, such as advanced technological capabilities and a commitment to sustainability.”
What kinds of services or programs are most in demand from companies looking toward Europe?
Koumi ISHIKAWA: “From our experience, there are three main areas of need. First, matchmaking support with local agents and distributors. Since Japanese SMEs often lack local sales know-how, finding and connecting with reliable partners is highly demanded. Second, support for compliance with strict regulations and standards. Europe has its own rigorous rules, such as safety standards like the CE mark. It is extremely challenging for SMEs to research and comply with these requirements on their own, making this an area where we frequently receive consultations from the companies we support. Third, Market research and localization support. It is quite common that simply rolling out strategies that succeeded in other regions does not translate to sales in Europe. Therefore, there is a high need for support in fine-tuning designs and features to meet local needs, as well as in formulating effective marketing strategies.”
What are the key success factors for Japanese SMEs entering the European market today?
Koumi ISHIKAWA: “In our view, the key to success in the European market is understanding its unique characteristics and effectively adapting to the local environment. Specifically, a “long-term commitment” is essential, based on the premise that building brand power and trust takes time.
Additionally, companies must ensure compliance with “strict regulations and standards,” such as CE marking and sustainability requirements, viewing them not merely as barriers but as opportunities to gain global credibility. Furthermore, instead of clinging to past successes in other regions, it is crucial to collaborate with local experts and flexibly fine-tune products and strategies to meet local needs.”
Do you expect more Japanese SMEs to establish a direct and long-term presence in Europe, especially in the current geopolitical landscape? How are geopolitical tensions and global supply chain disruptions influencing the international ambitions of Japanese SMEs?
Koumi ISHIKAWA: “Geopolitical tensions, particularly the situation in the Middle East, are certainly driving the need for Japanese SMEs to expand into Europe. Specifically, disruptions in maritime shipping routes have caused severe spikes in transportation costs and delays, rapidly increasing the need for “localization” to ensure a stable supply closer to the market. Additionally, as fossil fuel supply risks accelerate Europe’s decarbonization efforts, business opportunities are expanding for Japanese companies with strengths in environmental technologies. Furthermore, amid rising global uncertainty, Europe is being re-evaluated as a safe and stable market for diversifying medium- to long-term risks due to its highly transparent and clear legal frameworks.”
What role can Europe play in the future growth strategy of Japanese SMEs?
Koumi ISHIKAWA: “For Japanese SMEs, we believe that moving forward, Europe will serve not merely as a “new sales market,” but will play a key role in elevating them to global standards.
The European market has strict demands for environmental sustainability and quality, meaning that a proven track record there is recognized worldwide. Furthermore, through the process of adapting to cutting-edge regulations and localizing products alongside local partners, a company’s own business models and product development standards are naturally upgraded. The know-how and brand power forged and acquired through European expansion can be rolled out to other regions. Therefore, we believe Europe plays a crucial role in driving the overall step-up and growth of these companies.”
