Japan designates fund to shift production out of China
By MYBRANDBOOK
Japan has designated an amount of $2.2 billion of its record economic stimulus package to help its manufacturers shift production out of China as due to Coronavirus has disrupted supply chains between the major trading partners.
The extra budget to deal with the effects of the pandemic includes 220 billion yen ($2 billion) for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries, according to details of the plan posted online.
China is Japan’s biggest trading partner under normal circumstances, but imports from China slumped by almost half in February as the disease shuttered factories, in turn starving Japanese manufacturers of necessary components.
This has triggered Japan to reduce their reliance on China as a manufacturing base. The government’s panel on future investment last month discussed the need for manufacturing of high-added value products to be shifted back to Japan, and for production of other goods to be diversified across Southeast Asia.
“There will be something of a shift,” said Shinichi Seki, an economist at the Japan Research Institute, adding that some Japanese companies manufacturing goods in China for export were already considering moving out. “Having this in the budget will definitely provide an impetus.” Companies, such as car makers, that are manufacturing for the Chinese domestic market, will likely stay put, he said.
Japan exports a far larger share of parts and partially finished goods to China than other major industrial nations, according to data compiled for the panel. A February survey by Tokyo Shoko Research found 37% of the more than 2,600 companies that responded were diversifying procurement to places other than China amid the coronavirus crisis.
It remains to be seen how the policy will affect Prime Minister Shinzo Abe’s years-long effort to restore relations with China.
“We are doing our best to resume economic development,” Foreign Ministry spokesman Zhao Lijian told a briefing in Beijing, when asked about the move. “In this process, we hope other countries will act like China and take proper measures to ensure the world economy will be impacted as little as possible and to ensure that supply chains are impacted as little as possible.”
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