This marked an increase of 3.4 percentage points from 2024, according to the Japan External Trade Organisation’s 2025 Survey on the Business Conditions of Japanese Companies Investing Overseas, released on Monday.
This is the first time in five years that Vietnam has outperformed the ASEAN average of 65.3%. Meanwhile, the proportion of firms forecasting losses for the year fell to 17.6%, down 1.7 points from a year earlier, marking a second consecutive year of improvement.
In the manufacturing sector, the profitability ratio rose 3.9 points to 74.1% while the loss-making ratio dropped sharply to 13%. Gains exceeding 15 points were recorded in industries such as paper, wood products and printing; electrical and electronic components; and iron, steel and non-ferrous metals.
In the non-manufacturing sector, 61.2% of firms reported profits, up 3.3 points, although the loss-making ratio also edged up to 22%. Real estate leasing, education and healthcare saw improvements of more than 20 points while less than 50% of transport equipment, mining, energy, tourism, entertainment, retail and food services firms expected to be profitable.
JETRO attributed the manufacturing rebound mainly to stronger export demand while growth in domestic demand was the key driver for non-manufacturing firms. However, intensifying competition and rising labor costs remain major challenges.
This year, 47.6% of surveyed firms expect higher profits though more than 30% of transport equipment and parts manufacturers anticipate worse performance. Over the next year or two, 56.9% of firms plan to expand operations, an increase of 0.8 points year-on-year and the highest rate in ASEAN for the second year in a row. Only 4.2% expect to scale down and just 0.7% consider relocation or withdrawal.
Some 35% of Japanese firms in Vietnam export to the U.S., higher than the regional average. About one-third of these exporters foresee substantial negative impacts from U.S. tariffs, mainly due to weaker demand from that market. Many firms are responding by cutting costs, renegotiating prices and diversifying markets.
Vietnam’s key investment advantages continue to be market size and growth potential (68.4%), low labor costs (55.2%) and political and social stability (53.2%). Conversely, complex administrative procedures remain the top concern, cited by 67.5% of firms, alongside legal transparency issues and rising labor costs.
Japanese investment in Vietnam was estimated at around US$3 billion last year, up 19.5% from 2024, with growing interest in digital transformation and high-tech sectors. JETRO emphasized that while Vietnam remains a leading investment destination in ASEAN, further administrative reform, legal transparency and workforce development are critical to sustaining long-term attractiveness.
