Japan has earmarked US$2.2 billion of its record economic stimulus package to help its manufacturers shift production out of China as the COVID-19 pandemic disrupts supply chains between the major trading partners.
The extra budget, compiled to try to offset the devastating effects of the pandemic, includes ￥220 billion (US$2 billion) for companies shifting production back to Japan and ￥23.5 billion for those seeking to move production to other countries, according to details of the plan posted online.
The move coincides with what should have been a celebration of friendlier ties between the two countries.
Chinese President Xi Jinping (習近平) was supposed to be on a state visit to Japan early this month, but what would have been the first visit of its sort in a decade was postponed a month ago amid the spread of the virus.
No new date has been set.
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.
That has renewed talk of Japanese firms reducing their reliance on China as a manufacturing base.
The Japanese government’s panel on future investment last month discussed the need for manufacturing of high value-added 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,” Japan Research Institute economist Shinichi Seki said, 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 automakers, that are manufacturing for the Chinese domestic market, are likely to 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 Ltd found 37 percent of the more than 2,600 companies that responded were diversifying procurement to places other than China amid the novel coronavirus crisis.
It remains to be seen how the policy would affect Japanese Prime Minister Shinzo Abe’s years-long effort to restore the nation’s relations with China.
Asked about the move, Chinese Ministry of Foreign Affairs spokesman Zhao Lijian (趙立堅) said: “We are doing our best to resume economic development.”
“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,” he told a briefing on Wednesday in Beijing.
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