Japan manufacturers exit China, Southeast Asia to bring production back home

A rapidly weakening yen, supply-chain constraints, geopolitical risks and changing wage patterns are prompting the switch, a Japanese steel executive said

Even before the yen’s tumble this year, Japan’s government had been supporting relocation of domestic companies’ production bases back to the country

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Employees work on the Honda Civic production line at a factory in Wuhan that the Japanese carmaker operates as a joint venture with China’s Dongfeng Motor Group. Japanese manufacturers are increasingly looking to move offshore operations back home, according to reports. Photo: AFP

Published: 11:02am, 16 May 2022Updated: 11:04am, 16 May 2022

Japanese manufacturers are increasingly looking to move offshore operations to their home market, according to a Tokyo Steel Manufacturing Co. executive.

The rapidly weakening yen, global supply-chain constraints, geopolitical risks and changing wage patterns are prompting the switch, Kiyoshi Imamura, a managing director of the steelmaker, said in an interview in Tokyo last week.

Among those moving manufacturing to Japan are makers of everything from car parts to cosmetics and consumer electronics, he said, with the trend expected to accelerate towards the end of this year.

Workers check cars at a Toyota factory in Miyagi prefecture, northern Japan. Wages in Japan have barely changed over the past 30 years, while wages in Southeast Asia have roughly tripled over the same period. Photo: AFP

According to Imamura, more Japanese companies are shifting operations out of China, Southeast Asia and Russia. The move to build new plants in their home country is fuelling demand for steel used in construction, with the company receiving nearly 30 orders related to such switches, he said.

“The yen has fallen so much that Japan’s trade balance will not be back in the black – under such circumstances, companies judge it’s better to do manufacturing in Japan,” Imamura said. His company has seen orders for steel used in construction rise 10 per cent so far this year, compared with a year earlier, he said.

The yen has declined about 11 per cent against the US dollar since the start of the year, exacerbating rising prices for Japan’s imported commodities.