Why Are Japanese Brands Moving Overseas Production Back Home?

Japanese manufactures, from makers of daily necessities to brands like Canon, Honda and Nissan, are shutting down some of their overseas factories to move more production back home, reports the Economic Information Daily (EID), a media outlet under the Xinhua News Agency. 

 

Rising labor costs in emerging markets, Japan’s easy monetary policies and the resulting weak position of the yen, and government’s local economic revival plan all contributed to the trend. Yet a few other reasons merit special attention, commentator Liu Chunyan wrote for EID.

 

First is the increasing demand from emerging markets for quality “Made in Japan” products, Liu said. By increasing production at home, Japanese businesses are responding to this trend, using its domestic R&D and management capacities, and making the most of the “Made in Japan” brand.

 

And international consumers are purchasing Japanese goods in newer ways, she argued. For example, with the rapid development of tourism, travelers to Japan also drive the expansion of its domestic consumption market. In 2018 alone, tourist spending in Japan totaled 4.5 trillion yen ($40.2b), 34.7 percent of which went to shopping. Also, cross-border e-commerce platforms have made it convenient for foreign consumers to buy Japanese products online. In 2017, the volume of online sales to Chinese consumers surged by 25.2 percent to nearly 1.3 trillion yen ($11.6b). 

 

By signing the Japan-Europe Economic Partnership Agreement and the Comprehensive and Progressive Trans-Pacific Partnership Agreement, Japan has won lower tariffs, improving the competitiveness of its export businesses, the commentator noted. Some Japanese companies, weighing the costs of overseas production and the potential benefits of Japan’s drive to develop new technologies like AI, infer that bringing manufacturing back home will be more profitable.  

 

However, citing a report by The Japan Research Institute, Limited, Liu argues that although the return of Japanese businesses can provide an economic boost, further development will be curtailed if the country’s demographic declines are not reversed. This highlights a more urgent priority for Japan - preventing population reductions.