2023-E-1

Bank of Japan Review

Fast Facts on Japan’s R&D Investment in the Tankan:
Uncovering Data Trends and Patterns
Research and Statistics Department
MASUJIMA Ayako and WASHIMI Kazuaki

January 2023
The Bank of Japan has recorded R&D investment in its Tankan since the March 2017 survey. As the R&D
data have been collected for several years now, this report aims to provide a snapshot of data trends andpatterns for users. Compared to other well-known R&D statistics, the Tankan asks annual projections
and makes it possible to conduct a comparison across items and cross tabulation with the same sample.
In fact, data analysis suggests that (1) large manufacturing firms stand out in their R&D share and R&D
implementation rate, and (2) revisions for annual projections of R&D investment are smaller than thoseof fixed investment, which cannot be necessarily quantified with the existing statistics. Going forward,
more in-depth analysis would be expected to be made possible as the data set grows.
Research and Development” by Ministry of Internal
Affairs and Communications shows an increasing trend
of R&D expenditure 2 in Japan (Chart 1). The
benchmark revisions of Japan’s SNA conducted in theend of 2016 have reclassified R&D investment as
investment (gross fixed capital formation) fromservices consumed as inputs into production(intermediate consumption) (Chart 2) given that R&D
can be recognized as a source of added value incorporate activity. Accordingly capturing R&D
investment has become an essential element forunderstanding the economic and business activity.

Introduction
The Bank of Japan has recorded research anddevelopment (R&D) investment since the March 2017
survey in its Tankan (Short-Term Economic Survey ofEnterprises in Japan) 1 on the back of the rising
importance of R&D in economic activity. In recent
years firms have focused on the development of newtechnology as a source of medium- to long-termcompetitiveness amidst the rapid progress oftechnological innovation in decarbonization and digitaldomains etc. while they have regarded royalty revenue
in exchange of new technology as an increasingly
important source of income. For instance “Survey of[Chart 2] Treatment of R&D
CY2009[Chart 1] R&D Expenditure
20

Tril. yen%

Inclusion
to GDP
4.0

15

3.5

10

3.0

5

2.5

0
FY 2001

Dec-16

Mar-17"R&D investment" was added
to the Tankan

Dec-21

Tankan has been used asbase data for R&D since
3Q2021 GDP estimate

Use ofTankan

2.0
05
10
15
20
Universities and colleges
Non-profit institutions and public organizations
Business enterprises
Ratio to GDP (right axis)

The 2008 SNA was approved
at UN to treat R&D as capitalformation
R&D investment has been
incorporated into capitalformation since FY2015 GDP

Compared to other well-known R&D statistics the
Tankan asks not only the actual results but also annual
projections of R&D investment on a quarterly basis
which makes it possible to gauge revisions in a timely
manner (Chart 3). It can also conduct a comparison
across items and cross tabulation with the same sample.

Source: Ministry of Internal Affairs and Communication“Survey of Research and Development”; Cabinet
Office “National Accounts of Japan”

1Bank of Japan January 2023

[Chart 4] Share by Six Categories (FY2021)[Chart 3] Comparison between the Tankan andOther Statistics<R&D Investment>
100

%

20

0

0
Small

Large

Small

Large

Manufacturing

Nonmanufacturing

Small

20

M edium-sized

40

Large

40

Small

60

M edium-sized

60

%

Large

80

M edium-sized

80

Manufacturing

Note: The coverage of the Tankan and the Survey on Planned
Capital Spending corresponds to the number of
respondents on R&D.

<Fixed Investment>
100

M edium-sized

Survey of Research andSurvey on Planned
TankanDevelopment
Capital Spending
Ministry of Interal Affiars Development Bank ofConducted by
Bank of Japanand Communication
Japan
Business enterprises, nonPrivate enterprises withprofit institutions andLarge enterprises with aa capital of 20 million
public organizations,capital of a billion yen or
Coverage
yen or more: 8,660 as of universities and colleges
more: 592 as of FY
the June 2022 survey for a total of approximately
2021
18,400 as of 2021
Statistical unit
Unconsolidated basis
Enterprises and groups
Consolidated basis
Mar, Jun, Sep, and Dec
Frequency andOnce a year
Once a year(the beginning or middle
release schedule(Dec of next year)(June)of next month)
Projections
Available
Not available
Available
Available
Available
Available
Survey items
Sales, business
Fixed investment,
other than R&D
Sales etc.
conditions and so forthsales DI

Nonmanufacturing

Note: Fixed investment includes land purchasing expenses,
but excludes software investment and R&D
investment (hereafter the same).
Source: Bank of Japan

Due in part to the timeliness of the Tankan the R&D
data have been used in the quarterly estimates of GDP
for the R&D output since the 3rd quarter of 2021 which
underscores the importance of the Tankan regarding
R&D data development (Chart 2). Nonetheless there
have been virtually no studies that examine the trends
and characteristics of R&D investment in the Tankan,
as far as the authors know.3 Therefore this report aims
to provide a snapshot of data trends and patterns inorder to increase and broaden the use of the data for awider segment of users.
This report is structured as follows: the next section
presents the features of R&D investment by firm size
and industry and then outlines revision patterns of thepast surveys observed from a chart on revisions ofannual projections of R&D investment toward theactual results. Lastly it reviews some caveats to be kept
in mind when using the R&D data in the Tankan.

[Chart 5] Implementation Rateby Six Categories (FY2021)<R&D Investment>
100<Fixed Investment>

%
100

Small

M edium-sized

Manufacturing

Large

Small

M edium-sized

Nonmanufacturing

Large

Manufacturing

Small

0

M edium-sized

20

0

Large

40

20
Small

60

40

M edium-sized

80

60

Large

80

%

Nonmanufacturing

Note: Estimates based on firm-level data.
Source: Bank of Japan

investment while only around 30 percent of large firms
have spent on R&D in nonmanufacturing (Chart 5). In
terms of the R&D share of large firms by industry“automobile” has the largest share in manufacturingfollowed by “electrical machinery” and “chemicals”
while “information communication” has the largest
share in nonmanufacturing followed by “wholesaling”
and “construction” (Chart 6). Comparing theinvestment size in large manufacturing firms byindustry the level of R&D investment outweighs thatof fixed investment in several industries (such as
business oriented industry and automobile) on a nonconsolidated basis (Chart 7).5
While large manufacturing firms have actively
engaged in R&D in domestic sites coupled with an
optimization of global supply chains the export of new
products as a result of new technology and licenseprovision toward overseas base have expanded. For
instance the relationship between R&D investment

Data Trends of R&D Investment
Looking at the comparison between “R&D investment”
and “fixed investment (tangible fixed asset
investment)”4 by firm category the data suggest thatlarge manufacturing firms have led R&D investment inJapan unlike fixed investment. For six maincategories—two industries (manufacturing andnonmanufacturing) times three capital sizes (large
medium-sized and small enterprises)— large
manufacturing firms account for more than 80 percent
of R&D investment
while the share ofnonmanufacturing is less than 10 percent (Chart 4).
This is in contrast to nonmanufacturing having asizable presence in the share of fixed investment. The
implementation rate also shows that about 90 percentof large manufacturing firms make some sort of R&D
2

Bank of Japan January 2023

shows that intra-group transactions account for the
majority of technology exports by manufacturing(Chart 9) thus implying that new technology
developed by domestic R&D activity is often used in
the form of license fee for the production of overseas
subsidiaries.

[Chart 6] R&D Investment Share by Industries(Large Firms, FY2021)<Manufacturing>
Production
machinery,
4%

Businessorientedmachinery,
5%

Others,15%[Chart 8] Relationship between Export and R&D
Investment (Large Manufacturing Firms,
FY2021)

Automobile,
33%
Chemicals,
20%

R&D-to-sales ratio, %8Electricalmachinery,
23%

7
6
5
4

<Non-manufacturing>3

Electric Others,6%& gas
utilities,
7%
Transport& postal
activities,
8%

2
1
0
Bottom quartile Third quartile Second quartile Top quartile

Information &communication,
37%

Export-to-sales ratio

Note: Estimates based on firm-level data.
Source: Bank of Japan

Construction,
17%

Wholesaling,
25%[Chart 9] Technology Exports
Tril. yen
5
Intra-group transactions

Source: Bank of Japan

4[Chart 7] Comparison of Investment(Large Manufacturing Firms, FY2021)

Others3

R&D investment / fixed investment

2

Business oriented machinery
Motor vehicles
Electrical machinery
Production machinery
Chemicals
Shipbuilding, Heavy machinery &etc.
Texitiles
General-purpose machinery
Processed metals
Ceramics, Stone &Clay
Nonferrous metals
Food & Beverages
Lamber & Wood products
Petroleum & Coal products
Pulp & Paper
Iron & Steel1
Average ofLarge Manufacturing

0
FY 07

09

11

13

15

17

19

21

Note: Technology exports are the receipts for providing
license, know-how and technical assistance etc.
Source: Ministry of Internal Affairs and Communication“Survey of Research and Development”
0.0

0.5

1.0

1.5

2.0

2.5

3.0

Source: Bank of Japanand exports implies the tendency that the higher theexport-to-sales ratio is the higher R&D-to-sales ratio
would be (Chart 8). Earlier literature also pointed outthat a number of firms have expanded their products
worldwide through rising competitiveness by R&D. 6
In addition “Survey of Research and Development” by
Ministry of Internal Affairs and Communications
3

Bank of Japan January 2023

Data Patterns[Chart 12] Revision Patterns of Fixed
Investment (Large Firms, FY2020)

Revision Patterns
Next let us take a look at revision patterns of annual
R&D projections (year-on-year terms) of large
manufacturing firms from the first March survey—
which asks annual projections for the next year for the
first time—to the sixth actual result survey (the Julysurvey of the next year). The extent of revisions of
R&D investment is smaller relative to fixed investment
and there do not appear significant downward revisions
toward the actual results (Chart 10).7 During FY2020
when the spread of COVID-19 started to materialize
R&D investment saw continuous downward revisions
over the year similar to fixed investment albeit to amodest extent. A similar trend can be confirmed withthe firm-level revision patterns for selected industries<Automobile> <Electrical Machinery> <Chemicals>
%
80

-20
-40
-60
-80

ActualForecast

Dec.

Sept.

June

ActualMarch

Forecast

Dec.

Sept.

<Automobile> <Electrical Machinery> <Chemicals>%
80
ReleasedseriesMedian
20
0
-20
-40
-60

ActualForecast

Dec.

Sept.

June

ActualMarch

Forecast

Dec.

Sept.

June

Forecast

Dec.

Sept.

June

March

March
Actual-80

JuneActualForecast

Dec.

Sept.

June

March

ActualForecast

Dec.

Sept.

June

March

[Chart 11] Revision Patterns of R&D Investment(Large Firms, FY2020)

40

March

-20

Source: Bank of Japan

60

Actual-10-20Forecast

0

-10

Dec.

Relationships with Short-term Business Cycle
Here we briefly review the relationship between R&D
investment short-term business cycle and financial
conditions.10 This section examines their relationshipover a relatively long period and then explores therelationship between DI for business conditions andfinancial position and R&D investment in the Tankan
before and after the COVID-19 pandemic using thefirm-level data.
The scatter plot of R&D investment and machinery& equipment investment against DI for businessconditions (all industries) reveals that there is a positive
correlation between them but the variations in R&D
investment are smaller relative to fixed investment(Chart 13 left panel). The same association can beobserved for the relationship with DI for financial
position. For instance fixed investment recorded asizable negative growth in the wake of devastating
deterioration in financial position during the Leman’s
collapse. On the other hand the decline in R&D
investment was relatively limited (Chart 13 rightpanel).

10

FY2017FY2018FY2019FY2020
FY2021

Sept.

(Chart 11 and 12).8 Reasons for this include that R&D
investment is less adjusted to short-term business cycle
and tends to be implemented based on the medium-to
long-term plan including labor costs for researchers.9

%

0

June

Source: Bank of Japan

20

10Median0<Fixed Investment>

%

40

March

20

Releasedseries20[Chart 10] Revision Patterns(Large Manufacturing Firms)<R&D Investment>

60

Note: Median is based on firm-level data. Shaded area
represents upper and lower 25 percentile (hereafter thesame).
Source: Bank of Japan

4

Bank of Japan January 2023

Further let us compare the year-on-year change in
R&D investment and fixed investment using the firmlevel data with the sample (large manufacturing) whichchose tighter options for DI for business conditions andfinancial position before and after the COVID-19
pandemic. The results show that the year-on-yearchanges of fixed investment declined to a large extent
as either of business conditions or financial position
deteriorated while the decline in R&D investment
remained relatively limited (Chart 14). Although careshould be taken in interpreting the results given thelimited data period the results indicate that at least
through the lens of the Tankan the impact of short-termbusiness cycle and deteriorating financial position on
R&D investment would be smaller relative to fixed
investment.

Caveats to Be Kept in Mind
Lastly let us review some caveats to be kept in mind
when using the R&D data in the Tankan. While theTankan covers more than 90 percent of R&D
investment by private enterprises11 it excludes somespecific industries and firms with small levels of capital.
For instance “scientific research professional andtechnical services” accounts for about 40 percent of
R&D investment in nonmanufacturing according to“Survey of Research and Development” by Ministry ofInternal Affairs and Communications (Chart 15). On
the other hand some industries which may have a weaklink with economic conditions such as “education
learning support” are excluded from the target[Chart 13] DI for Business Condition and
Financial Position, and Fixed Capital Formation
by TypeYear-on-year change, %Year-on-year change, %15
R&D
Machinery & Equipment
10

15
10

y = 0.11x + 1.63
R² = 0.33

5

0

0

-5

-5

-10

-10
y = 0.31x + 1.86
R² = 0.58-15

y = 0.13x + 0.36
R² = 0.14

5Transport &postalservices2%

y = 0.36x - 0.67
R² = 0.27

-15

-20

[Chart 15] Share of R&D Expenditure in Nonmanufacturing by Industries (Survey of
Research and Development, FY2021)

Construction
9%

-20

-25

Others3%

Academic
research,
professional
and technicalservices
41%

-25
-60

-40

-20

0

20

-40

DI for Business Conditions

-20

0

20

DI for Financial Position

Wholesaling
21%

Note: The sample period ranges from CY2000 to 2021. DI isthe annual average for each year (all industries).
Source: Cabinet Office “National Accounts of Japan”, Bank ofJapan

Information &communication
24%[Chart 14] Changes in Fixed Investment and
R&D Investment in the Wake of Deteriorating
Business Condition and Financial Position(FY2020)

Source: Ministry of Internal Affairs and Communication“Survey of Research and Development”[Chart 16] Overseas R&D Ratio

Year-on-year change, %0Year-on-year change, %

%

30

-5

7

25

6

20

-10

5

15
10

-15

4

5

R&D investment

3

0

-20
Fixed investment-5

Business condition
Deteriorated

Overseas R&D expenditure-15

Financial positon
Deteriorated

2

Domestic R&D expenditure

-10

-25

1

Overseas R&D ratio (right axis)

-20

FY 08

Note: Estimates based on firm-level data. The sample arethose whose responses for business conditions andfinancial position worsened from December 2019 toJune 2020 (large manufacturing firms).

0
10

12

14

16

18

20

Source: Ministry of Internal Affairs and Communication“Survey of Research and Development”; Ministry of
Economy, Trade and Industry “Basic Survey onOverseas Business Activities”

Source: Bank of Japan

5

Bank of Japan January 2023

population in the Tankan (Chart 6). Also firms withcapital of less than 20 million yen which include
startups are out of the target population of the Tankan.12
According to “Basic Survey on Overseas Business
Activities” by the Ministry of Economy Trade andIndustry etc. the share of overseas R&D in total R&D
has been on an increasing trend (Chart 16). Thus itshould be noted that the size of overseas R&D activity
is non-negligible which is not captured by the Tankan.

Concluding Remarks
As the data on R&D investment have been collected forseveral years (since the March 2017 survey) this reportprovides an overview of trends and patterns on R&D
investment. Unlike fixed investment R&D investment
has been led by large manufacturing firms and forthese firms R&D investment outweighs fixed
investment on a non-consolidated basis. In the wake ofsizable economic shocks etc. the revisions of annual
projections of R&D investment toward actual resultsappear smaller relative to fixed investment given thatR&D investment is implemented based on medium-to
long-term investment plan.
Nonetheless more data are needed to conductdetailed analysis on for instance identifying the causal
relationship between R&D investment and overseas
business activities. From this perspective it is crucial
to provide data conducive to various research bycollecting accurate figures and enhancing the data
quality on R&D investment in the Tankan.

6Bank of Japan January 2023

BOX: Global Landscape of R&D Investment
This report confirms that Japan’s R&D investment is characterized by a remarkable concentration inlarge manufacturing firms, while the share of nonmanufacturing is less than 10 percent. This box
examines whether these characteristics are also observed in other major countries, using “Industrial
R&D Investment Scoreboard” (2020) by the EU, which surveys the top 2,500 companies accounting
for approximately 90 percent of the world’s business-funded R&D investment. The results suggest thatlarge manufacturing companies have led R&D investment in all major countries, albeit with somevariations in the industry composition across countries.
First, the composition of the 2,500 companies’ R&D investment shows that the top 100 companies
account for more than half of the total R&D investment (Box Chart 1). In other words, R&D investment
tends to be concentrated in a handful of large companies, not only in Japan but also worldwide.
Second, the industry composition of R&D investment for the four major countries (the U.S., China,
Japan, and Germany) indicates that manufacturing sector account for more than half of R&D
investment in all countries (Box Chart 2). Notably, the manufacturing sector—especially automobile
manufacturing—has a high share in Germany, similar to Japan. On the other hand, the share ofnonmanufacturing sector—led by information communication, which has invested in R&D related to
information technology—is relatively high in the U.S. and China.
Country breakdowns of R&D investment for the world’s top 100 companies show that the U.S. andChina has increased their presence in recent years (Box Chart 3), which suggests that both countries
have focused on R&D investment in digital domain including not only technology hardware but also
information communication.

[BOX Chart1][BOX Chart2][BOX Chart3]

Pharmaceuticals & Software & Computer
Automobiles &Biotechnology
Parts
Services
Other
Technology Hardware &Other nonmanufacturing
Equipment
manufacturing

Top 1,001-2,500,
10.9

%
50
45
40

US

2013

2020

35
30

Top 101-1,000,
37.4

Top 100,
51.8

China

25
20

Germany

15

10
Japan

5
0%

20%

40%

60%

80%

100%

0

Japan

US

China Germany Others

Note: BOX Charts 1 and 2 are based on the data as at 2020. The blue thick lines in BOX Chart 2 represent the share ofmanufacturing. BOX Chart 3 shows the share of the top 100 companies by country.
Source: EU “Industrial R&D Investment Scoreboard”

Masahiko Kataoka “A Primer on the Tankan—Characteristics
and Peculiarities of Major Items ” (Bank of Japan Review Series
2010-E-8 2010).
4 In this report fixed investment includes land purchasing
expenses but excludes software investment and R&D
investment.
5 It has been pointed out that the level of fixed investment
outweighs that of R&D investment in almost all industries on aconsolidated basis. For all industries R&D investment amounts
to about a third of fixed investment in the Tankan as well.

The Tankan consists of the Tankan (main survey) and three
supplemental surveys that is the Survey of Financial
Institutions; the Survey of Business Consultants & Pure Holding
Companies; and the Survey on Overseas Business Activities. In
this report the Tankan refers to the main survey.
2 R&D expenditure consists of labor costs material tangible
fixed assets intangible fixed assets lease fees and otherexpenses.
3 For the characteristics of major items in the Tankan see thefollowing:
1

7

Bank of Japan January 2023

noted that the results would be subject to what explanatory
variables are used as a proxy for financial conditions.
Aghion, P., N. Berman, L. Eymard, P. Askenazy, and G. Cette“Credit Constraints and the Cyclicality of R&D Investment:
Evidence from France ” Journal of the European Economic
Association Vol. 10 No. 5 (October 2012) pp. 1001-1024.
11 As mentioned above the share of nonmanufacturing in R&D
investment amounts to only around 10 percent. Given that large
firms account for a majority of R&D investment the share ofthose with capital of less than 20 million yen is estimated to bevery limited.
12 This depends on the definition of startups (e.g. the size andage of firms). The target population of the Tankan basically
includes firms with capital of 20 million yen or more including
startups.

Though a panel Granger test was conducted to examine thestatistical relationship between exports and R&D investment
with the sample period from FY2017 to FY2021 the results were
not significant partly due to the relatively short sample period.
Among previous studies the following indicates that R&D canenhance firms’ productivity which has a larger impact on export
market relative to domestic market.
Maican, F.G., M. Orth, M.J. Roberts, and V.A. Vuong “The
Dynamic Impact of Exporting on Firm R&D Investment ”
NBER Working Paper No. 27986 (2020)
7 Fixed investment of large firms tends to be revised upwardfrom the first March survey to the June survey with investment
plans crystallized and those from the previous fiscal year delayed
to the fiscal current year. From the December survey to the actual
result survey (the June survey of the next year) fixed investmentof large firms tends to be revised downward due to delay inconstruction and the deferment of plans to the following fiscal
year.
8 It should be noted that the released series are based on a
population estimate which are different from the mean ofindividual (firm-level) data.
9 For instance the breakdown of R&D expenditure in “Surveyof Research and Development” shows that labor costs accountfor about 40 percent of R&D investment. During the Lehman’s
collapse labor costs declined by only around 5 percent in yearon-year term while the total R&D spending decreased by about
12 percent.
10 Previous studies suggest that the deterioration in firms’
financial position is expected to reduce the amount of R&D
investment. For instance see the following. But it should be
6

Bank of Japan Review is published by the Bank of Japan to
explain recent economic and financial topics for a wide rangeof readers. This report 2023-E-1 is a translation of theoriginal Japanese version 2023-J-1 published in January
2023. The views expressed in the Review are those of theauthors and do not necessarily represent those of the Bank ofJapan. If you have comments or questions please contact
ResearchandStatistics
Department(E-mail:post.rsd5@boj.or.jp). Bank of Japan Review and Bank ofJapan Working Paper can be obtained through the Bank ofJapan’s Web site (https://www.boj.or.jp/en).

8

Bank of Japan January 2023