'Made in Japan' resurges as Asia labor costs grow
Reverse import values, proportion of goods made overseas both shrink
TOKYO -- Japanese businesses are bringing more production of appliances and everyday goods back home, as the cost appeal of making such items overseas fades amid a soft yen and rising wages in Asia.
The value of reverse imports -- Japan-based companies importing goods made at their overseas branches -- dropped 13% to 2.59 trillion yen ($23.7 billion) in the January-March period from a peak in July-September 2015, the Ministry of Economy, Trade and Industry says. Japan also showed less reliance on imported consumer goods overall, as a measure of the proportion of these items in the domestic market dipped by around 5% in June compared with the March 2016 zenith.
Some companies appear to be tapping domestic plants to make their goods more competitive, as the extreme movement of production overseas appears to have slowed in general.
Labor gets pricier
This trend does not mean companies based overseas are losing the Japanese market, only that Japan-based businesses are making fewer goods for the domestic market abroad, finding it more expensive to pay workers in Asia.
Monthly pay at general factories in leading Chinese cities has climbed 20-30% over the past five years, the Japan External Trade Organization says. Reverse imports from China in January-March totaled 1.91 trillion yen, down 18% from a year and a half ago. The proportion of Chinese-made goods in the Japanese market also slid to 42% from 50% five years ago.
Wage hikes are spreading throughout Asia. A Malaysian labor group representing workers in mainstay industries has lobbied for the minimum wage to be raised by half next year.
Bringing it on home
Roughly 60% of the decline in reverse import value comes from electric machinery such as home appliances. At the end of 2015, electronics maker JVC Kenwood transferred some output of its car GPS devices for the Japanese market from factories in Indonesia and China to a production hub in Nagano Prefecture. Before that, nearly all of its GPS devices were made overseas.
Part of the appeal of domestic production involves less susceptibility to foreign exchange-rate fluctuations. Electronics manufacturer Canon made 56% of its goods in Japan in the calendar year 2016. The company plans to lift that ratio to 60%, including by furthering automation of camera production at a mainstay Oita Prefecture plant.
Even domestic everyday goods are getting a second look, despite the low-priced items being heavily produced in Asia.
"[Our] general merchandise has mostly consisted of goods made overseas, but we will be adding more domestic products," said Daiso Industries, the Hiroshima Prefecture company that operates Daiso 100-yen stores.
Consumer goods producer Iris Ohyama is investing around 10 billion yen toward opening a plant in January for light-emitting diode illumination, anticipating demand from the metropolitan Tokyo region in advance of the 2020 Olympics.
A broader view
Despite the dearth of prospects for major growth in the Japanese market, factory investment in the country can be called part of an optimized production strategy for Asia as a whole. One of Casio Computer's goals with a new wristwatch factory in Yamagata Prefecture is to consolidate production there, then move management functions for Asian centers into space created by the shift.
If a major trade pact such as the Trans-Pacific Partnership takes effect, "overseas plants will become more competitive," said Satoshi Osanai of the Daiwa Institute of Research. Japan's reliance on imports is "structurally headed for a rise," he said.