Japanese Efforts to Bring Manufacturing Back Face Challenges

Hopeful local media reports and a weaker yen are raising hopes that Japanese companies will move their factories back home, but we’re unlikely to see an increase in ‘made in Japan’ labels anytime soon, analysts say.

“While the speed of offshoring may slow somewhat if the yen depreciates further, offshoring cannot be stopped, barring a long-term change in the Japanese economy’s declining presence in the global economy,” Goldman Sachs said in an April 2 report.

A steady trickle of media reports about companies such as consumer electronics conglomerate Panasonic and air conditioner maker Daikin moving some production back to Japan has captured the local media’s imagination in a country that remains nostalgically attached to its bygone manufacturing heydays.

But “many companies remain committed to the model of local production for local consumption, and while the pace of moving production offshore may slow down, it is unlikely to be reversed,” Nomura said in a report on March 31.

Japan Inc has been moving its factories overseas since the 1980s and the trend has been accelerating.

In the late 1980s, less than 5 percent of Japanese companies made their products overseas, according to Nomura’s calculations based on the Cabinet Office’s annual corporate behavior surveys.

But the proportion of manufacturing companies that have overseas production facilities had risen to 21.6 percent by fiscal 2013 and is projected to rise to 25.5 percent by fiscal 2018, according to the Cabinet Office’s survey of 867 companies listed on the Tokyo and Nagoya Stock Exchanges.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza