ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Politics

Japan to help bring home factories that left after 2011 disaster

State-backed lender prepares $9bn in funding as coronavirus hits supply chains

Japanese automakers struggled to deal with parts shortages after the coronavirus outbreak all but shut down manufacturing in China.   © Reuters

TOKYO -- The Japanese government will extend emergency loans to companies trying to bring home overseas production facilities as the coronavirus pandemic severs links in global supply chains.

The move comes as the outbreak has exposed risks of offshoring, which picked up after the March 2011 earthquake and tsunami that battered Japanese supply chains. 

Tokyo looks to provide more than 1 trillion yen ($9 billion) in funding through the government-owned Development Bank of Japan to help companies restructure supply chains over the longer term. 

Reshoring will likely involve products in heavy demand in Japan, as well as goods with high added value that will still be profitable even if exported rather than made locally.

The DBJ will offer syndicated loans with private-sector financial institutions -- split roughly 50-50 -- to cover the cost of plant relocations, which can run from millions of dollars to hundreds of times that. The DBJ is seeking local banks' involvement since many struggling regions are eager to attract businesses.

Total lending could swell to levels seen following the 2008 global financial crisis, when the government-owned bank gave companies 3 trillion yen in emergency funding.

To mitigate increases in labor costs caused by moving to Japan, subsidies will be provided to companies for industrial robots and other labor-saving measures.

The pandemic has brought into sharp relief Japan's heavy reliance on other countries, particularly China, for parts and materials. Japan's imports from China plunged by nearly half on the year in February as the coronavirus brought that country's production to halt, according to Finance Ministry trade data, as manufacturing there ground to a near-halt.

The share of manufacturing by Japanese companies handled outside the country reached a high of 25.4% in fiscal 2017, industry ministry data shows. The figure rose as high as 47% for autos and other transportation and 29% for telecommunications equipment.

As of the end of September, of the 4.31 million people who worked at Japanese companies with at least 100 million yen in capital, roughly a quarter were Chinese, spanning a variety of industries including electrical equipment and chemicals. Another 10% or so hailed from Europe, with a particularly high concentration in transportation equipment.

The coronavirus has made clear the risks of this shift. Manufacturers accounted for about 40% of the 677 companies that reported effects from the pandemic in a survey last week by Tokyo Shoko Research. A growing number cited trouble procuring parts due to issues with cross-border supply chains. Toto has said the outbreak is leading to longer delivery times for toilets and sinks.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media