Japan mulls ‘China exit’ for 87 manufacturing projects

The Japanese government has laid out its plan for shifting manufacturing out of China to Southeast Asia or Japan, reports Nikkei Asian Review.

As part of the plan, Japan's Ministry of Economy, Trade and Industry on Friday announced that 87 companies or groups will be provided with a total 70 billion yen ($653 million) to move their production lines out of China.

Japan is looking forward to reduce its reliance on China and build resilient supply chains, according to the Nikkei Asian Review report.

Of the companies, 30 will shift to Southeast Asia. This includes: Hoya Corporation, which will produce hard-drive parts in Vietnam and Laos; Sumitomo Rubber Industries, which will manufacture nitrile rubber gloves in Malaysia; and Shin-Etsu Chemical, which will shift its rare-earth magnet production to Vietnam, among others.

The rest 57 projects will move to Japan for their operations.

Iris Ohyama, which currently produces face masks at Chinese plants in Liaoning Province and west of Shanghai, will shift its production to its factory in Miyagi Prefecture in northern Japan.

With the help of subsidies, the company will begin producing face masks at its Kakuda factory in its home base in Miyagi Prefecture. All material will be prepared locally, independent of overseas suppliers.

Companies which are eligible for the subsidy also include producers of alcohol-based sanitiser, aviation parts, auto parts, fertiliser, medicine and paper products.

Big names such as Sharp, Shionogi, Terumo and Kaneka are among those eligible for the subsidy, according to the Nikkei Asian Review report.

The government of Japan has allocated 220 billion yen in the supplementary budget for fiscal 2020 to create a subsidy programme aimed at encouraging companies to move their plants to Japan.  

Of the amount, 23.5 billion yen would be used to promote diversification of production sites from China to Southeast Asia, the report added.

Meanwhile, the Japanese government has also decided to provide up to 500 billion yen in loans over the next two years to help developing countries in the Asia-Pacific region fight against the novel coronavirus, sources said.

In principle, the funds provided under the scheme can be used for any purposes, The Japan News reports.

Under the emergency loan system, the government of Japan will provide loans with lower than usual interest rates to developing countries impacted by tax revenue declines and other difficulties.

As part of the scheme, the repayment period will be reduced by half to about 15 years.

For one of the first steps, the Japanese government processed a document on July 1 for a loan of up to 50 billion yen to the Philippines, which has been hit hard by the spread of infections.

The interest rate on yen loans had been typically set at 0.5 percent to 1 percent for countries other than the extremely poor.

However, for the Philippines, Myanmar and Bangladesh, the rate was set to be applied at 0.01 percent.