Japan has made a plan to shift its manufacturing units out of China. Image Courtesy – https://www.aljazeera.com
Japan is planning to shift manufacturing units out of China and is planning to invest in its companies for ease of shifting. Bloomberg, a New York-based media has reported that the disturbances caused in production by the coronavirus pandemic have forced to replanning of the business process between the two vital trading partners.
For the chunk of economic boost-up package, Japan has designated $2.2 billion to help their production units to shift from China – 220 billion yen is designated for companies to shift production units back to Japan and 23.5 billion yen for the companies looking to shift production units to other countries.
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China and Japan are usually one of the biggest trading partners. But, due to the coronavirus pandemic, imports from China have collapsed since February 2020 due to lockdowns. It has created a heavy impact on production and the supply chain.
Shinichi Seki, Economist, Japan Research Institute, stated that shifting of production units would occur in future because a dialogue with the Japanese companies has already been done as per the renewed plan to reduce dependency on China. Shinichi Seki also told Bloomberg in an interview that having the plan in the budget would certainly provide momentum in the Japanese economy. Companies that are producing for the Chinese domestic market would stay there.
The Japanese government has decided that production units for high-added value products would be shifted to Japan and those for other goods would be shifted across Southeast Asia. In about 2,600 companies, 37% of them are deliberating to shift their production units to countries other than China. This policy may have an impact on the relations with China, which Prime Minister Shinzo Abe has made with his years-long effort.
