Shiga Prefecture Enterprise Trends Survey Results Q2 2025 Performance and Q3 Outlook - Business Sentiment Improves Slightly but Remains in Double-Digit Negative Territory for Third Consecutive Quarter

Overview

This is a regular survey report published by Shigagin Economic and Cultural Center on "Shiga Prefecture Enterprise Trends Survey Results Q2 2025 Performance and Q3 Outlook - Business Sentiment Improves Slightly but Remains in Double-Digit Negative Territory for Third Consecutive Quarter." The report comprehensively analyzes business sentiment and management conditions of companies in Shiga Prefecture, revealing that while there are signs of improvement, the challenging business environment continues. ## Key Points ### 1. Survey Overview - **Survey Organization**: Shigagin Economic and Cultural Center Co., Ltd. - **Publication Date**: June 30, 2025 - **Survey Period**: May 7-26, 2025 - **Survey Target**: 995 companies in Shiga Prefecture - **Valid Responses**: 347 companies (35% response rate) - Manufacturing: 157 companies - Non-manufacturing: 190 companies - **Survey Method**: Mail/FAX distribution, WEB/FAX/mail collection ### 2. Business Conditions DI Trends (Core Indicator) - **Current (Q2)**: -13 - Improved 3 points from previous quarter (Q1: -16) - First improvement in 3 quarters - **Breakdown by Industry**: - Manufacturing: -18 (improved 7 points from -25) - Non-manufacturing: -10 (improved 1 point from -11) - **3-Month Outlook (Q3)**: -15 - Expected to worsen by 2 points from current - **Important Feature**: Double-digit negative for 3 consecutive quarters ### 3. Factors and Limitations of Business Sentiment Improvement - **Improvement Factors**: - Recovery in manufacturing production activities - Solid domestic demand - Effects of spring wage negotiations - **Factors Hindering Improvement**: - Continued price inflation - Rising labor cost pressure - Uncertainty from Trump administration's trade policies - Chronic labor shortage ### 4. Major Business Indicator Trends #### Sales DI - **Current**: -4 (unchanged) - **Feature**: Negative for 2 consecutive quarters - **By Industry**: - Manufacturing: -12 - Non-manufacturing: +2 #### Operating Profit DI - **Current**: -12 (unchanged) - **Serious Situation**: Negative for 15 consecutive quarters - **By Industry**: - Manufacturing: -19 - Non-manufacturing: -7 - **Factor**: Difficulty passing on cost increases to prices ### 5. Price Trends and Pass-Through Status - **Selling Price DI**: +17 (down 8 points from +25) - **Purchase Price DI**: +48 (down 7 points from +55 but remains high) - **Price Pass-Through Indicator**: -31 - Unable to pass purchase price increases to selling prices - Main factor squeezing corporate profits ### 6. Employment Situation - **Employment DI**: -26 - Improved 11 points from -37 - Still severe labor shortage - **By Industry**: - Manufacturing: -22 - Non-manufacturing: -29 - **Countermeasures**: - Promoting labor-saving investments - Business efficiency improvements - Improving treatment ### 7. Sudden Change in Capital Investment Trends - **Implementation Rate**: 41% (sharp drop from 53%) - Below 50% for first time in 5 quarters - Rapid cooling of investment appetite - **Main Investment Content**: - Production/sales equipment renewal: 41% - Vehicle purchases: 31% - Office equipment purchases: 28% - **Background to Investment Restraint**: - Future uncertainty - Cash flow concerns - Doubts about investment effectiveness ### 8. Industry-Specific Characteristics and Challenges #### Manufacturing - Production activities recovering but lacking strength - Uncertainty in overseas demand - High raw material costs persisting - Need to address aging equipment #### Non-manufacturing - Relatively solid supported by domestic demand - Severe labor shortage in service industries - Need for digitalization investments - Strength of locally-rooted businesses ### 9. Future Outlook and Challenges - **Short-term Outlook**: - Business sentiment flat or slightly worsening - Price pass-through progress is key - Continued labor shortage - **Medium-term Challenges**: - Need for productivity improvement - Efficiency through DX promotion - Human resource securing and development strategies - New market development ### 10. Summary and Policy Implications This survey highlights that while the Shiga Prefecture economy is in a gradual recovery process, it faces structural challenges. Particularly noteworthy are the harsh profit environment with operating profit DI negative for 15 consecutive quarters and the rapid decline in capital investment appetite. Companies face a double burden of being unable to pass cost increases to prices while also dealing with labor shortages. Breaking through this situation requires comprehensive policy responses including strengthened support for productivity improvement investments, creating an environment that facilitates price pass-through, and enhancing human resource securing support measures. The business conditions DI remaining in double-digit negative territory for three consecutive quarters indicates that the regional economy is still halfway to normalization, strongly suggesting the need for unified public-private sector efforts.