Japan to pay firms to produce goods locally or in Southeast Asia, in shift from China

Dozens of companies will get US$536 million in subsidies to invest in production in Japan
Another 30 firms will receive money for investments in Vietnam, Myanmar, Thailand and other Southeast Asian nations, according to a separate announcement

Japan

Bloomberg

Published: 12:52pm, 20 Jul 2020

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The government of Japan will start subsidising some companies to invest in local factories and those in Southeast Asia as part of efforts to reduce reliance on manufacturing in China.

Fifty-seven firms, including privately-held face mask-maker Iris Ohyama and Sharp, will receive a total of 57.4 billion yen (US$536 million) in subsidies from the government to invest in production in Japan, said the Ministry of Economy, Trade and Industry (METI) on Friday.

Another 30 firms will 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.

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While the METI statement does not explicitly state the money is to move production out of China, Prime Minister Shinzo Abe said in March that Japan needed to bring production back home or diversify output to Asean nations and elsewhere to cut reliance on any one country such as China.

The government will pay a total of 70 billion yen in this round, the Nikkei newspaper reported.

The payments come from 243.5 billion yen that the government earmarked in April to reduce reliance on Chinese supply chains, with the money aimed at helping companies shift factories back home or to other nations.

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As US-China relations deteriorate and the trade war worsens, there has been growing discussions in the US and elsewhere about how to “decouple” economies and firms from China.

Japan’s decision is similar to a Taiwanese policy in 2019, which was aimed at bringing investment back home from China. So far, no other country has enacted a concrete policy to encourage the shift.

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China is Japan’s biggest trading partner under normal circumstances and Japanese companies have massive investments there.

The coronavirus pandemic has damaged those economic ties as well as China’s image in Japan.

The Abe government has been trying for years to improve relations with China after anti-Japan riots in 2012, but the fallout from the pandemic and the ongoing territorial dispute over islands and gas fields in the East China Sea have undercut those efforts.

This article appeared in the South China Morning Post print edition as: Japanese firms paid to Leave china

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