Date
18 January 2017
Toyota operates a factory in Tianjin, China, part of its effort to bring production closer to its customers. Photo: Bloomberg
Toyota operates a factory in Tianjin, China, part of its effort to bring production closer to its customers. Photo: Bloomberg

Japanese firms still moving factories abroad

Japanese manufacturers are still moving their plants abroad, and the fall in the yen doesn’t show any signs of causing a reversal in that trend, Bloomberg reported.

The overseas factories’ share of the firms’ production is approaching one-third, setting a new record in last year’s fourth quarter, more than three years after the Japanese currency began its steep decline from a post-war high versus the US dollar.

A weaker currency might be expected to make Japanese exports more price-competitive and so encourage more production to be done at home rather than abroad.

In fact, the yen’s strength was cited by many firms over the past decade as one of the reasons for taking jobs overseas.

But increasingly, manufacturers want factories close to their customers.

With Japan’s population shrinking and its consumers long ago cured of their spendthrift ways, it’s little wonder corporate planners are still locating new plants in the Americas, Europe and elsewhere in Asia, the report said.

As a result, they also buy more parts and materials overseas.

Hiroaki Muto, a Tokyo-based economist at Sumitomo Mitsui Asset Management Co., said businesses know the yen won’t continue to weaken forever.

“No company manager with common sense is going to cut the ratio of overseas production,” Muto was quoted as saying.

Carmakers and electronics firms have led the shift overseas.

North America ranks as the No. 1 production center for corporate Japan, followed by China.

These assets are of growing importance to Japan’s companies, bringing in record profits.

Meanwhile, domestic production capacity has dropped, along with the number of factories and jobs at them, both well below their level before the 2008 financial crisis.

– Contact us at [email protected]

RA/FL

EJI Weekly Newsletter