Japan’s government on Friday said it would start subsidizing some companies to invest in factories in Japan and Southeast Asia as part of efforts to reduce reliance on manufacturing in China.
Fifty-seven companies including privately held mask-maker Iris Ohyama Inc and Sharp Corp would receive a combined ￥57.4 billion (US$536 million) in subsidies from the government to invest in production in Japan, the Japanese Ministry of Economy, Trade and Industry said.
Another 30 firms would receive money for investments in Vietnam, Myanmar, Thailand and other Southeast Asian nations, according to a separate announcement, which did not provide details on the amount of money.
While the ministry’s statement did not explicitly state that the money is to move production out of China, Japanese Prime Minister Shinzo Abe in March said that Japan needed to bring production back home or diversify output to ASEAN and elsewhere to cut reliance on any one country such as China.
The government would pay a total of ￥70 billion in this round, the Nikkei newspaper reported.
The payments come from ￥243.5 billion that the government in April earmarked to reduce reliance on Chinese supply chains, with the money aimed at helping companies shift factories back home or to other nations.
Amid a US-China trade dispute, there have been increasing discussions in the US and elsewhere about how to “decouple” economies and firms from China. Japan’s decision is similar to a Taiwanese policy last year, which was aimed at bringing investment back home from China.
So far, no other country has enacted a concrete policy to encourage the shift.
China is Japan’s biggest trading partner under normal circumstances and Japanese companies have massive investments there. The COVID-19 pandemic has damaged those economic ties as well as China’s image in Japan.
Japanese exports fell by more than 20 percent for a third straight month even as key markets started to reopen from virus shutdowns.
The value of Japan’s overall shipments overseas slid 26.2 percent last month from a year earlier, led by steep declines in exports of vehicles and auto parts, the Japanese Ministry of Finance reported yesterday.
Economists forecast a 24.7 percent fall.
Although exports continued to be down sharply compared with the previous year, there were signs that declines might have bottomed.
Vehicle exports halved last month compared with falls of about two-thirds in May. Overall drops in exports to the US and the EU were 4 to 5 percentage points less than in the prior month, data showed.
Improving shipments to China have helped prevent Japan’s export declines from being even worse. Shipments to the world’s second-largest economy dropped just 0.2 percent last month, compared with a year earlier, data showed.
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