TOKYO -- Shiseido is investing 40 billion to 50 billion yen ($364 million to $455 million) to open a new factory on the southern main island of Kyushu around 2021 amid growing demand for Japanese-made cosmetics among Asian consumers.
Global production capacity will double for the Tokyo-based cosmetics maker when the plant, to be set up in the city of Kurume in Fukuoka Prefecture, and two others already under construction in Osaka and Tochigi prefectures, go online.
The move is part of a broader trend seen among Japanese manufacturers of consumer goods. Toiletry maker Lion will open its first domestic toothpaste factory in 52 years in Kagawa Prefecture in western Japan.
Visitors to Japan, who exceeded 30 million last year, often take to Japanese products and continue to buy them after returning home. Japanese goods purchased by Chinese consumers online are estimated to account for 10% of exports to China. Asia's transformation from a production base to a major consumer market is driving Japanese manufacturers' domestic investment.
Shiseido's Kurume plant will be built on a 100,000-sq.-meter parcel in the eastern part of the city, with annual production capacity reaching around 140 million units. Elixir, a medium to high-end skincare brand, is among the products to be produced there.
Kurume was chosen because of its proximity to other parts of Asia. Shiseido will also use the factory to help address chronic product shortages at home.
The facility will employ the "internet of things" and other technologies to achieve high productivity. By doing so, Shiseido believes the plant can remain internationally competitive despite Japan's high wage levels.
Driven by surging demand, Shiseido's annual revenue exceeded 1 trillion yen for the first time in 2017. The company expects to post a record operating profit for 2018 as well. Shiseido's three existing domestic plants, including one in Osaka, are operating at full capacity.
Shiseido plans to open a plant in Ohtawara, Tochigi Prefecture, in 2019, and one in Ibaraki, Osaka Prefecture, in 2020. But the company believes that output from these factories will not be enough to meet demand.
Unicharm will also open its first new domestic plant in 26 years in Fukuoka Prefecture this year, with plans to churn out such offerings as high-end disposable diapers, popular in China.
Domestic production facilities and sales channels were once essential for selling products abroad. Now, the rise of international e-commerce has eliminated the need.
Japan's trade ministry had predicted in 2017 that the market for Japanese products purchased by Chinese on cross-border e-commerce platforms would reach 1.6 trillion yen in 2018. The value is a tenth of overall Japanese exports to China. Cosmetics exports to China grew 10-fold over eight years through 2018, while watches and clocks increased 90% and home electronics 40%.
Besides China, Indonesia and Vietnam are also emerging as promising markets as visitors from these Southeast Asian countries have shown double-digit percentage growth.
Drawn by cheap labor, Japanese companies had been moving production to emerging markets. But as those nations mature into robust consumer markets, helped by rising wages, plants in Japan are being upgraded to again serve as export hubs.