For the first time in a hundred years Japanese companies are building their products abroad to ship home as a strong Yen, improved overseas work skills and aging workforce eroded the age-old adage of what’s sold in Japan should be made in Japan.
Car manufacturer Nissan has led the way for some of Japan’s biggest companies to import foreign made goods. Shipments to the home country from Japanese overseas factory’s have more than doubled in the last ten years seeing a 31% jump.
“Nissan’s decision was epochal,” said Masato Sase, an auto-industry analyst and partner at Deloitte Tohmatsu Consulting Co. based In Tokyo. “Before then there was a tacit assumption that cars sold in Japan would be made in Japan.”
The shift to overseas manufacturing is a big departure from the industrial strategy begun by the Meiji leaders who overthrew the last Shogun in 1868. The new model is the opposite to the old “made by Japan “model , now manufacturers base operations with less regard to nationalism, but it has led to a boost in corporate competitiveness at the cost of jobs in the world’s third-biggest economy, deepening deflation pressures.
“People see the sale of cars made abroad as a sign of the times, as globalization,” said Shiro Kakinuma, a salesman at Taiyo Nissan Auto Sales Co.’s Shibaura Chuo showroom in Tokyo, which offers the Thai-made Nissan March “When the new March came out there were some articles questioning the quality of a car made in a developing country. Not anymore.”
More and more Japanese company are looking to manufacture abroad due to the huge 45% gain in the strength of the Yen in the past five years. The high Yen has affected Japanese exports and has been one of the key reasons as to why Japans economy has been struggling. Many offshore factories have far higher profit margins than those based in Japan with some providing up to 2.5 to 3 times higher margins.
The lure of shifting abroad will contribute to Japan losing 4 million manufacturing and construction jobs this decade, according to Tokyo-based Works Institute, a research arm of staffing agency Recruit Co. Factory jobs made up 16.5 percent of the workforce in December, the lowest level since comparable data began in 1953.
The global economic crisis and the strong Yen could see Japan outsourcing more and more of its production capability but it is expected to produce higher end quality goods.
Yuqing Xing, an economist at the Asian Development Bank Institute in Tokyo said; “Japan still has stocks of engineers, skilled workers and technologies that are essential for making top-end products,” said Xing, who also teaches at the National Graduate Institute for Policy Studies. “I don’t see any possibility that Japan would be left out of global supply chains.”
Japans government is already taking steps to bolster the service industries in the country as the economy moves from a predominantly manufacturing based one into a service on. Prime Minister Yoshihiko Noda has set his government the task of creating 2.8 million jobs in the health care sector by 2020.
Currently the Japanese Yen is trading in the region of 0.0080 against the Pound, 0.0127 against the US Dollar and 0.0101 against the Euro.
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